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Rite Aid Officer Says Brown Talked of Dumping Computer

Oct 2, 2003 | AP

Former Rite Aid Corp. chief counsel Franklin C. Brown once said that copies of allegedly backdated retirement-benefits letters were on a computer that had been sunk in the Atlantic Ocean‚ Timothy J. Noonan‚ the former chief operating officer‚ testified Wednesday.

Noonan said the claim occurred during a conversation with Brown in a suburban Harrisburg bagel shop in March 2001‚ after Noonan had decided to cooperate with the federal investigation that led to charges against Brown‚ who is on trial for fraud and conspiracy.

Noonan testified Brown reassured him that criminal investigators would not be able to examine the computer of Janene Kope‚ the secretary who allegedly helped former chief executive Martin L. Grass create a set of bogus documents after Grass left the company that were worth millions to Noonan‚ Brown and other senior officers.

“He said they’ll never get her computer now‚ it’s in the Atlantic‚†said Noonan. He allowed the FBI to tape-record the bagel-shop conversation‚ but background noise rendered it unintelligible so he described it for the jury.

Noonan said he decided the severance-benefits letter Brown gave him was inappropriate because it appeared to have been backdated‚ and never submitted it to the company. Instead‚ he negotiated his own deal worth millions less with Grass’ successor.

Brown‚ 75‚ is accused of conspiring to falsely inflate income at the nation’s third-largest pharmacy chain in the late 1990s‚ and then misleading investigators. The company was forced to retroactively lower its net earnings in July 2000 by $1.6 billion and a new management team has struggled to return it to profitability.

Also Wednesday‚ the third day of testimony‚ prosecutors played audio and video from another meeting‚ in which Brown told Noonan he employed a system of prepaid phone cards and pay phones to coach Eric Sorkin‚ then the vice president for pharmacy purchasing‚ “for hours and hours†prior to Sorkin’s meeting with Rite Aid’s internal investigators.

Over coffee at a McDonald’s restaurant‚ Brown asked Noonan if there was anything he “might want me to volunteer or weave in†during an upcoming meeting with investigators.

On Tuesday‚ Brown’s former secretary Mary Lou Egan testified that he gave her $25‚000 for a new car one week after she helped him create backdated documents that qualified Brown and other senior executives for thousands of shares of Rite Aid stock.

In March 1998‚ she said‚ Brown dictated what were purported to be minutes of a March 5‚ 1995‚ meeting of the board of directors’ compensation committee and accompanying letters to Brown and three other former officers outlining the performance-based stock awards.

The other recipients were Grass‚ Noonan and chief financial officer Franklyn M. Bergonzi. All three former Rite Aid managers have pleaded guilty to federal criminal charges related to the alleged accounting-fraud scandal and await sentencing.

Brown faces charges of conspiracy‚ conspiracy to obstruct justice‚ obstruction of grand jury proceedings‚ obstruction of government-agency proceedings‚ witness tampering‚ and the counts of wire fraud and lying to the SEC.

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