Secret Tape of Rite Aid Exec Played at His Trial

On a secretly recorded tape played at his trial Thursday, former Rite Aid Corp. executive Franklin C. Brown said the recipient of an allegedly backdated severance letter would provide legal cover if asked about when he received the lucrative document.

On the tape, Brown is heard reassuring former Chief Operating Officer Timothy J. Noonan that the letter to former Vice President Eric Sorkin would not implicate Noonan, saying Sorkin would tell federal investigators he received it before Chief Executive Martin L. Grass left the company in October 1999.

“I would bet a terrible amount that he got it in April 1999 -- as far as he’s concerned,” Brown said on the tape, recorded by the FBI outside a suburban Harrisburg, Pa., shopping center in May 2001.

Prosecutors claim Brown conspired with Grass to fraudulently prepare lucrative severance letters for top executives -- signed by Grass on Rite Aid CEO stationery -- after Grass was no longer employed by the Camp Hill, Pa.-based pharmacy chain.

Noonan, Grass and Sorkin have pleaded guilty to federal charges connected to the investigation, but Brown, 75, has pleaded not guilty and is on trial on fraud and conspiracy charges.

Under cross-examination by Brown’s lawyer Thursday, Noonan agreed that Brown never discouraged him from meeting with federal investigators, nor did Brown ever say that he planned to lie. Noonan said that was not Brown’s style.

“He would just suggest thoughts, opinions,” Noonan said.

Noonan also said he agreed to cooperate with federal investigators in part because of concerns he could face criminal charges for defrauding Rite Aid vendors.

In July 2002, Noonan pleaded guilty to a felony charge of concealing the crimes of others in a deal that capped his potential sentence at three years in prison and a $250,000 fine.

Tapes that Noonan made of other conversations with Brown, played in court Wednesday, showed Brown and Grass eager for clues about the direction of the probe, confident in their ability to defend themselves and even lighthearted about the financial crisis from which the pharmacy chain still is reeling.

“We had an earnings shortfall,” Grass said. “Who the hell knows how big an earnings shortfall we had.”

After an internal investigation into financial problems at Rite Aid, the company was compelled in July 2000 to lower its earnings retroactively by $1.6 billion. The company’s shares, which peaked above $50 in January 1999, rose 17 cents Thursday to $5.42 on the New York Stock Exchange.

Five former Rite Aid executives already have pleaded guilty to federal charges and are awaiting sentencing, including Grass and former Chief Financial Officer Franklyn M. Bergonzi.