ILNews

Witnesses: Don Marsh’s expenses never questioned

Back to TopCommentsE-mailPrintBookmark and Share

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 Mays, 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.

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
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. The practitioners and judges who hail E-filing as the Saviour of the West need to contain their respective excitements. E-filing is federal court requires the practitioner to cram his motion practice into pigeonholes created by IT people. Compound motions or those seeking alternative relief are effectively barred, unless the practitioner wants to receive a tart note from some functionary admonishing about the "problem". E-filing is just another method by which courts and judges transfer their burden to practitioners, who are the really the only powerless components of the system. Of COURSE it is easier for the court to require all of its imput to conform to certain formats, but this imposition does NOT improve the quality of the practice of law and does NOT improve the ability of the practitioner to advocate for his client or to fashion pleadings that exactly conform to his client's best interests. And we should be very wary of the disingenuous pablum about the costs. The courts will find a way to stick it to the practitioner. Lake County is a VERY good example of this rapaciousness. Any one who does not believe this is invited to review the various special fees that system imposes upon practitioners- as practitioners- and upon each case ON TOP of the court costs normal in every case manually filed. Jurisprudence according to Aldous Huxley.

  2. Any attorneys who practice in federal court should be able to say the same as I can ... efiling is great. I have been doing it in fed court since it started way back. Pacer has its drawbacks, but the ability to hit an e-docket and pull up anything and everything onscreen is a huge plus for a litigator, eps the sole practitioner, who lacks a filing clerk and the paralegal support of large firms. Were I an Indiana attorney I would welcome this great step forward.

  3. Can we get full disclosure on lobbyist's payments to legislatures such as Mr Buck? AS long as there are idiots that are disrespectful of neighbors and intent on shooting fireworks every night, some kind of regulations are needed.

  4. I am the mother of the child in this case. My silence on the matter was due to the fact that I filed, both in Illinois and Indiana, child support cases. I even filed supporting documentation with the Indiana family law court. Not sure whether this information was provided to the court of appeals or not. Wish the case was done before moving to Indiana, because no matter what, there is NO WAY the state of Illinois would have allowed an appeal on a child support case!

  5. "No one is safe when the Legislature is in session."

ADVERTISEMENT