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Witnesses: Don Marsh’s expenses never questioned

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Lawyers for Don Marsh continue to hammer home their claims that the former supermarket CEO's expenses for lavish travel were widely accepted as normal business costs.

Defense witnesses Mark Varner and Steve May, two top-level accounting executives who worked at Marsh Supermarkets Inc., both testified Thursday in federal court in Indianapolis that company directors and other executives knew about its executive vouchers program.

The so-called e-voucher system has been closely scrutinized by lawyers of Marsh Supermarkets, which is suing Don Marsh in an attempt to recover more than $3 million in company funds it says the former CEO spent on travel, gifts and meals.

May, who served as Marsh Supermarkets’ director of internal controls from January 2003 to December 2006—about the time Florida-based Sun Capital Partners bought the company—said he learned of the e-voucher system from then-CFO Doug Elbin.

Although May recounted that Elbin described it as a “secret accounts system,” Elbin also said it shouldn’t be a “huge concern” to May because the corporate controller knew about it.

Varner was Marsh Supermarkets’ corporate controller from 1991 until he retired in 2007 after a 36-year career at the company. Varner told jurors he actually reported to Elbin and Doug Dougherty, another CFO, during Varner’s tenure.

When one of Don Marsh’s lawyers, Jonathan Mayes, asked Varner whether he was aware of the e-voucher system, he replied: “absolutely, yes.”

Varner said he first became aware of the system in the late 1970s or early 1980s. Much of Don Marsh’s defense rests on his assertions that he submitted his business expenses for reimbursement within the system for many years while paying personal expenses out of his own pocket.

Lawyers for Marsh Supermarkets maintain he used it as an accounting maneuver to hide his lavish spending.

The invoices “demanded some confidentiality,” Varner said, because the expenses might contain business secrets not to be seen by general accounting clerks.

Instead, Karen Workman, Marsh’s director of accounting until 2008, handled most of the invoices, Varner said. She testified Wednesday that higher-ranking company executives approved the expenses.

Varner said that as many as 35 to 40 company directors and executives might have had their expenses paid through the e-voucher system to ensure that confidentiality.

Varner told jurors he provided e-voucher documentation to outside auditors, who, “not to my knowledge,” ever questioned the expenses.

Charles R. Clark, a Muncie attorney and former Marsh board member who approved some of Don Marsh’s expense reports, testified that he also relied on the company’s auditors to voice concerns about expenses.

“I didn’t hear anything, so I didn’t react,” he said, when asked on cross-examination whether he drew any conclusions from a lack of auditor concerns.

Scott Sorensen, a former senior manager at Ernst & Young LLP, Marsh Supermarkets’ auditor at the time, testified Wednesday during cross-examination that it’s not an auditor’s responsibility to detect fraud.

Varner further told jurors that he was involved in due diligence activities leading up to Marsh Supermarkets’ sale in September 2006 to Sun Capital. During the process, he provided the private-equity firm with “volumes” of reports detailing Don Marsh’s travel and entertainment expenses.

He testified that Sun Capital never raised concerns about Marsh’s treating his travel costs as business expenses.

May later told jurors that, as the sale of Sun Capital approached, he was tasked by Dougherty to summarize in a report the contents of e-voucher documents for the fiscal years 2005 and 2006.

May presented his findings to Marsh Supermarkets' audit committee, in which he said the firm's internal financial control system showed “significant deficiencies.”

He described the system to jurors as “average” to “below average.” He maintained that the company’s CFO is charged with establishing internal controls.

On cross-examination, however, he admitted that Don Marsh and his son David Marsh, the company’s former president and chief operating officer, also shared in the responsibility.

“Between the CEO and the CFO, you would expect the CEO to contribute more to the tone at the top of the company,” Ryan Hurley, a lawyer for Marsh Supermarkets, asked May during cross examination.

“Yes,” replied May.

The defense expects to rest its case Thursday afternoon, which would leave closing arguments and jury instructions for Friday morning. The jury could get the case as soon as mid-morning Friday.
 

