Former Rite Aid Corp. chief executive Martin L. Grass yesterday filed a new guilty plea in connection with massive accounting fraud at the drugstore chain, exposing himself to more prison time than he would have served in an earlier deal rejected by a judge as too lenient.
Grass, 50, faces a maximum of 10 years in prison under the two conspiracy charges. Federal prosecutors in Pennsylvania said they would file a motion seeking to give the former corporate executive some credit for his "substantial assistance" with their investigation. Inmates in the federal system must serve at least 85 percent of their sentences.
U.S. District Judge Sylvia H. Rambo scuttled an earlier plea that called for Grass to spend no more than eight years behind bars. Rambo agreed with probation officials and ruled April 21 that Grass should serve between nine and 10 years. She then gave Grass a few weeks to decide whether to go ahead with the guilty plea.
Yesterday Grass agreed to forfeit $3 million and to pay $500,000 in fines. He also must disclose all of his assets, submit to polygraph tests and answer prosecutors' questions truthfully, lest he face additional federal charges.
"We hope and expect that the judge will impose significantly less than the 10-year maximum sentence because of Martin's substantial assistance to the government, as well as other factors, but how much less is entirely within her discretion," William H. Jeffress Jr., an attorney for Grass, said in an e-mail message.
Kim Douglas Daniel, an assistant U.S. attorney, said prosecutors would file a motion "in the near future" describing Grass's help with the ongoing investigation. Daniel declined to comment further on the nature of Grass's cooperation.
The judge has not set a sentencing date for Grass.
Grass first attempted to plead guilty a week before he was scheduled to go to trial last June on nearly three dozen charges of fraud, obstruction and false statements. Prosecutors alleged in a 96-page indictment that Grass stood at the center of a conspiracy to inflate Rite Aid's earnings from 1996 to 1999, backdating contracts and letters to hide key facts from investigators.
Defense lawyers said the tussle over Grass's prison sentence reflects broader tensions about plea deals, which, in addition to mandatory sentencing guidelines, limit federal judges' control over prison terms.
"Judges don't want what little discretion they have left taken away from them," said Kirby D. Behre, a partner at Paul, Hastings, Janofsky & Walker in Washington and co-author of a book on federal sentencing issues.
Last week, the wife of Enron Corp.'s former finance chief was sentenced to a year in prison for failing to report income from her husband's secretive business partnerships. Lea W. Fastow agreed to a stiffer sentence after a federal judge in her case refused to approve a deal that called for her to serve five months behind bars and five months in home detention.