A former Rite Aid Corporation vice president and a New Jersey businessman agreed to plead guilty in connection with a $14.6 million surplus inventory sales fraud and kickback scheme.
Timothy P. Foster, 65, of Portland, Oregon, a former Rite Aid vice president, was charged with making false statements to authorities. Jay Findling, 54, of Manalapan, New Jersey, was charged with conspiracy to commit wire fraud.
Both defendants agreed to plead guilty and cooperate with the government. Findling’s plea agreement obligates him to make a $11.6 million lump sum forfeiture payment to the government, the DOJ said.
Foster voluntarily surrendered $2.9 in cash to the FBI. The DOJ said he lied when the FBI interviewed him in January 2014. He denied working with Findling to defraud Rite Aid. Foster recanted when he was interviewed again in May 2014. During that interview he surrendered the cash kickbacks he had taken from Findling.
It was Foster’s job to liquidate surplus Rite Aid inventory across the United States. He and Findling tricked Rite Aid into believing the surplus inventory had been sold to Findling’s company, J. Finn Industries LLC. Instead they sold the surplus to third parties for more money than they reported to Rite Aid. Findling would then kick back a portion of his profits to Foster.
The nine-year scheme ended in 2010 when Foster resigned from Rite Aid. The DOJ said Findling received at least $87.4 million from the real buyers of the surplus Rite Aid inventory. He and Foster paid just $72.8 million to Rite Aid. Findling was left with $14.6 million in profits and paid Foster $2.9 million from that amount.
The false statement and conspiracy counts are punishable by up to 5 years in prison. No date has been set for Foster and Findling to appear in court and enter their guilty pleas.
Last month, Rite Aid Corp. agreed to pay $3 million to settle a False Claims Act suit that alleged it used gift cards to entice Medicare and Medicaid beneficiaries to transfer their prescriptions to its pharmacies. A whistleblower was awarded $500,000 under the FCA.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.