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Rite Aid Aide Tells of Forging Documents

Sep 30, 2003 | AP

A former Rite Aid executive gave an aide $25,000 for a new car after she helped him create backdated documents qualifying him and other executives for thousands of shares of company stock, the secretary testified Tuesday.

But on cross-examination, the woman testified she did not believe the car represented any sort of payoff.

Franklin C. Brown, former chief counsel for the pharmacy chain, is on trial for allegedly conspiring to falsely inflate income in the late 1990s, and then misleading investigators.

Mary Lou Egan, Brown's legal secretary, testified Tuesday that in March 1998, Brown dictated to her what were purported to be minutes of a March 5, 1995, meeting and accompanying letters to Brown and three other former officers outlining the stock awards.

One week after the minutes and letters were edited, Brown offered to buy her a new car, Egan testified.

"It was an overly generous offer I was uncomfortable with," but Brown persisted and she relented, later returning $2,000 to him that she did not need to buy the convertible, she said.

On cross-examination by Brown's attorney, she acknowledged that Brown had first raised the possibility of giving her a car several months earlier.

"I did not have (the) feeling that the car was in exchange for anything I did," she said.

The other stock awards went to chief executive and chairman Martin L. Grass, chief financial officer Franklyn M. Bergonzi and chief operating officer Timothy J. Noonan. All three have pleaded guilty in the accounting-fraud scandal and await sentencing.

On Monday, 24 of 35 criminal counts against Brown, 75, were dismissed, leaving charges of conspiracy, wire fraud, obstruction, witness tampering, and five counts of lying to the Securities and Exchange Commission.

The scandal forced Rite Aid was forced to retroactively lower its net earnings in July 2000 by $1.6 billion.

Also testifying Tuesday was Noonan, who was briefly promoted from chief operating officer to CEO after Grass was forced out in October 1999. Noonan described how he and other managers frantically negotiated last-minute deals with drug makers in February of that year to plug a $100 million earnings shortfall.

Brown's grand jury indictment said that recording $17 million from a legal settlement he had reached with Bristol-Myers Squibb Co. as income in that quarter's books was "improper" because it was contingent on other issues being ironed out.

Noonan said Brown showed him and other Rite Aid executives a settlement letter from Bristol-Myers on Feb. 26, 1999, one day before the end of the retailer's fiscal year.

"(Brown) said, 'This is a deal that can be used for this year,'" Noonan testified.

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