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Marsh Supermarkets rests case against former CEO

February 13, 2013

Lawyers for Don Marsh got their first chance to go on the offensive Wednesday after Marsh Supermarkets Inc. rested its case against the company’s former CEO.

The locally based grocery chain is suing Don Marsh in an attempt to recoup more than $3 million in what it alleges are personal expenses he charged to the company before Florida-based Sun Capital Partners purchased it in 2006.

Lawyers for Don Marsh called as their first witness P. Lawrence Butt, the company’s former corporate counsel.

Butt said he once traveled to Russia for a week as Don Marsh explored business opportunities there, meeting with Nadia Kovarskaya. Her name has been prevalent during the nearly two-week trial, as Don Marsh admitted to jurors that he had numerous extramarital affairs, including a tryst with Kovarskaya.

Butt, however, told jurors he was unaware of the affair and believed Don Marsh’s relationship with her was legitimate business. Kovarskaya had a consulting agreement with a Marsh Supermarkets subsidiary called Marsh Cultural, he said, and Don Marsh was exploring whether to sponsor a Russian ice ballet in the United States.

Don Marsh admitted to jurors that he visited Kovarskaya about twice a month in the year 2000 while he put her up in a New York City apartment, part of the expenses Marsh Supermarkets is trying to recover.

Earlier Wednesday, Don Marsh's son David concluded his testimony, restating his belief to jurors that the numerous trips he and others took were essential to the business of Marsh Supermarkets Inc.

David Marsh, who served as the company's president, remained adamant that the trips he took with either his family or father benefitted the company, even when presented with thousands of dollars of charges relating to a 10-day trip he and his then-wife took to Beijing in May 2005.

The charges included a $10,000 balance owed to the Young Presidents’ Organization, which was holding a conference in the Chinese city, along with airline tickets that cost $8,099 each.

Two months later, he and his father jetted to Alaska on the company plane for Marsh Supermarkets’ retreat.

“We believed it was very, very effective for the company,” David Marsh said when questioned by company lawyer David Herzog.

In 2005 alone, David Marsh took roughly 25 trips to such far-reaching destinations as Beijing, Toronto and Thailand. David Marsh contended that he or company suppliers picked up the tab for some of the travels when necessary.

David Marsh testified that he often needed the company jet—he sometimes took as many as three trips in a single month—because his time was valuable to Marsh Supermarkets.

He told jurors he gave “120 percent” to the company and often was the last person to leave the office in the evenings.

That prompted Herzog to respond, “forgive me, but you weren’t at the company very much.”

Marsh Supermarkets launched a legal fight against David in 2006 after he sued the company, alleging it shorted him $102,000 on his $2.1 million severance package. The company shot back that he had used the company “as his personal checkbook,” submitting expenses from family trips, and should have to repay more than $750,000. The parties reached a confidential settlement in 2007.

David Marsh testified for about an hour early Tuesday evening before Judge Sarah Evans Barker halted proceedings.

He said then that Marsh Supermarkets picked up the tab for a lease on a new BMW and $25,500 in financial planning services because he believed his contract with the company allowed for it.

“It’s an open-ended clause,” David Marsh said after pointing out a section in his contract that he thinks entitled him to the perks.

David Marsh said he and his father often discussed business while on hunting and fishing trips to Alaska and South Dakota. When Herzog asked why they didn't instead go to an Arby's across the street from company headquarters, David said, "It’s not the same as getting out of town."

In earlier testimony Tuesday, jurors heard from Patrick Calhoun, a former IRS special agent hired by Marsh Supermarkets to investigate Don Marsh's expenses. His job was to identify business and non-business expenses from 1999 to 2006, to determine whether they were "ordinary and necessary."

Calhoun found more than $3.3 million in expenses he said had no benefit to the company.

Here’s a sample:

—$927,210 for “nondeductible outings” that included taxidermy services and hunting licenses.

—$397,616 for professional organization costs that included trips to Young Presidents’ Organization and World Presidents’ Organization meetings.
 
—$625,776 for Marsh family travel expenses .

—$159,169 for “cultural” expenses that included hotel charges for Nadia Kovarskaya, the head of a Russian ice ballet with whom Don Marsh had an affair.

—$315,415 in estate planning services.

—$120,640 in nondeductible credit card expenses that included the purchase of several pairs of boots at an Alaskan store.

—$135,468 in “other” nondeductible expenses, such as gifts for weddings.

—$64,871 in daily per-diem charges that Marsh Supermarkets says Don Marsh collected while also billing expenses to the company.

—$21,500 for cash advances Don Marsh took to spend on trips to such places as Cuba, where credit cards aren’t accepted.

The trial is expected to conclude Friday.
 

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