Ethics Newsline®

NEW YORK
For the second time in less than a month, a federal judge has rejected a guilty plea in one of the country’s high-profile crackdowns on corporate fraud — this time nixing the deal between prosecutors and Martin Grass, the former chief executive of Rite Aid.

Grass is accused of heading up an accounting scam that inflated profits, hid losses, and forced the nation’s third-largest pharmacy chain into a $1.6 billion restatement, reported the Associated Press.

Facing criminal charges and up to ten years in prison, Grass copped a deal just days before his case was to go to trial. That deal — a guilty plea on just two counts — would have given him eight years in prison, with time off for cooperating with prosecutors, noted the AP.

Last week, U.S. District Judge Sylvia Rambo killed the deal, saying she agreed with the U.S. Probation Office that the plea arrangement was too lenient in light of Grass’s alleged role as head of the conspiracy.

“Based on the court’s intimate knowledge of [Grass's] role in the events underlying his guilty plea, the court finds it would not serve the ends of justice,” Rambo wrote, saying he should face the maximum sentence.

Rambo dismissed contentions that Grass’s cooperation should ease his way, saying that he pleaded guilty only days before the trial was to begin and after the court had spent nearly $13,000 selecting a jury.

She also said Grass should not get preferable treatment simply because his plea deal, which included $3.5 million in fines and restitution, involved more cash than required by federal sentencing guidelines.

Lightening his sentence because of the agreed-upon monies, might “give the perception to the public that certain criminal defendants can buy a sentence,” she noted, according to the AP.

Rambo is expected to formally reject the guilty plea on April 29, after which prosecutors and defense lawyers — all of whom had urged her to accept the plea deal — have the chance to strike a second deal.

Last week’s development came shortly after a federal judge in Texas rejected the plea deal of former Enron executive Lea Fastow, insisting that he would not allow his hands to be tied during her sentencing.