ILNews

Sun Capital execs 'shocked' by Marsh financials

Back to TopCommentsE-mailPrintBookmark and Share

Any feelings of satisfaction that executives of Sun Capital Partners had after completing its acquisition of Marsh Supermarkets Inc. quickly turned to “shock and surprise,” a managing director of the private-equity firm told jurors Tuesday.

Sun Capital bought the locally based supermarket chain in 2006 and began paying longtime CEO Don Marsh a $4.2 million severance after the two parties agreed he would no longer remain with the business.

But Marsh Supermarkets, under the direction of Sun Capital, stopped paying Marsh after it says it discovered millions of dollars of travel expenses, some related to visits to mistresses, that he billed to the company.

Marsh’s trips, many of them via the company jet, are at the crux of a civil lawsuit brought by the supermarket chain. It accuses him of using company funds to pay more than $3 million in personal expenses. Marsh, 75, spent 38 years leading the public company before Sun bought it.

“We said, ‘This can’t be true that this went on,’” recalled Scott King, a managing director of Sun Capital. ‘What do we do?’”

What Marsh Supermarkets did was terminate its agreement with Don Marsh about 18 months after the sale, paying him just half his severance. After Marsh Supermarkets sued Don Marsh in federal court in 2009, he countersued, asserting the company improperly halted his post-retirement payouts in 2008.

The decision to halt payment weighed on Marsh Supermarkets, which spent more than a year investigating the company’s finances while worrying about any backlash it might suffer from bad press.

At the time, the iconic chain, founded by Don Marsh’s father in 1931, had more than 100 stores in Indiana, Illinois and Ohio. Moreover, Marsh was one of Indiana’s highest-profile executives for decades and frequently appeared in the company’s TV advertising.

“His last name’s on the building,” King said. “It could harm the business from a PR standpoint to have this out in the papers.”

Marsh Supermarkets ultimately chose to attempt to recoup the expenses from Marsh in court, because “it was not his money to spend; it was the shareholders',” King said.

Sun Capital, which specializes in acquiring companies with $50 million to $500 million in annual revenue, previously had not acquired a company as large as Marsh.

During cross-examination of King, Andrew McNeil, Don Marsh’s lawyer, questioned whether the acquisition was too big for Sun Capital. It took several months for the deal to close, rather than the 30 days it typically takes the private-equity firm to conclude a purchase.

Without Sun Capital, Marsh Supermarkets likely would have ended up in bankruptcy, King said. A former Marsh CFO told jurors Friday that he sought out bankruptcy lawyers for advice.

Sun Capital replaced Don Marsh with Frank Lazaran, a veteran supermarket executive who arrived to a CEO's office devoid of documents or files. He testified via deposition Tuesday that he didn’t understand Marsh Supermarkets’ e-voucher system used to track Don Marsh’s expenses.

“I'd never seen anything like it,” Lazaran said in his deposition.

Attorneys for Don Marsh defend the expenses, saying they were within the boundaries of his employment contract. And they say his extensive travels were justified to promote the company and stay on top of trends in food retailing.

Also testifying Tuesday morning was Patrick Calhoun, a former IRS special agent hired by the supermarket chain to look into Don Marsh's expenses from 1999 to 2006 and determine whether they were "ordinary and necessary."

Among the discoveries he discussed on the stand:

— $927,210 in "non-deductible outings" that were improperly expensed. Examples include taxidermy services and hunting licenses.

— $804,141 in costs for personal use of the company airplane, versus $906,997 for business use. After reviewing aircraft records, Calhoun determined that 47 percent of the flights were for personal business, far more than the 10 percent that Don Marsh reported.

Lawyers for Marsh Supermarkets are expected to wrap up their case against Don Marsh on Tuesday afternoon and could call David Marsh, Don Marsh’s son, as their last witness. David worked under his father as company president.

Marsh Supermarkets launched a legal fight against David in 2006 after he sued the company, alleging it shorted him $102,000 on his $2.1 million severance package. The company shot back that he had used the company “as his personal checkbook,” submitting expenses from family trips, and must repay more than $750,000. The parties reached a confidential settlement in 2007.

Don Marsh’s trial is expected to last two weeks and should conclude Friday.
 

Originally published in IBJ Daily, a sister publication of Indiana Lawyer.

