PENNSYLVANIA Prosecutor: Ex-Rite Aid chairman will plead guilty

Prosecutors are dealing rather than take complex charges to trial.
HARRISBURG (AP) -- The former head of Rite Aid Corp., facing dozens of charges of attempting to defraud shareholders and then trying to conceal it, will plead guilty in federal court, a prosecutor said.
Assistant U.S. Attorney Martin Carlson declined to say what charges Martin L. Grass -- who faced counts of conspiracy, fraud and witness tampering -- would plead to today. Carlson declined to further comment.
Grass, Rite Aid's former chairman and chief executive, and son of the company founder, was indicted by a federal grand jury a year ago along with two other former executives and one current employee of the Camp Hill-based corporation.
Grass, who resigned in October 1999 and now lives in Virginia Beach, Va., did not return phone messages Monday. His attorney, William H. Jeffress Jr., said by e-mail he would not comment until after today's hearing.
2nd to opt for deal
The plea will make Grass the second high-ranking Rite Aid executive to strike a deal with federal prosecutors in the past two weeks. Former chief financial officer Franklyn M. Bergonzi pleaded guilty to one count of conspiracy June 5 and agreed to cooperate with prosecutors.
Grass' plea will leave Rite Aid's former vice chairman and chief counsel, Franklin C. Brown, to stand trial alone in federal court starting July 23.
Brown faces the same charges as Grass: conspiracy, fraud in the purchase or sale of securities, conspiracy to obstruct justice, obstructing grand jury proceedings, obstructing proceedings of a government agency, witness tampering, 13 counts of lying to the SEC, 10 counts of mail fraud and six counts of wire fraud.
The fourth defendant, Eric S. Sorkin, Rite Aid's vice president for pharmacy purchasing, is expected be tried separately on charges of conspiracy to obstruct justice and lying to a grand jury.
One suggestion
One observer of corporate criminal prosecutions suggested that federal prosecutors may have been more willing to make a deal with the Rite Aid defendants because of the complicated nature of accounting evidence that is central to obtaining convictions in such cases.
"When you're dealing with financial fraud or allegations of financial fraud, the issues are quite technical, difficult and not typically in the zone of experience of the everyday juror," said Charles M. Elson, director of the Center for Corporate Governance at the University of Delaware. "They're tough to try."
The indictments allege that the increase in Rite Aid's stock price under Grass' management team was accomplished by "massive accounting fraud, the deliberate falsification of financial statements, and intentionally false [Securities and Exchange Commission] filings."
Rite Aid restated $1.6 billion of earnings in July 2000.
To turn the company around, the new management team has unloaded assets, closed hundreds of stores and restructured Rite Aid's once-crippling debt.
The court action has had no effect on the nation's third-largest drugstore chain, said Rite Aid spokeswoman Karen Rugen.
"We've been moving ahead now for the past four years," she said. "Martin Grass hasn't been here for four years."