updated 4/21/2004 1:28:57 PM ET 2004-04-21T17:28:57

The federal judge handling the case of former Rite Aid Corp. chief executive Martin L. Grass on Wednesday rejected a plea deal that had capped his potential prison time at eight years.

After the deal is formally rejected at a hearing scheduled for April 29, Grass may withdraw his plea, setting the stage for a trial or negotiations on a new plea deal.

Grass, 50, pleaded guilty in June to conspiracy to obstruct justice and conspiracy to defraud for his role in an accounting scandal that led Rite Aid, the nation's third-largest pharmacy chain, to restate its earnings by $1.6 billion.

The deal called for a maximum prison term of eight years. But in a presentencing report, the U.S. Probation Office concluded Grass did not deserve leniency and should be sentenced to the maximum 10 years in prison that the law allows.

Both prosecutors and Grass' lawyers objected to that recommendation, but U.S. District Judge Sylvia H. Rambo on Wednesday sided with the probation office, saying a sentencing-guideline range of nine to 10 years is appropriate.

She said Grass should not be credited for a timely guilty plea because it took place after a three-day jury selection and a week prior to trial. Rambo also ruled that the sentencing range should reflect that Grass was organizer or leader of a criminal activity that involved five or more participants.

The deal Grass had negotiated allows him to withdraw his guilty plea if Rambo sentences him to more than eight years, and the judge wrote that she could not justify going below the nine-year minimum outlined in the probation recommendation.

Four other company executives have pleaded guilty to criminal charges as a result of the investigation and a sixth, former vice chairman and chief counsel Franklin C. Brown, was convicted by a jury of 10 criminal counts last year.

Phone messages left Wednesday morning with the U.S. attorney's office in Harrisburg and with Grass' defense attorney, William H. Jeffress Jr., were not immediately returned.

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