GRAND UNION FORMER VP IS CHARGED WITH FRAUD

ELLIOT ZWIEBACH

WAYNE, N.J. -- Donald C. Vaillancourt, a former longtime Grand Union Co. executive, has been accused of mail fraud and of embezzling more than $2.15 million from the company over an eight-year period, according to a complaint issued last week by the office of the U.S. Attorney in Newark, N.J.

Vaillancourt, 56, was arrested last week by the Federal Bureau of Investigation and arraigned in U.S. District Court in Newark, where bail was set at $600,000. If convicted, he faces up to five years in prison plus a $1 million fine.

Local authorities said Vaillancourt was arrested at his home, where FBI agents reportedly found $55,000 in cash and round-trip tickets indicating that Vaillancourt and his wife planned to leave that evening for Rio de Janeiro.

Vaillancourt, an attorney, was employed by Grand Union, headquartered here, from 1971 until last February, when he was terminated as part of a corporate reduction in the chain's work force. At the time he left, he was corporate vice president for public affairs, counsel and corporate secretary for the 217-store chain.

Neither Vaillancourt nor his attorneys could not be reached for comment.

Michael Chertoff, a Grand Union attorney with the firm of Latham & Watkins, Newark, told SN the allegations against Vaillancourt were unknown at the time he was terminated, and the company was not looking for evidence of any criminal activity after he left. "The discrepancies turned up in the course of reviewing materials," he explained.

Jeffrey Freimark, Grand Union's executive vice president and chief financial officer, told SN questionable documents were brought to the company's attention by "certain people," whom he declined to name.

According to a complaint issued last week by the office of the U.S. Attorney in Newark, Vaillancourt set up three fictitious companies -- Universal Services Co., Patricia Nabors & Co. and Creative Communications -- that allegedly issued invoices for services that were never performed, including public-relations planning and implementation and design, typography, artwork and related services in connection with a Grand Union newsletter.

"Defendant Vaillancourt created ... phony invoices bearing the letterhead of the companies to create the false impression that a particular company provided the services identified in the phony invoices and was entitled to payment by Grand Union for the alleged services," the complaint said.

"Thereafter, Vaillancourt caused the invoices to be sent and delivered through the mails to his department at Grand Union for processing and payment," the complaint indicated. "[He] authorized payment of the invoices ... and forwarded them to the accounts payable department."

The complaint says a review of the cancelled checks Grand Union issued showed they were deposited into bank accounts registered to Vaillancourt's home address. According to the complaint, Grand Union paid the three companies $2,151,480.33 between Dec. 2, 1991 and Nov. 5, 1999.

Chertoff said the evidence will be submitted to a grand jury, and if an indictment is handed up -- possibly in the next few weeks -- a trial date would be set. He said a trial could start late this year.

Grand Union said it will continue to examine materials and to fully cooperate with federal authorities to determine the full scope of the alleged embezzlement. The company said it does not anticipate that the allegedly embezzled funds would have an adverse effect on its financial statements because the funds have already been accounted for as expenses in prior financial statements.

The company said it has notified its insurance carrier and would seek to recover any embezzled funds.