Rite Aid Corp.'s former chief executive, Martin L. Grass, wants a federal judge to reduce his eight-year sentence to less than five years for his role in the company's accounting-fraud scandal.
Grass' attorney said in a memorandum filed last week that he deserves a shorter sentence because his crimes weren't aimed at enriching himself, that the cost of his crimes was overstated and that other similar defendants have received less time.
Grass pleaded guilty in June 2003 to conspiracy to defraud the company and its shareholders and conspiracy to obstruct justice. He is imprisoned in Florida.
The 3rd U.S. Circuit Court of Appeals in May gave Grass a new sentencing hearing in light of a U.S. Supreme Court decision earlier this year that invalidated the federal guidelines under which Grass had received eight years.
Grass, 51, is to be resentenced Aug. 11 and is seeking a prison term of no more than four years, nine months.
His lawyer Mark T. Stancil argued that the value of backdated severance-benefits letters Grass issued to his former employees after he left the company were improperly counted against him.
"Protecting vulnerable longtime employees, with no quid pro quo or other personal enrichment motive, is not on a moral par with outright greed," Stancil wrote.
At sentencing in May 2004, Grass apologized to Rite Aid, its shareholders and employees "for the harm caused to them" but insisted he did not intend to profit personally from his crimes.
Grass argues his misdeeds did not cause Rite Aid's stock price to tumble from a high of $51 a share to $12 by September 1999 — noting that the accounting problems didn't become public until the following month.
"The law does not permit this court to sentence Mr. Grass for bad business decisions — although Mr. Grass' growth strategy for Rite Aid was unwise, there is not a shred of evidence that he is criminally responsible for Rite Aid's larger misfortune," Stancil wrote.
After Grass was forced out in October 1999, the company retroactively lowered net earnings by $1.6 billion.
Grass' five-year sentence on the obstruction count, Stancil argued, is disproportionately higher than that given to some other recent high-profile defendants in federal obstruction cases, including investment banker Frank Quattrone and lifestyle guru Martha Stewart.
Grass also argues that his family relationships and his personal character — including charitable donations — warrant a lower prison term. He said he spends about 14 hours a week tutoring other inmates at the federal prison.
Assistant U.S. Attorney Kim Douglas Daniel said his office's reply to Grass' memorandum will be filed Wednesday.
"Suffice to say, I think for now, that we believe the guideline calculation was a good calculation last year, and it did take everything properly into account," Daniel said.
Four high-ranking Rite Aid executives also pleaded guilty to charges related to the investigation. A sixth man, former company vice chairman and chief counsel Franklin Brown, was found guilty at trial of 10 criminal counts and received 10 years.
