© D.L. Crumbley
Rite Aid Fraud Case
Former CEO Martin Glass bragged that the computer used to generate backdated letters had disappeared at sea. “They have no computer. The letters that were done on the computer…they do not have and never will have, unless they use a Trident submarine.”
Wrong. President Timothy Noonan was wearing a wire. He recorded 6 meetings over 10 weeks. Federal investigators heard everything.
CFO Franklyn Bergonzi:
Obtained $30 million in extra profits by dunning Rite Aid’s suppliers for merchandise that was supposedly outdated or damaged (but not so).
Another $75.6 million came from rebates from pharmaceutical firms that had yet to be earned.
Failed to report certain expenses properly.
Increased the useful life of some assets.
The financial restatements wiped out $1.6 billion in profits.
KPMG agreed to pay $125 million fine.
Source: Mark Maremont, “Call To Account: Rite Aid Case Gives Early View of Fraud on Trial,” Wall Street J., June 11, 2003, p. A-6.