Rite Aid Executive’s Federal Trial to Begin

Opening statements begin today in the federal fraud and conspiracy trial of a former Rite Aid Corp. executive accused of inflating the company’s financial performance and then obstructing an investigation.

Franklin C. Brown, 75, was the drugstore chain’s longtime general counsel and former vice chairman. He faces 11 criminal charges, including conspiracy to defraud, conspiracy to obstruct justice and tampering with a witness.

Five other former Rite Aid executives have pleaded guilty to federal charges and are awaiting sentencing, including former Chief Executive and Chairman Martin L. Grass, 49, and former Chief Financial Officer Franklyn M. Bergonzi, 58.

All five could be called as witnesses against Brown during the trial in Harrisburg, Pa.

Brown was indicted in June 2002 and accused of conspiring with Grass and Bergonzi to inflate Rite Aid’s financial statements during the late 1990s, a period when the company’s stock soared. Rite Aid, the nation’s third-largest pharmacy chain, was compelled in 2000 to lower net earnings by $1.6 billion because of accounting irregularities. The Camp Hill, Pa.-based company operates 3,386 stores in the United States.

Other charges against Brown include wire fraud, lying to the Securities and Exchange Commission, conspiring to obstruct justice, obstructing a grand jury and witness tampering.

A major element of the case against Brown concerns the details of company accounting methods and financial practices. Potential jurors were grilled about any accounting training in their backgrounds, from college courses to work experience.

Both sides are expected to put on witnesses who will try to simplify the arcane accounting rules and practices employed at large firms such as Rite Aid.