DEMOULAS STOCK TRANSFER ON TRIAL IN MASSACHUSETTS

MARK TOSH

TEWKSBURY, Mass. -- A lawsuit related to the alleged fraudulent transfer of Demoulas Super Markets stock between the families of the two founders is being heard in Massachusetts state court.

The family of the late George Demoulas charged in a civil suit that George's brother, Telema-chus, currently president and chief executive officer of the chain, diverted all but about 8% of their Demoulas Super Markets stock over a 16-year period, according to Robert C. Gerrard, a Boston attorney representing George Demoulas' family.

George Demoulas and his family owned 50% of the business in 1971 when he died while vacationing in Greece.

Officials of Demoulas Super Markets could not be reached for comment.

The civil suit was scheduled to enter its sixth week of trial beginning today in Middlesex Superior Court and will likely continue for another four weeks, Gerrard said. The suit was originally filed in 1990.

George Demoulas' family has charged Telemachus Demoulas with fraud, diversion and racketeering, Gerrard said.

At issue in the trial is whether Telemachus Demoulas was faithfully looking after his brother's family following George Demou-las' death or, as the plaintiffs have alleged, whether he schemed to defraud them of their rightful share of the company.

"We claim he fraudulently and in breach of his fiduciary duty as executor and trustee [of George Demoulas' estate] converted stock to his own side of the family," Gerrard said. "So they went from owning a 50% interest to owning an 8% interest."

In its suit, George Demoulas' family is seeking to recover its Demoulas Super Market stock, monetary distributions made to Telemachus Demoulas' side of the family by virtue of owning that stock, and the return of the separately owned Market Basket business to Demoulas Super Markets and "whatever monetary damages flow from that," Gerrard said.

"We're just looking to have what their father left to them returned to them intact," he said. "Once that's done, then we'll address whatever [management and administration] problems or opportunities arise."

George and Telemachus Demoulas, 73, founded Demoulas Super Markets here in 1955. The Demoulas and Market Basket operations combined have grown to about 45 stores and estimated annual sales of about $1.3 billion.

Lawyers for Telemachus Demoulas, who is known as Mike, said their client has been branded a "thief and a crook," when in fact he is a "good, decent, honest human being," according to local press reports about the trial.

George's family wanted to "cash out of the business to avoid financial risks," an attorney for Telemachus Demoulas said in the local reports, "and now they have turned on him."

A separate civil suit brought by Arthur S. Demoulas, George's son, is set to begin later this year.