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Rite Aid slips on report
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February 17, 2000: 3:43 p.m. ET
U.S. Attorney said to be investigating drug chain's accounting practices
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NEW YORK (CNNfn) - Financially embattled drugstore chain Rite Aid Corp. was subject to even more pressure Thursday after reports surfaced that the company may be under criminal investigation for its past accounting practices.
Rite Aid already is the subject of an ongoing probe by the Securities and Exchange Commission for alleged accounting irregularities. In October, the company said it would restate its fiscal results for the last three years, reducing its earning for that period by roughly $500 million.
On Thursday, a report published in the Wall Street Journal said the Camp Hill, Pa.-based company's accounting practices now are being investigated by a federal prosecutor in Harrisburg, Pa.
David M. Barasch, the U.S. attorney for the Middle District Pennsylvania, would neither confirm nor deny an investigation of Rite Aid (RAD: Research, Estimates), the No. 3 U.S. drugstore chain. "I cannot comment in any way," he said.
Representatives from Rite Aid also declined to provide any information about a criminal investigation.
"We have no comment as to whether or not we are being investigated by the U.S. Attorney's Office," Karen Rugen, a Rite Aid spokeswoman, said.
"We are currently under investigation by the SEC. We continue to cooperate fully with that investigation, and we'll cooperate with any official investigation," Rugen added.
Rite Aid shares, which have been falling steadily for the past year, slipped 1/4, or 4.4 percent, to 6-13/16 in New York Stock Exchange trade Thursday.
At issue in the SEC's investigation is how Rite Aid accounted for income based on estimates of recoveries from vendors, certain deferred costs, and certain expenses charged against its acquisition accruals.
The alleged irregularities were enough to prompt accounting firm KPMG to resign as the company's financial auditor, saying it was "unable to continue to rely on management's representations."
The Journal report said Frank Bergonzi, Rite Aid's former chief financial officer, had been subpoenaed by the U.S. attorney to produce documents.
Bergonzi and former Rite Aid CEO Martin Grass both resigned their posts last year. In December, Rite Aid's board of directors seated a new senior management team, headed by Robert G. Miller, former CEO of Portland, Ore.-based food and drug retailer Fred Meyer Inc.
The company also has hired Deloitte & Touche LLP as its new auditors. 
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