Last night Frontline aired an excellent documentary on Enron. (http://www.pbs.org/wgbh/pages/frontline/shows/regulation/) It stated, among other things, that Enron's growth came mostly as the result of purchasing companies. This was what explained the earnings explosion of many Fortune 500 companies in the past ten years, including Rite Aid apparently.
=== The Plain Dealer, December 3, 1995 Sunday, FINAL / ALL PROFIT MARGINS DRIVE TAKEOVERS BY DRUGSTORES By BILL LUBINGER; PLAIN DEALER REPORTER It wasn't long ago that drugs were sold at the corner pharmacy by professionals concerned more about the needs of their customers than complex issues like "economies of scale." But today, instead of walking to the neighborhood drugstore and buying prescriptions with cash, more and more customers simply whip out their plastic insurance card, which brings them convenience and lower costs. The card represents not only a different method of payment, but also an ongoing overhaul of the nation's health care system. Prescription plans offered by health insurers and managed-care companies simply won't pay high prices for drugs, driving profit margins so low that only the largest and most savvy stand a chance. It was that pressure - the increasingly present squeeze on profits - that was the driving force behind last week's announcement that Rite Aid Corp. was acquiring Twinsburg-based Revco D.S. Inc. in a $1.8 billion deal. It was a move to grab a bigger and more profitable piece of the $65 billion retail pharmacy business, which is growing 10 percent to 12 percent annually because of inflation, the medical needs of an aging population and the introduction of new drugs. In a nutshell, while Rite Aid was already the nation's No.1 drugstore chain in terms of sales, it wasn't big enough. "If you don't get bigger, you are going to die," explained Martin L. Grass, Rite Aid's chairman and chief executive officer. "Managed-care companies are looking for the lowest cost provider and the very best quality service. "The bigger you are, the more muscle you will have." ==== Former Rite Aid Executives Charged With Defrauding Investors By THE ASSOCIATED PRESS HARRISBURG, Pa. (AP) -- The former chairman and two other past senior executives of Rite Aid Corp. were indicted Friday in what authorities described as a far-reaching securities and accounting fraud that prompted the largest restatement of corporate earnings in American history. One current executive was also charged in a 37-count federal indictment related to the financial reporting and accounting practices at the nation's third-largest drugstore chain. ``The charges announced today reveal a disturbing picture of dishonesty and misconduct at the highest level of a major corporation,'' said Wayne M. Carlin, northeast regional director of the SEC. ``Rite Aid's former senior management employed an extensive bag of tricks to manipulate the company's reported earnings and defraud its investors.'' Martin L. Grass, 47, of Virginia Beach, Va., the former chairman and chief executive officer; Franklin Brown, 74, of Harrisburg, the former chief counsel and vice chairman; and Franklyn Bergonzi, 57, of Hummelstown, a former executive vice president and chief financial officer, face the most serious charges. The charges include conspiracy to defraud, fraud in connection with the purchase or sale of securities and making false statements to the Securities and Exchange Commission. Grass and Brown also are accused of tampering with witnesses and obstructing various investigations. full: http://www.nytimes.com/aponline/business/AP-Rite-Aid.html Louis Proyect Marxism mailing list: http://www.marxmail.org
