Marsh Inks IRS Settlement With Former CEO

Marsh Supermarkets Inc. has reached a settlement with the Internal Revenue Service regarding some $5 million in personal travel and entertainment expenses it reimbursed to its former CEO Don Marsh.

The settlement was revealed last week in court documents filed by the Indianapolis-based grocery chain in its ongoing legal dispute with Don Marsh, who it claims defrauded it of millions of dollars by using the retailer to bankroll extravagant trips, vacation homes and personal relationships with females.

According to local reports, however, new allegations revealed in last week’s court filing provide additional details regarding Don Marsh’s use of company funds, including a trip to Russia and his alleged interest in sponsoring a Russian ice ballet tour in the United States. While the tour never occurred, a report in the Indianapolis Business Journal (IBJ) said, “Marsh used company funds to enter into two consulting agreements with a Russian woman who was to serve as the director of the ice ballet, according to the document.

“The company alleges that Don Marsh had a sexual relationship with her for at least a few years and used the company plane to visit her in New York City, where she had an apartment paid for by Marsh Supermarkets. Don Marsh also used the company plane a half-dozen times to pursue a sexual relationship with a high school friend who lived in Smyrna, Tenn.,” the IBJ said, quoting court documents, which went on to say that “the company has documentation for just one flight to Tennessee.”

Attorneys representing Don Marsh maintain the allegations are an attempt to tarnish their client’s reputation.

As for the IRS settlement, Marsh Supermarkets agreed to pay a “negligence penalty in connection with the disallowed deductions” it submitted for the $5.3 million in personal expenses Don Marsh racked up from April 2004 to September 2006, the period covered by an IRS audit.

Marsh was terminated from the 100-store regional retailer that bears his name in September 2006, following its $88 million acquisition by Florida-based Sun Capital Partners, plus the assumption of $237 million in debt.

When it filed its suit in April 2009 against Don Marsh, the supermarket company alleged that the expenses for which it reimbursed him, including use of the company jet and petty cash, had become the subject of an IRS audit.

Don Marsh has a counterclaim pending against Marsh Supermarkets.