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Former Marsh CFO sought out bankruptcy lawyers

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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.
 

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  1. He TIL team,please zap this comment too since it was merely marking a scammer and not reflecting on the story. Thanks, happy Monday, keep up the fine work.

  2. You just need my social security number sent to your Gmail account to process then loan, right? Beware scammers indeed.

  3. The appellate court just said doctors can be sued for reporting child abuse. The most dangerous form of child abuse with the highest mortality rate of any form of child abuse (between 6% and 9% according to the below listed studies). Now doctors will be far less likely to report this form of dangerous child abuse in Indiana. If you want to know what this is, google the names Lacey Spears, Julie Conley (and look at what happened when uninformed judges returned that child against medical advice), Hope Ybarra, and Dixie Blanchard. Here is some really good reporting on what this allegation was: http://media.star-telegram.com/Munchausenmoms/ Here are the two research papers: http://www.sciencedirect.com/science/article/pii/0145213487900810 http://www.sciencedirect.com/science/article/pii/S0145213403000309 25% of sibling are dead in that second study. 25%!!! Unbelievable ruling. Chilling. Wrong.

  4. Mr. Levin says that the BMV engaged in misconduct--that the BMV (or, rather, someone in the BMV) knew Indiana motorists were being overcharged fees but did nothing to correct the situation. Such misconduct, whether engaged in by one individual or by a group, is called theft (defined as knowingly or intentionally exerting unauthorized control over the property of another person with the intent to deprive the other person of the property's value or use). Theft is a crime in Indiana (as it still is in most of the civilized world). One wonders, then, why there have been no criminal prosecutions of BMV officials for this theft? Government misconduct doesn't occur in a vacuum. An individual who works for or oversees a government agency is responsible for the misconduct. In this instance, somebody (or somebodies) with the BMV, at some time, knew Indiana motorists were being overcharged. What's more, this person (or these people), even after having the error of their ways pointed out to them, did nothing to fix the problem. Instead, the overcharges continued. Thus, the taxpayers of Indiana are also on the hook for the millions of dollars in attorneys fees (for both sides; the BMV didn't see fit to avail itself of the services of a lawyer employed by the state government) that had to be spent in order to finally convince the BMV that stealing money from Indiana motorists was a bad thing. Given that the BMV official(s) responsible for this crime continued their misconduct, covered it up, and never did anything until the agency reached an agreeable settlement, it seems the statute of limitations for prosecuting these folks has not yet run. I hope our Attorney General is paying attention to this fiasco and is seriously considering prosecution. Indiana, the state that works . . . for thieves.

  5. I'm glad that attorney Carl Hayes, who represented the BMV in this case, is able to say that his client "is pleased to have resolved the issue". Everyone makes mistakes, even bureaucratic behemoths like Indiana's BMV. So to some extent we need to be forgiving of such mistakes. But when those mistakes are going to cost Indiana taxpayers millions of dollars to rectify (because neither plaintiff's counsel nor Mr. Hayes gave freely of their services, and the BMV, being a state-funded agency, relies on taxpayer dollars to pay these attorneys their fees), the agency doesn't have a right to feel "pleased to have resolved the issue". One is left wondering why the BMV feels so pleased with this resolution? The magnitude of the agency's overcharges might suggest to some that, perhaps, these errors were more than mere oversight. Could this be why the agency is so "pleased" with this resolution? Will Indiana motorists ever be assured that the culture of incompetence (if not worse) that the BMV seems to have fostered is no longer the status quo? Or will even more "overcharges" and lawsuits result? It's fairly obvious who is really "pleased to have resolved the issue", and it's not Indiana's taxpayers who are on the hook for the legal fees generated in these cases.

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