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  • Re: All About Slander and Money
    What Don did was absolutely stealing...ABSOLUTELY!! However, he did not steal from Sun Capital, he stole from the stock holders. The share holders are the people who should have sued him. Sun Capital is just as greedy and immoral as Don. @Terry You asked where the Board of Directors was. The board was right there all along. They were a group of "yes" men that Don put there as soon as he became president. I find it interesting that nobody ever talks about Alan, one of Don's brothers, who fought Don his whole career. He was a very honest business man who was constantly opposing Don and who Don threatened to have killed. Ermal Marsh, Don's father and the founder of Marsh, saw problems arising from nepotism on the horizon and was flying his plane to Chicago to facilitate the sale of Marsh when he crashed. It's truly sad that, in regards to Marsh Supermarkets, Don's utter lack of scruples will be remembered rather than the incredible business that was built by an outstanding business man (Ermal).
  • Local
    Local owners support local causes a lot more than out of town owners. That became obvious once the banks were no longer locally based.
  • Community Support
    I don't think it offsets anything, but the charity and support from Marsh over the years was above and beyond what most companies do. Many would rather pay themselves or pay for other things - which by the way are both tax deductions - but Marsh chose to support numerous activities in the city and state.
  • Mistress
    I just saw a picture of his Russian Mistress,,,oh my....so the extra $$$$ I spent at Marsh over the years went to make sure that Don Marsh could have a mistress? The sad thing is that everyone at Marsh knew that he was doing this stuff.
  • We are so tired of hearing about the Marshes
    I always knew he was a player and I knew one of the girls he ''played with''. Boy oh boy! What she had to say about him behind his back. But, as to saying that the charity given by Marsh grocery is an offset. That doesn't count. That was all a tax write-off and was for the benefit of the company.
  • All About Slander and Money
    Sun Capital is asking for 3.5 million. The Marsh family over the years has donated more than 10x's that amount to the communities it serves. It's so sad that no one has mentioned that. The shareholders never sued -just the greedy investment firm that knew about all this before they bought Marsh. The only thing this suit is really about is greed and making a family look bad. Nothing more or less.
    • Very Subjective
      Everyone thinks that Don is a crooks, but there is a fine line between what is appropriate and that which is not. If they thought there was a problem, the board and other officers had a duty to do something. Now we know Sun reviewed the account before the purchase. From what I have read, although seemingly lavish, these expenses were justifiable and Sun has no case.
    • White collar crime?
      The real crime here isn't Don Marsh's profligate spending, it's that the corporate culture accepts this as standard operating procedure among executives. (P.S. Scott Olson is doing a great job on this story!)
    • Illogical
      Let me get this right ... if Don Marsh had robbed a local bank, but the bank teller, bank mgr, bank security, etc., all looked the other way as he walked out, it would be they who would be culpable, legally liable, etc.? And Don Marsh would use their cooperation as his defense? Laughable. Does the man have no pride? 4 (known) affairs + countless other misdeeds. How much $$$$$ will Marsh Supermarkets spend litigating this case? There go the in-store discounts for the next few years (only partly kidding).
    • Ultimate fairness
      Sun states Don Marsh's expenses were overstated. This falsely reduced the company results implying Sun undervalued the company. If Sun recoups these expenses, will it adjust its initial price paid higher and pay the previous shareholders.
    • It makes sense now
      It's all making sense now, why Marsh's prices were so much higher than other grocery stores. They needed to be in order to support Don and David Marsh's seedy, crooked lifestyles. Sad thing is that so many people shopped there religiously and paid higher prices which just fed the Marsh fellas' scheme. Just my opinion...
    • JOKE!
      this is becoming a joke! seriously, do these fools really think that we are to believe that all these personal vochers were just ok? its obvious they used Marsh as a piggy bank. anyone would know what they are doing is wrong, but nobody will say anything bc how can you tell the CEO what to do? these CEOs have been crooks for decades, yet our pathetic legal system does nothing.
    • Where Did The Buck Stop
      This is classic! The CEO, the guy with the power to make you and your job disappear, spends the company's money like a drunken sailor, and he asserts that you are the person, or CFO if you choose, that allowed him, the CEO, to waste company funds as he determined were important to him, the CEO. Where was the Board of Directors? Who was in charge of the Audit Committee? Who was in charge of Executive Oversight? Were there any adults in the room?

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