Financial Fraud: Judge Jones – Rite Aid Vice President, and Jay Findling Sentenced For Million Fraud And Kickback Scheme
Former Rite Aid Vice President And New Jersey Businessman Sentenced To Prison In $12.9 Million Fraud And Kickback Scheme
HARRISBURG- 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 were sentenced on November 16, 2016, by United States District Court Judge John E. Jones, III, in Harrisburg, for their participation in a $12.9 million dollar fraud and kickback scheme.
According to United States Attorney Bruce D. Brandler, Jay Findling, age 55, of Manalapan, New Jersey, was sentenced to 48 months’ incarceration for his role in the scheme. In February 2015, Findling pleaded guilty to an information charging him with conspiracy to commit wire fraud.
In a separate proceeding, Judge Jones sentenced former Rite Aid Vice President Timothy P. Foster, age 66, of Portland Oregon, to 60 months’ incarceration. Foster pleaded guilty in February 2015, to an information charging him with false statements to authorities.
Judge Jones also ordered Findling and Foster to jointly pay $8,034,183 in restitution. Findling was ordered to pay $6,257,997 within 15 days of sentencing and Foster was ordered to pay $1,776,186 by the end of yesterday.
Under the terms of his plea agreement, Findling also forfeited and turned over an additional $11.6 million to the government at the time he entered his guilty plea.
Both Findling and Foster are to voluntarily surrender to the Bureau of Prisons on January 17, 2017.
The charges are based upon Foster’s and Findling’s 9-year conspiracy to defraud Rite Aid via a surplus inventory sales scheme between 2001 and 2010. As the Vice President for Quality Assurance, Foster’s primary responsibilities at Rite Aid involved the liquidation of surplus Rite Aid inventory across the United States. During the time period in question Foster worked for Rite Aid in Oregon. 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 ended his employment with Rite Aid. 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 submitted by 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 a loss hearing in June 2015, the government introduced proof that 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 with a profit of approximately $29.1 million from the scheme. The government also introduced proof that Findling kicked back $5.9 million of the $29.1 million to Foster, primarily in the form of cash. Upon the conclusion of the loss hearing, Judge Jones concluded the net loss to Rite Aid, after giving Findling some credit for his services, was $11.2 million. Judge Jones also found that Rite Aid sustained an additional $1.7 million loss as a result of a similar kick-back scheme with another West Coast businessman who was not charged in the scheme, bringing the total loss to Rite Aid to $12.9 million.
Foster admitted he knowingly and willfully lied when he was interviewed by the Federal Bureau of Investigation (FBI) in January 2014 and denied he conspired with Findling to defraud Rite Aid. Foster subsequently recanted his false statements when he was re-interviewed on May 1, 2014. During that interview Foster not only admitted to conspiring to defraud Rite Aid with Findling, Foster voluntarily surrendered $2,941,940 in cash kickbacks he had received from Findling over the life of the conspiracy. Foster stored the cash in three, 5-gallon paint containers in his Phoenix, Arizona garage. Foster later surrendered to the FBI an additional $454,020 in cash and approximately $541,342 in gold and silver coins.
The case was investigated by the Harrisburg Office of the Federal Bureau of Investigation. The cases were prosecuted by Assistant United States Attorney Kim Douglas Daniel.
