Former Rite Aid Vice President And New Jersey Businessman Plead Guilty In $29.1 Million Fraud & Kickback Scheme
The United States Attorney’s Office for the Middle District of Pennsylvania announced today that a former Rite Aid Vice President and a New Jersey business man have pleaded guilty to charges in connection with a $29.1 million dollar surplus inventory sales/kickback scheme. Rite Aid is a publicly-owned national drug store chain with its headquarters located in Camp Hill, Pennsylvania.
During a hearing before U.S. District Court Judge John E. Jones III this afternoon, Jay Findling, age 54, of Manalapan, New Jersey, pleaded guilty to an Information charging him with Conspiracy to commit Wire Fraud. In a separate proceeding held earlier in the day, Judge Jones also accepted the guilty plea of former Rite Aid Vice President Timothy P. Foster, age 65, of Portland, Oregon, to the same Information charging him with False Statements to Authorities. Both charges are punishable by up to 5 years imprisonment and a $250,000 fine.
According to U.S. Attorney Peter Smith, the charges are based upon Foster’s and Findling’s 9 year conspiracy to defraud Rite Aid via a surplus inventory sales scheme. During the time period in question, Foster worked for Rite Aid in Oregon. As the Vice President for Quality Assurance, Foster’s primary responsibilities involved the liquidation of surplus Rite Aid inventory across the United States. The scheme succeeded by making Rite Aid believe its surplus inventory had been sold to Findling’s company, J. Finn Industries, LLC, for amounts reported by Foster when, in fact, the inventory had been sold to third parties for greater amounts. Findling would then kick back a portion of his profits to Foster. The scheme started in 2001 and continued until February of 2010 when Foster resigned from Rite Aid.
During the guilty plea proceeding Findling admitted he established a bank account in New Jersey under the name of “Rite Aid Salvage Liquidation.” The account was used by the conspirators to collect the payments from the real buyers of the surplus Rite Aid inventory. After the payments were received, Findling would send lesser amounts dictated by Foster to Rite Aid for the goods, thus inducing Rite Aid to believe the inventory had been purchased by J. Finn Industries, not the real buyers. During the guilty plea proceeding the government alleged Findling received at least $127.7 million from the real buyers of the surplus Rite Aid inventory but, with Foster’s help, only tendered $98.6 million of that amount to Rite Aid, leaving Findling approximately $29.1 million in profits from the scheme. The government also alleged Findling kicked back approximately $5.7 million of the $29.1 million to Foster.
Foster admitted during his guilty plea hearing that he knowingly and willfully lied when he was interviewed by the FBI in January of 2014 and denied he conspired with Findling to defraud Rite Aid. Foster subsequently recanted his false statements when he was re-interviewed by the FBI on May 1, 2014. During that interview Foster not only admitted he conspired to defraud Rite Aid with Findling, he voluntarily surrendered $2.9 million in cash he had received from Findling over the life of the conspiracy. Foster had stored the cash stored in three 5 gallon paint containers in his Phoenix, Arizona garage.
The Information was filed pursuant to plea agreements with the two defendants. Both agreements require the defendants to cooperate with the government and to pay restitution to Rite Aid as ordered by the court. Findling’s plea agreement also obligated him to make a $11.6 million dollar, lump sum forfeiture payment to the government, which Findling turned over to the U.S. Marshal Service Asset Forfeiture Fund at the conclusion of the hearing.
The case was investigated by the Harrisburg Office of the FBI. Both defendants are being prosecuted by Assistant United States Attorney Kim Douglas Daniel assisted by David Clark, Litigation Financial Analyst.