Rite Aid Massive Accounting Scandal. The former chief financial officer of Rite Aid, the third-largest pharmacy chain in the US, on Thursday pleaded guilty to a single felony count related to a massive accounting scandal that plagued the company.
Franklyn Bergonzi was to face charges in a trial next week, alongside two other former Rite Aid executives. Martin Grass, former chairman and chief executive, and Franklin Brown, form er vice chairman and general counsel, are still set to go on trial in a US District Court in Harrisburg, Pennsylvania.
Mr Bergonzi pleaded guilty to one conspiracy charge and agreed to co-operate with prosecutors. He could potentially testify as a witness in Monday’s trial, said Martin Carlson, spokes man for the US District Attorney’s office in Pennsylvania. The charge carries a maximum penalty of five years in prison, plus a potential fine of up to $250,000. No date has been set for sentencing.
earnings and defraud investors
Rite Aid, based in Camp Hill, Pennsylvania, was last year the subject of a Securities and Exchange Commission probe. In June 2002, federal regulators alleged that Mr Grass and severa l former executives engaged in a huge accountancy fraud to inflate company earnings and defraud investors. The SEC, which started its investigation into Rite Aid in late 1999, said the former executives had conducted a “wide- ranging accounting fraud scheme” and overstated the company’s income “by massive amounts”.
Accounts of transactions with suppliers were allegedly massaged. Mr Bergonzi took steps to reverse the effect of account restatements ordered by the company’s general counsel.
When the fraud was discovered, Rite Aid restated its pre-tax income by $2.3bn, which the SEC said was the largest restatement ever recorded. Mr Grass, who is accused of schemes in whi ch he “sought to enrich himself”, also fabricated minutes of meetings, the SEC claims.