A former Rite Aid vice president, Timothy Foster of Oregon, has been charged in connection with a $14.6 million, surplus inventory sales/kickback scheme, according to the U.S. Attorney’s Office for the Middle District of Pennsylvania. He was charged with making false statements to authorities.
Also charged, for with conspiracy to commit wire fraud, was New Jersey businessman Jay Findling of Manalapan, New Jersey. The charges are based upon Foster’s and Findling’s alleged nine year conspiracy to defraud Rite Aid, a publicly-owned national drug store chain, via a surplus inventory sales scheme that took place between 2001 and 2010.
As the company’s vice president for quality assurance, Foster’s primary responsibilities at Rite Aid involved the liquidation of surplus inventory. Officals say the duo led Rite Aid to believe its surplus merchandise was sold to Findling’s company, J. Finn Industries, when it was actually sold to third parties at an even higher cost. Findling would then give a portion of his profits to Foster.
Findling established a bank account in New Jersey under the name of “Rite Aid Salvage Liquidation” and the account was used to collect the payments submitted by the real buyers of the surplus Rite Aid inventory. After the payments were received, Findling sent lesser amounts dictated by Foster to Rite Aid for the goods, inducing Rite Aid to believe the inventory had been purchased by J. Finn Industries, not the real buyers. Findling received at least $87.4 million from the real buyers of the surplus Rite Aid inventory but, with Foster’s help, only had to tender $72.8 million of that amount to Rite Aid, a $14.6 million profit. The scheme continued until February of 2010 when Foster resigned from Rite Aid, according to the U.S. Attorney’s office.
Officials allege that Foster lied when he was interviewed by FBI agents in January 2014 and denied his involvement. Foster later recanted those false statements when he was re-interviewed by the FBI in May 2014. During that interview, he admitted that he conspired to defraud Rite Aid with Findling and voluntarily surrendered nearly $3 million in cash kickbacks that he received for his involvemet.
Plea agreements reached with both men require them to cooperate with the government and pay restitution to Rite Aid. Findling’s plea agreement also obligates him to forfeit $11.6 million to the government at the time he enters his guilty plea. No date has been scheduled as yet for the entry of Foster’s or Findling’s guilty plea. Both the false statement and the conspiracy count are punishable by up to 5 years imprisonment and a $250,000 fine.