Don Marsh, grocery chain he led no closer to making peace

It’s been four years since Marsh Supermarkets Inc.’s new owners unceremoniously dumped CEO Don Marsh. Notification came in a terse letter—ironically on Marsh letterhead bearing the company’s slogan at the time, “We value you.”

Early last year, the bad blood between Sun Capital Partners—the Florida private equity firm that scooped up the grocer—and Don Marsh spilled into public view. Sun sought to recover millions of dollars in a lawsuit charging that Don Marsh treated the company “like his personal checkbook” to bankroll extravagant trips, maintain vacation homes and hide relationships with female employees.

Don Marsh dished it out as well, accusing Sun of misrepresentations and mismanagement.

“The allegations are false, and it is clear the out-of-state, venture capitalist group ownership is looking for someone to blame for their own poor business practices, which have severely impacted the company I once proudly led,” he said in a statement.

Time has done nothing to mellow out the litigants, who, after going through court-mandated settlement discussions this month, are gearing up for an October 2011 trial.
 

Marsh

Attorneys for Don Marsh, 72, asked the court this month to allow him to amend an earlier filing to include new defenses. One stems from the recent discovery that the company in 2009 destroyed “certain accounting records that have a direct bearing on the issues raised in the case,” according to the filing.

Another stems from Marsh Supermarkets’ decision in August to contest only part of an IRS assessment handed down a month earlier. The assessment relates to business expenses Don Marsh took while he was CEO that the company later called into question. Attorneys for Don Marsh argue the company weakened its case against him by failing “to mitigate its damages.”

Tax issues are at the heart of the battle. The company said when it filed suit in April 2009 that Don Marsh’s expenses, including use of the company jet and petty cash, had become the subject of an IRS audit.

The assessment the IRS handed down this July stems from that audit, though court records don’t reveal the amount the agency is seeking. David Herzog, a Baker & Daniels partner representing the grocery chain, and Andrew McNeil, a Bose McKinney & Evans partner representing Don Marsh, declined to comment.

A new court filing shows that Marsh Supermarkets last year told the IRS Don Marsh had earned $2.1 million more from 2004 through 2006 than the company previously had reported. The extra income stemmed from expenditures Don Marsh wrongly categorized as reimbursable business expenses, the filing says.

Even though all of Marsh Supermarkets’ groceries were in this geographic region, Don Marsh traveled globally at the company’s expense. From 2000 to 2006, according to the company, he took at least 25 international trips, visiting every continent except Antarctica.

In that same span, Marsh took more than 350 trips outside the region. “The company estimates that, due to his being away on these trips, Mr. Marsh spent at least 50 percent of the total days in each fiscal year traveling outside of Marsh’s geographic region for reasons that had little or no benefit to the company,” the complaint alleges.

But Don Marsh, the company’s CEO for 38 years, says his travels were justified.

For example, he served as president of the Paris-based Centre for Food Trade and Industry, which conducts research and training for the retail and wholesale-food-distribution industries “and looks for trends on a global basis,” a filing said.

“Because of his involvement with [the trade group], and similar organizations, Mr. Marsh was able to identify innovations and advancements in other countries and implement them in the company’s operations.”

Barring a settlement, get set for a lively trial. It’s expected to take 10 days and feature testimony from a bevy of former executives and board members.

Vera Bradley blasts off

The Oct. 21 inital public offering for Vera Bradley Inc., the Fort Wayne-based handbag maker, was a big success.

Underwriters exercised their options to sell an additional 1.65 million shares because of high demand. In total, existing shareholders sold 8.65 million shares and the company sold 4 million new shares.

The offering price was $16, the high end of the expected range, and the shares have zoomed higher since. They’re now fetching nearly $29 apiece.•