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Rite Aid's ex-counsel, 75, goes on trial

HARRISBURG — HARRISBURG - Franklin C. Brown, Rite Aid Corp.'s former chief counsel and vice chairman, went on trial yesterday on charges that he helped inflate the company's financial performance and concealed the fraud from U.S. investigators.

Jury selection was under way for Brown, 75, the last defendant in the case after former Chief Executive Officer Martin Grass and four other defendants pleaded guilty. Prosecutors claim Brown helped Grass inflate income and understate expenses by hundreds of millions of dollars.

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Defense attorney Joseph Metz predicted that Brown, a lawyer for a half-century, will be acquitted of the charges contained in a June 2002 indictment.

"How likely is it that somebody is going to decide to turn into a bad apple at the age of 71 after having had no allegations his whole life?" Metz asked. "The sheer unlikeliness of it probably says more than any single factor."

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Brown is accused of helping Grass and former Chief Financial Officer Frank Bergonzi in a fraud that led Camp Hill, Pa.-based Rite Aid to erase $1.6 billion in net income in July 2000, one of the largest restatements in U.S. history.

Prosecutors say the phony accounting helped boost Rite Aid shares from $12.81 in March 1995 to $50.94 in January 1999.

Grass and Bergonzi, who also pleaded guilty, are helping prosecutors and are to testify against Brown in bids for leniency at sentencing. Brown had been expected to plead guilty to conspiracy to obstruct justice but he backed out on June 26 and chose to go to trial. Opening statements are scheduled for Monday.

Former Rite Aid President Timothy Noonan is expected to guide jurors through six tapes he secretly recorded of Brown for the FBI. Noonan, who pleaded guilty and is cooperating with prosecutors, taped Brown instructing colleagues on impeding U.S. investigations, prosecutors assert.

Prosecutors say Brown incriminates himself on audio and video tapes made by Noonan for his federal handlers from March to May 2001

Metz said that the four hours of tapes won't damage Brown when they're played in their entirety.

Metz said prosecutors have told him they will drop some of the 35 charges against Brown, who is accused of conspiring to defraud Rite Aid, securities fraud, lying to the U.S. Securities and Exchange Commission, mail and wire fraud and obstructing justice.

Shares of Rite Aid fell 6 cents to $5.38 yesterday.


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