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. He called our nation a nation of cowards because we didn't want to talk about race. That was a cheap shot coming from the top cop. The man who decides who gets the federal government indicts. Wow. Not a gentleman if that is the measure. More importantly, this insult delivered as we all understand, to white people-- without him or anybody needing to explain that is precisely what he meant-- but this is an insult to timid white persons who fear the government and don't want to say anything about race for fear of being accused a racist. With all the legal heat that can come down on somebody if they say something which can be construed by a prosecutor like Mr Holder as racist, is it any wonder white people-- that's who he meant obviously-- is there any surprise that white people don't want to talk about race? And as lawyers we have even less freedom lest our remarks be considered violations of the rules. Mr Holder also demonstrated his bias by publically visiting with the family of the young man who was killed by a police offering in the line of duty, which was a very strong indicator of bias agains the offer who is under investigation, and was a failure to lead properly by letting his investigators do their job without him predetermining the proper outcome. He also has potentially biased the jury pool. All in all this worsens race relations by feeding into the perception shared by whites as well as blacks that justice will not be impartial. I will say this much, I do not blame Obama for all of HOlder's missteps. Obama has done a lot of things to stay above the fray and try and be a leader for all Americans. Maybe he should have reigned Holder in some but Obama's got his hands full with other problelms. Oh did I mention HOlder is a bank crony who will probably get a job in a silkstocking law firm working for millions of bucks a year defending bankers whom he didn't have the integrity or courage to hold to account for their acts of fraud on the United States, other financial institutions, and the people. His tenure will be regarded by history as a failure of leadership at one of the most important jobs in our nation. Finally and most importantly besides him insulting the public and letting off the big financial cheats, he has been at the forefront of over-prosecuting the secrecy laws to punish whistleblowers and chill free speech. What has Holder done to vindicate the rights of privacy of the American public against the illegal snooping of the NSA? He could have charged NSA personnel with violations of law for their warrantless wiretapping which has been done millions of times and instead he did not persecute a single soul. That is a defalcation of historical proportions and it signals to the public that the government DOJ under him was not willing to do a damn thing to protect the public against the rapid growth of the illegal surveillance state. Who else could have done this? Nobody. And for that omission Obama deserves the blame too. Here were are sliding into a police state and Eric Holder made it go all the faster.

  2. JOE CLAYPOOL candidate for Superior Court in Harrison County - Indiana This candidate is misleading voters to think he is a Judge by putting Elect Judge Joe Claypool on his campaign literature. paragraphs 2 and 9 below clearly indicate this injustice to voting public to gain employment. What can we do? Indiana Code - Section 35-43-5-3: Deception (a) A person who: (1) being an officer, manager, or other person participating in the direction of a credit institution, knowingly or intentionally receives or permits the receipt of a deposit or other investment, knowing that the institution is insolvent; (2) knowingly or intentionally makes a false or misleading written statement with intent to obtain property, employment, or an educational opportunity; (3) misapplies entrusted property, property of a governmental entity, or property of a credit institution in a manner that the person knows is unlawful or that the person knows involves substantial risk of loss or detriment to either the owner of the property or to a person for whose benefit the property was entrusted; (4) knowingly or intentionally, in the regular course of business, either: (A) uses or possesses for use a false weight or measure or other device for falsely determining or recording the quality or quantity of any commodity; or (B) sells, offers, or displays for sale or delivers less than the represented quality or quantity of any commodity; (5) with intent to defraud another person furnishing electricity, gas, water, telecommunication, or any other utility service, avoids a lawful charge for that service by scheme or device or by tampering with facilities or equipment of the person furnishing the service; (6) with intent to defraud, misrepresents the identity of the person or another person or the identity or quality of property; (7) with intent to defraud an owner of a coin machine, deposits a slug in that machine; (8) with intent to enable the person or another person to deposit a slug in a coin machine, makes, possesses, or disposes of a slug; (9) disseminates to the public an advertisement that the person knows is false, misleading, or deceptive, with intent to promote the purchase or sale of property or the acceptance of employment;

  3. The story that you have shared is quite interesting and also the information is very helpful. Thanks for sharing the article. For more info: http://www.treasurecoastbailbonds.com/

  4. I grew up on a farm and live in the county and it's interesting that the big industrial farmers like Jeff Shoaf don't live next to their industrial operations...

  5. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

ADVERTISEMENT