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 Oceanâ€š Timothy J. Noonanâ€š the former chief operating officerâ€š testified Wednesday.
Noonan said the claim occurred during a conversation with Brown in a suburban Harrisburg bagel shop in March 2001â€š after Noonan had decided to cooperate with the federal investigation that led to charges against Brownâ€š 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 Kopeâ€š 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 Noonanâ€š Brown and other senior officers.
â€œHe said theyâ€™ll never get her computer nowâ€š itâ€™s in the Atlanticâ€šâ€� said Noonan. He allowed the FBI to tape-record the bagel-shop conversationâ€š 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 backdatedâ€š and never submitted it to the company. Insteadâ€š he negotiated his own deal worth millions less with Grassâ€™ successor.
Brownâ€š 75â€š is accused of conspiring to falsely inflate income at the nationâ€™s third-largest pharmacy chain in the late 1990sâ€š 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 Wednesdayâ€š the third day of testimonyâ€š prosecutors played audio and video from another meetingâ€š in which Brown told Noonan he employed a system of prepaid phone cards and pay phones to coach Eric Sorkinâ€š then the vice president for pharmacy purchasingâ€š â€œfor hours and hoursâ€� prior to Sorkinâ€™s meeting with Rite Aidâ€™s internal investigators.
Over coffee at a McDonaldâ€™s restaurantâ€š Brown asked Noonan if there was anything he â€œmight want me to volunteer or weave inâ€� during an upcoming meeting with investigators.
On Tuesdayâ€š Brownâ€™s former secretary Mary Lou Egan testified that he gave her $25â€š000 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 1998â€š she saidâ€š Brown dictated what were purported to be minutes of a March 5â€š 1995â€š meeting of the board of directorsâ€™ compensation committee and accompanying letters to Brown and three other former officers outlining the performance-based stock awards.
The other recipients were Grassâ€š 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 conspiracyâ€š conspiracy to obstruct justiceâ€š obstruction of grand jury proceedingsâ€š obstruction of government-agency proceedingsâ€š witness tamperingâ€š and the counts of wire fraud and lying to the SEC.