Don Marsh takes lumps as he fights on in court

April 22, 2011

Don Marsh is so hellbent on winning his legal battle with Marsh Supermarkets Inc. that he’s willing to sully his own reputation if that’s what it takes.

His attorneys at Bose McKinney & Evans this month filed excerpts of depositions with board members that make it abundantly clear insiders were alarmed about the massive expenses he submitted for reimbursement in the years before directors decided to terminate him “without cause” in 2006.

Having done so, the Bose attorneys argue, the company triggered a “hell-or-high-water” provision in Don Marsh’s employment agreement that released him from future company claims and allowed him to keep the millions of dollars in severance he’s already received.

marsh-don-mug Marsh

Don Marsh got the ax in September 2006, just after Florida-based Sun Capital Partners bought the locally based grocery chain for $88 million cash, plus the assumption of $237 million in debt.

“The undisputed evidence reveals that Marsh’s board of directors (old and new) were aware of the alleged misconduct by Don before making the decision to terminate his employment such that the company could have pursued a for-cause termination at any point in 2006 if it had chosen to do so,” Bose attorneys argued.

“Marsh made its decision to terminate Don’s employment without cause in 2006 and, under the employment agreement, must live with it.”

The grocery chain hasn’t responded to the filing, which asks Judge Sarah Evans Barker to toss out the company’s 2-year-old lawsuit seeking to recover millions of dollars from Don Marsh, 73. The filing also asks Barker to rule in Don Marsh’s favor in a counterclaim pending against the grocery chain.

Marsh Supermarkets previously scoffed at similar arguments, writing in a filing in 2009 that Don Marsh’s “fraudulent conduct” gives it the right to rescind his employment agreement.

“The company has a lot to say in response to Mr. Marsh’s motion” and will do so in court filing by next month, said David Herzog, chairman of the business litigation group at Baker & Daniels.

The company’s lawsuit charges Don Marsh treated the business “like his personal checkbook” to bankroll extravagant trips, maintain vacation homes and hide relationships with female employees.

Even though all of Marsh Supermarkets’ groceries were in Indiana or adjacent states, Don Marsh traveled globally at the company’s expense. From 2000 to 2006, according to the company, he took at least 25 international trips, visiting every continent except Antarctica.

Don Marsh, the company’s CEO for 38 years, says his travels were justified. Because of his globe-trotting, “Mr. Marsh was able to identify innovations and advancements in other countries and implement them in the company’s operations,” a filing says.

But in depositions taken in recent months, board members said they were not aware of the extent of Don’s reimbursements, which were handled through a different system from other employees’, until a new chief financial officer, John Elbin, began scrutinizing company records in July 2005.

After receiving expense details, “I went ballistic,” board member Steve Huse said in a deposition. He said the payments Marsh received—in the form of cash advances before trips, reimbursement or direct payments for expenses and per-diem payments—appeared to be even greater than the amounts he claimed as expenses.

By early 2006, the board had multiple reasons to oust Don Marsh but chose not to because the company was in financial trouble and wanted to present an air of stability as it worked toward negotiating its sale, said Huse, an Indiana restaurateur.

“I was afraid, the whole board was afraid, if we rocked the boat and the deal fell through, the company might go bankrupt and the shareholders and stakeholders would have no value,” he said.

Board members considered having outside directors Cathy Langham and John Heidt step in to run the company. Instead, they opted to leave Don Marsh’s title unchanged, but to scale back his responsibilities and promote his brother William to president.

“Don seems like he is gridlocked … a no-show,” Huse told fellow board members in an e-mail shortly before the company announced William’s promotion in February 2006. In his deposition, Huse added: “It was his mental condition at the time, and his lack of leadership that was an equal problem.”

Even in better times, Don Marsh was difficult to deal with and had a my-way-or-the-highway management style, company insiders said in their depositions.

Former Chief Financial Officer Doug Dougherty said Don Marsh “threatened to fire me many times a year” before finally following through in 2005.

“Don Marsh walked into my office and said, ‘I am going on a trip. I am going to be gone until, maybe, a week from Friday, and I want you out of here by the time I get back,’” Dougherty said in his deposition.•


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