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Don Marsh says he owes more than $500,000 in back taxes

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The Internal Revenue Service says Don Marsh owes $518,892 in federal taxes stemming from his final years as CEO of Marsh Supermarkets Inc., his lawyer revealed Thursday.

The disclosure came during the fourth day of Marsh’s civil trial. The locally based supermarket chain accuses the former CEO of using company funds to pay more than $3 million in personal expenses. Marsh, 75, spent 38 years leading the company before it was sold to Florida-based Sun Capital Partners in 2006.

Don Marsh's tax debt stems from an IRS audit that found "disallowed deductions" for personal expenses he wracked up from April 2004 to September 2006. Marsh Supermarkets ended up paying a negligence penalty in connection with the findings.

After the audit, the company sent 1099 tax forms to Don Marsh for those years listing $2 million more in compensation than it had originally reported. Marsh said he has yet to pay the $518,892 in back taxes and is unsure how the company calculated the $2 million figure.

“They dumped everything in there,” Marsh said.

The IRS says the debt stems from a tax-law change that required Marsh to count his wife’s expenses on trips they took together as additional income. Marsh testified that his wife frequently flew with him on the company jet to destinations worldwide for what he considered business travel.

Marsh’s testimony on cross-examination Thursday revealed that part of his lawyers’ strategy is to persuade jurors that the frequent trips he took on the company jet were for business and not pleasure.

In earlier testimony, Marsh admitted he took dozens of trips over the years, including several to see mistresses.

Sun Capital Partners terminated Marsh’s contract “without cause” after it took over. It stopped paying his $4.2 million severance in early 2008, after it claims it discovered widespread personal expenses charged to the company.   
 
Marsh is countersuing Sun Capital, claiming the company still owes him about half his severance.

Both sides are expected to call dozens of witnesses during the trial, which began Monday and is expected to last two weeks. Marsh testified for three consecutive days. Only one other witness has appeared on the stand.

The plodding pace of the trial prompted federal Judge Sarah Evans Barker to urge lawyers several times to pick up the pace.

“Let’s push on through this,” the judge told Marsh’s lawyer, Andrew McNeil. “I would like to finish Mr. Marsh and get another witness on the stand today.”

To which McNeil responded: “This is my last [exhibit] in this category.”

“In this category—that’s what worries me,” she shot back.

At times, Marsh’s testimony has been tense. In response to grilling by company attorney David Herzog about his expenses, Marsh at one point said, “Do you want to know something?”

That prompted Barker to warn Marsh that “you better not go there.”

Ann Diebolt, one of Don Marsh’s personal secretaries, followed Marsh on the witness stand. She explained to jurors how she logged Marsh’s personal and business expenses.

Another witness, Terry Landry-Fisher, who was director of Marsh’s floral department, had her depositions summarized in court by lawyers on both sides. Landry-Fisher now lives in California.

Marsh began as CEO in 1968. The company was founded in 1931 in Muncie and went public in 1953. Marsh has testified that his many trips helped him build the company into a billion-dollar corporation.

The trial resumes Friday morning.


 

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  • 500K in income taxes
    No, the IRS did not disallow deductions of $500,000. That is the amount of tax that is due, the amount of taxable income/disallowed deductions is much, much higher than the $500,000 in additional tax.
  • Still In Love
    I'm really enjoying the daily write up by the IBJ, thank you kindly. Keep them coming.
  • Where was the Board?
    I always thought that "boards? are there to watch over the hen house..seems to me that the board is liable for not being good stewards of the company funds..... The other question is why is this just now coming out in the light. Anyone who ever was associated with Don Marsh or his company knew that he was a sleaze when it came to women.Im surprised he never got a harassment charge against him.
  • Board of Directors over sight?
    Per Terry's observation that the BOD kind of dropped the ball on oversight, I would guess that Mr. Marsh had that packed with people who wouldn't challenge him on anything either...there are a lot of BOD's that are a rubber stamp, especially for a guy with his name on the building. This is an interesting case, for sure. This stuff goes on everywhere, but from the testimony so far, you would have to say that Mr. Marsh certainly seemed to think that he could do about anything he wanted and call it business. We will see what the jury thinks...the fact that the Judge is getting impatient with defense counsel would make one think that McNeil is having to work awfully hard to make his point that "it was all business"
  • Marsh
    Disallowed personal deductition of over HALF OF MILLION DOLLARS over 2 years! He didn't know that? No doubt. Indianapolis sure has a who's who of ......
    • Like many who live high on the hog,
      he ends his days in prison. Well, maybe his enjoyment of it all is worth the price he'll pay.
    • It is Easy
      In large organizations like Marsh Supermarkets, it is common for the executives to add in a few personal items on expense accounts, because the money is not really their money. Marsh's personal secretary wrote down what he told her to write down, when it came to expenses or any other corporate action. Personal Secretaries want to keep their job, so rarely do you find a secretary arguing with the boss over expense account reporting. I previously offered that Mr. Marsh still had his day coming with the IRS, and it came sooner than I expected. Don Marsh has a problem and the IRS will not go away following this court event. As for the Marsh claims that he had no knowledge of the changes to the tax code and world events regarding CEO's abusing corporate expense accounts, it appears he was too busy to read the Wall Street Journal, the New York Times, or the Daily News during those business trips to New York. Abuse of corporate power and the misuse of corporate funds does not happen by accident. What, may I ask, was the Board of Directors doing throughout this abuse of power and overstatement of expense spending?
    • Don the dufus
      what a lack of awareness? he probably thought he was above the law too. Damage control as sun capital markets (who owns marsh) can't take the marsh name off their stores soon enough.

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