Judge Dismisses One Criminal Charge against Three Former Rite Aid Executives
U.S. Middle District Senior Judge Sylvia H. Rambo dismissed a count that sought forfeiture of the executives' 1998 bonuses and an 83-acre Fairview Twp. property bought by a real estate partnership co-owned by Martin L. Grass, Rite Aid's former chairman and chief executive officer.
Grass, along with Franklin C. Brown, former vice chairman and general counsel, and Frank Bergonzi, former chief financial officer, were accused of harming three financial institutions through the improper payments from Rite Aid accounts for the bonuses and the property purchase.
The government argued that the bank that processed the bonuses was harmed because it lost interest and incurred expenses. Two other banks were harmed through the land sale, the government said.
Prosecutors contended the bonuses were improper since the executives were not entitled to them because they had inflated the company's earnings. The land deal was improper, the government claimed, because company money was used to buy land on behalf of a private real estate company in which Grass was a partner.
"Under the government's theory," Rambo wrote in an opinion issued Tuesday, "any time a wire fraud causes a bank to transfer funds, criminal forfeiture would be appropriate without a showing that the financial institution suffered a loss or was exposed to some tangible, realistic risk.
"This argument stands in stark contrast to the holdings of numerous courts, including this court, that the mere transfer of funds does not affect a financial institution," she concluded.
Dismissal of the forfeiture count leaves the three executives facing several other charges returned in an indictment last June 21. Grass and Brown each are charged with 35 counts ranging from fraud to obstruction of justice. Bergonzi faces 27 fraud-related charges.
The charges stem from an overstatement of $1.6 billion in Rite Aid's earnings in the late 1990s. Their trial is scheduled for June 9.
Grass, along with Franklin C. Brown, former vice chairman and general counsel, and Frank Bergonzi, former chief financial officer, were accused of harming three financial institutions through the improper payments from Rite Aid accounts for the bonuses and the property purchase.
The government argued that the bank that processed the bonuses was harmed because it lost interest and incurred expenses. Two other banks were harmed through the land sale, the government said.
Prosecutors contended the bonuses were improper since the executives were not entitled to them because they had inflated the company's earnings. The land deal was improper, the government claimed, because company money was used to buy land on behalf of a private real estate company in which Grass was a partner.
"Under the government's theory," Rambo wrote in an opinion issued Tuesday, "any time a wire fraud causes a bank to transfer funds, criminal forfeiture would be appropriate without a showing that the financial institution suffered a loss or was exposed to some tangible, realistic risk.
"This argument stands in stark contrast to the holdings of numerous courts, including this court, that the mere transfer of funds does not affect a financial institution," she concluded.
Dismissal of the forfeiture count leaves the three executives facing several other charges returned in an indictment last June 21. Grass and Brown each are charged with 35 counts ranging from fraud to obstruction of justice. Bergonzi faces 27 fraud-related charges.
The charges stem from an overstatement of $1.6 billion in Rite Aid's earnings in the late 1990s. Their trial is scheduled for June 9.