Rite Aid sued by fired executive Former vice president says he was victim of 'smear campaign'

Executive suite

November 18, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

An ousted Rite Aid Corp. executive has sued the company, charging that a corporate investigation was a "smear campaign" against him that failed to discover "highly questionable business practices" by Chairman and Chief Executive Officer Martin L. Grass.

The Camp Hill, Pa.-based chain denied the charges yesterday, saying that it fired Kevin J. Mann, former vice president for category management, because of poor performance that he was given five months to correct.

In a lawsuit filed last week in U.S. District Court in Philadelphia, Mann argued that a "sham" investigation led to his abrupt firing June 12. The suit also names as defendants Grass and Decision Strategies/Fairfax International LLC, the investigative company.

Franklin Brown, Rite Aid's vice chairman, said: "We fired him for good and valid business reasons in terms of his performance. All of his allegations are a smoke screen to suggest we fired him for other reasons. For a period of five months, we pointed out his deficits in performance, and he did not correct them."

He declined to discuss Mann's performance in detail.

Mann's lawyers also said the investigation was intended to deflect criticism from Rite Aid's firing of brokers -- a decision that the company knew would disrupt its relationships with manufacturers represented by brokers rather than in-house sales people.

"The smear campaign was designed to make [Mann] a scapegoat, by implying his allegedly improper relationship with certain brokers was justification for the new relationship Rite Aid intends to implement with brokers," Mann's lawyers charge in the suit.

But Brown said the two were not related. "We have terminated our brokers, but we don't know what in the world that has to do with him," Brown said.

Mann's lawyers also alleged that Decision Strategies' investigation "ignored or failed to uncover" Grass' favorable treatment of the Hartz Group, which manufactures and sells pet products.

According to the lawsuit, Leonard N. Stern, Hartz' chief executive officer, also served as chairman of Rite Aid's compensation committee in 1995. After the compensation committee granted "lucrative stock options" to several executives -- including Grass -- Grass directed Mann and another executive to expand the Hartz Group's presence at all Rite Aid stores.

The suit charges that Grass "breached his duty of loyalty and fair dealing by directing that business be steered to the Hartz Group, without regard to whether such an arrangement was in the best interests of Rite Aid."

Brown also dismissed the charges about improper business dealings between Stern and Grass. He said Rite Aid has been carrying Hartz's products for several years and that the relationship between the two companies is disclosed in proxy statements.

Mann, a 17-year Rite Aid employee, said Rite Aid publicized its investigation of him and timed his firing to coincide with an annual industry convention, making him "virtually unemployable." He is seeking more than $12 million, the value of stock options that he says he was denied.

Pub Date: 11/18/98

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