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May 22, 2006

Buried in the audit committee report in the proxy that Rite Aid (RAD) filed on Friday was a brief mention that the company had received a comment letter from the SEC sometime over the past year. Rite Aid provided no details on the contents of the letter and a quick search of Rite Aid’s earlier filings comes up empty. Ditto for a search of SEC comment letters.

While it’s certainly true that comment letters are often fairly routine, Rite Aid’s history with the SEC on accounting issues — in October 2000, it restated $1.6 billion in net income — means that they should provide a lot more details so that investors can feel comfortable that the company’s new management is not engaging in some of the tricks that brought down the previous management.

Equally troubling is that the two top executives substantially increased their personal use of the corporate jet last year. CEO Mary Sammons spent 45% more last year than in fiscal 2005 while COO James Mastrian’s personal use of the corporate jet more than doubled. While the numbers are not off the map — Mastrian spent $59,304 last year, compared with $23,876 in fiscal 2005 — one would hope that given Rite Aid’s continuing struggle to recover from past problems, the new top execs would go out of their way to make sure the excesses of the past were avoided at all costs.

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