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Should Rite Aid Pay for GC's Appeal of Criminal Fraud Convictions?

By Casey C. Sullivan, Esq. on March 01, 2017 | Last updated on March 21, 2019

Franklin Brown was a chairman and general counsel for Rite Aid before he was convicted of criminal fraud and sentenced to ten years in federal prison. Brown was accused of being "the hub of the conspiratorial wheel" in the company's early late-90s accounting fraud scheme.

Brown has spent years, naturally, challenging his conviction. And he's arguing that Rite Aid needs to cover his attorney fees. His case was recently taken up the Delaware Supreme Court.

Rite Aid, Conspiracy, and Indemnification

Franklin Brown was vice chairman and chief counsel of Rite Aid before he was convicted on fraud charges in 2003. Brown was accused of inflating the drug store's earnings so that he and other execs could earn bigger payouts, as well as obstructing justice, tampering with witnesses, and lying to the SEC.

Rite Aid stopped paying for Brown's defense nine months before his trial in 2003. Brown is currently seeking to have his collateral challenge to his conviction treated as a continuation of his criminal case, according to the Delaware Business Court Insider, and thus to be indemnified by Rite Aid. He's currently pursuing a Section 2255 motion before an en banc panel of the Delaware Supreme Court, which heard oral arguments in the case last week.

Brown is pursuing the 2255 motion after being denied a cert petition by the Supreme Court in 2014. A form of post-conviction relief, the motion allows Brown to assert that he received ineffective representation when Rite Aid stopped paying his legal fees.

Brown's lawyers argued that the 2255 motion was intentionally designed as a continuation of his criminal proceeding, rather than a separate action such as a habeas petition, which Brown is also pursuing.

"All you need to prevail is for us to agree with you that 2255 is a continuation, and you should leave habeas corpus and all of these other collateral attacks alone," Delaware Supreme Court Justice Randy J. Holland said during oral arguments. "I think your strongest argument is that 2255 is different because the Third Circuit and other courts have characterized it as a continuation. No other attack is a continuation."

Brown has been out of prison since 2011. His legal fees have surpassed $6 million, he estimates.

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