Marsh and Legal Issues and Fraud and Retail and Law and Real Estate & Retail

Don Marsh fighting to keep jury from learning he took Fifth

August 18, 2012

 

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Two years ago, fearing he was facing an IRS criminal investigation, Don Marsh invoked the Fifth Amendment more than 200 times while fielding questions from attorneys for Marsh Supermarkets Inc.

Now, attorneys for Don Marsh are trying to ensure that his refusal to answer questions during that 2010 deposition doesn’t come back to haunt him when the grocery chain’s fraud lawsuit against him goes to trial in October.

“It is clear that the company intends … [to] bludgeon Mr. Marsh at trial with the fact that, at one time, he asserted (upon the advice of counsel) his constitutional right against self-incrimination,” attorneys for Marsh, 74, said in an Aug. 7 filing.

“The jury should hear nothing about Mr. Marsh’s previous assertion of his Fifth Amendment privilege,” and allowing it to do so would unfairly cast a cloud over the executive, according to the motion.

Attorneys for the grocery chain have not yet filed a response, but said they intend to oppose the motion.

The Fifth Amendment skirmish is the latest in a string of legal battles to break out since Marsh Supermarkets sued its former CEO in April 2009, saying he improperly charged the grocery chain for millions of dollars in personal expenses. The suit said he treated the company “like his personal checkbook” to bankroll extravagant trips and hide extramarital affairs.

Even though all Marsh groceries are in this geographic region, Don Marsh billed the company for at least 25 international trips from 2000 to 2006, visiting every continent except Antarctica.

Don Marsh, who served as CEO from 1968 until Florida-based Sun Capital Partners bought the company in 2006, contends his travels were justified.

For example, he served as president of the Paris-based Centre for Food Trade and Industry, which conducts research and training for the retail-and-wholesale-food-distribution industries “and looks for trends on a global basis,” a filing said. Don’s involvement in that and similar organizations helped him “identify innovations and advancements in other countries and implement them in the company’s operations.”

After the high-profile lawsuit caught the attention of the Internal Revenue Service, it launched an audit. The agency concluded Marsh Supermarkets had improperly deducted $5.3 million in travel and entertainment expenses submitted by Don Marsh and his son David, the company’s former president, from 2004 to 2006. The company paid a penalty under a settlement reached last year.

Don Marsh received word of the IRS inquiry on July 20, 2010, as the first day of his deposition was wrapping up. His attorneys argue that indications at the time were the criminal division of the IRS had launched the probe, potentially leaving Don Marsh in legal peril.

The IRS ultimately took a softer stance, finding civil negligence on the company’s part. Following Marsh Supermarkets’ settlement last year, Don Marsh reversed course and said he would fully answer questions. His new deposition is scheduled for Aug. 30.

There is no need for the jury to know Don Marsh ever took the Fifth, his attorneys argue, because his doing so did not hinder the company’s discovery efforts. Don Marsh already had spent a whole day answering questions, and dozens of other witnesses also provided testimony. In addition, Don Marsh formally withdrew his invocation of the Fifth in August 2011, giving the other side plenty of advance warning before trial, his attorneys say.

Regardless of which side prevails on this issue, attorneys for the company seem sure to launch a full-scale attack on Don Marsh’s integrity and morals when the two-week trial kicks off Oct. 15.

A filing last year alleged Don Marsh had a sexual relationship for several years with a Russian ice ballerina and that he used the company plane to visit her in New York City, where she had an apartment paid for by Marsh Supermarkets.

Don Marsh also used the company plane a half-dozen times to pursue a sexual relationship with a high school friend who lives in Smyrna, Tenn., the filing said.

But amid the deluge of accusations about his personal life, Don Marsh has scored at least one major legal victory. In May, Judge Sarah Evans Barker ruled that the company must comply with language in his employment agreement requiring it to pick up a portion of his legal fees.

That portion—relating to claims involving the company’s benefit plans—could stick the company with a multimillion-dollar tab. Marsh Supermarkets asked Barker to reverse herself. But in a testy July 27 ruling, she refused.

“We have reached a point in this lawsuit where the procedural posture is oddly reminiscent of Anne Frank’s sagacious remark that, ‘Up to now, [we] always thought bickering was just something children did and that they outgrew it,’” she wrote.

As the dispute between Marsh Supermarkets and Don Marsh “seemingly intensifies, the court would welcome any abatement of the parties’ continued bickering.”•

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