June 24, 2003|By BLOOMBERG NEWS
HARRISBURG, Pa. - The accounting fraud and obstruction-of-justice trial of Rite Aid Corp.'s former chief counsel, Franklin Brown, was delayed until Monday after lawyers questioned jurors about publicity on the case.
U.S. District Judge Sylvia Rambo pushed back opening arguments, which were to have begun yesterday, after asking 12 jurors and six alternates behind closed doors about guilty pleas by Rite Aid's former chief executive officer, Martin L. Grass, and its former chief financial officer, Frank Bergonzi.
Grass and Bergonzi, who had been scheduled to go on trail with Brown, separately admitted inflating income and understating expenses by hundreds of millions of dollars in the late 1990s at Rite Aid, the nation's third-largest drugstore chain.
The fraud resulted in Camp Hill, Pa.-based Rite Aid having to restate $1.6 billion in net income.
Brown attorney Reid Weingarten wouldn't comment on the questioning of the jurors, saying only: "This is a terrific judge. I have no complaints about the fairness of the procedure."
Assistant U.S. Attorney Kim Daniel, the government's main trial attorney, declined to comment outside the courtroom.
Weingarten had argued in court papers that jurors might have been tainted by the extensive pretrial publicity given Grass' guilty plea June 17 and Bergonzi's June 5. Rite Aid's former president, Timothy Noonan, pleaded guilty last year after secretly recording Grass and Brown allegedly discussing plans to conceal information from investigators.
Grass, Bergonzi and Noonan are cooperating with prosecutors and might testify against Brown. Prosecutors say the four men ran the company and committed a "massive accounting fraud" during the late 1990s.
Brown is accused of conspiring to defraud Rite Aid, securities fraud, mail fraud and wire fraud. He is also charged with conspiring to obstruct justice, witness tampering and obstructing a grand jury.
Rite Aid, which hired new management in 1999, settled shareholder lawsuits by paying $155 million in notes and $45 million in cash from insurance proceeds.
The company also agreed to a cease-and-desist order with the Securities and Exchange Commission but paid no penalty.
Rite Aid shares fell 19 cents to $4.03 in New York Stock Exchange composite trading yesterday.
Rambo estimated that the trial will last three to four weeks, according to an assistant, Mark Armbruster.
