ILNews

Former Marsh CFO sought out bankruptcy lawyers

Back to TopCommentsE-mailPrintBookmark and Share

A former top executive of Marsh Supermarkets Inc. became so concerned about the company’s deteriorating finances less than a decade ago that he took the desperate step of meeting with bankruptcy lawyers.

Doug Dougherty, a key witness in the civil trial of former CEO Don Marsh and Marsh's former chief financial officer, testified Friday morning that his warnings of possible financial collapse largely went ignored by his boss at the time.

“I was getting more calls from vendors that had some concern about our ability to pay,” Dougherty said.

Dougherty began receiving calls from vendors in late 2004 and early 2005, about a year-and-a-half before Florida-based Sun Capital Partners acquired the locally based supermarket chain. Marsh Supermarkets says Don Marsh continued to treat the company as his personal checkbook even after the CFO warned of financial problems.

Marsh Supermarkets accuses the former CEO of using company funds to pay more than $3 million in personal expenses. Marsh, 75, spent 38 years leading the public company before it was purchased by Sun Capital.

Dougherty told jurors he expressed his concerns about the company’s finances to Marsh, who reassured him “not to worry about it” because Marsh Supermarkets is in “better financial shape than he knows.”

Don Marsh testified Wednesday that he didn’t agree with company directors that the company was in financial distress.

“Some people felt that way,” Marsh said. “I didn’t.”

But Dougherty said Friday that he became increasingly worried because the company planned to refinance a line of credit and he didn’t believe it would qualify for satisfactory financing terms if it was performing poorly.

Dougherty had served as the company’s CFO since 1994 and was a veteran accountant who previously held similar positions at several other companies, including Topeka, Kan.-based Payless Shoesource Inc.

His relationship was often rocky with Don Marsh, who thought Dougherty’s business style was “too conservative,” he told jurors.

“There was a lot of conflict,” Dougherty testified. “You wouldn’t know if you were dealing with a rational businessman. He threatened to fire me many times.”

Don Marsh did just that in May 2005, when he told Dougherty he needed to be gone by the time Marsh returned from a five-day trip. Dougherty said Marsh never gave him a reason.

Earlier in the trial, Don Marsh told jurors: “I felt like he wasn’t performing the way I thought he should.”

After his replacement quit, however, Dougherty returned to Marsh Supermarkets in December 2005. At the time, Marsh was a $1.7 billion company with more than 115 grocery stores and 160 Village Pantry gas stations.

David Herzog, Marsh Supermarkets' lawyer, asked Dougherty why he would want to return seven months after being fired.

“I knew losing two CFOs in that time would be very difficult for a company to get terms from vendors, and there were 10,000 jobs on the line of people I liked,” Dougherty responded.

Before his firing, directors of Marsh Supermarkets in June 2004 signed off on a company code of conduct following federal passage of the Sarbanes-Oxley Act, a high-profile law which mandates that top management of public companies certify the accuracy of financial information.

But jurors learned earlier in the trial that Marsh continued to use the company jet for personal reasons, including numerous extramarital affairs, even after his company adopted the code of conduct to discourage financial fraud within the company.

Marsh testified Thursday that he’s “always been open and honest with the company.”

Dougherty, however, said Friday that the code of conduct was never publicized within the company because “my understanding was that Mr. Marsh didn’t want to widely distribute” it.

Lawyers for Don Marsh began cross-examining Dougherty early Friday afternoon.

On Thursday, Don Marsh’s lawyer revealed he owes more than $500,000 in federal taxes from an IRS audit that found "disallowed deductions" for personal expenses he racked up from April 2004 to September 2006.

The trial, which began Monday, is expected to last another week.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. The fee increase would be livable except for the 11% increase in spending at the Disciplinary Commission. The Commission should be focused on true public harm rather than going on witch hunts against lawyers who dare to criticize judges.

  2. Marijuana is safer than alcohol. AT the time the 1937 Marijuana Tax Act was enacted all major pharmaceutical companies in the US sold marijuana products. 11 Presidents of the US have smoked marijuana. Smoking it does not increase the likelihood that you will get lung cancer. There are numerous reports of canabis oil killing many kinds of incurable cancer. (See Rick Simpson's Oil on the internet or facebook).

  3. The US has 5% of the world's population and 25% of the world's prisoners. Far too many people are sentenced for far too many years in prison. Many of the federal prisoners are sentenced for marijuana violations. Marijuana is safer than alcohol.

  4. My daughter was married less than a week and her new hubbys picture was on tv for drugs and now I havent't seen my granddaughters since st patricks day. when my daughter left her marriage from her childrens Father she lived with me with my grand daughters and that was ok but I called her on the new hubby who is in jail and said didn't want this around my grandkids not unreasonable request and I get shut out for her mistake

  5. From the perspective of a practicing attorney, it sounds like this masters degree in law for non-attorneys will be useless to anyone who gets it. "However, Ted Waggoner, chair of the ISBA’s Legal Education Conclave, sees the potential for the degree program to actually help attorneys do their jobs better. He pointed to his practice at Peterson Waggoner & Perkins LLP in Rochester and how some clients ask their attorneys to do work, such as filling out insurance forms, that they could do themselves. Waggoner believes the individuals with the legal master’s degrees could do the routine, mundane business thus freeing the lawyers to do the substantive legal work." That is simply insulting to suggest that someone with a masters degree would work in a role that is subpar to even an administrative assistant. Even someone with just a certificate or associate's degree in paralegal studies would be overqualified to sit around helping clients fill out forms. Anyone who has a business background that they think would be enhanced by having a legal background will just go to law school, or get an MBA (which typically includes a business law class that gives a generic, broad overview of legal concepts). No business-savvy person would ever seriously consider this ridiculous master of law for non-lawyers degree. It reeks of desperation. The only people I see getting it are the ones who did not get into law school, who see the degree as something to add to their transcript in hopes of getting into a JD program down the road.

ADVERTISEMENT