U.S. grand jury subpoenas Ahold records

Dutch firm says order goes back to Jan. 1999

No shredding, memo says

Scope appears wider than U.S. Foodservice earnings

March 04, 2003|By Paul Adams | Paul Adams,SUN STAFF

A federal grand jury has subpoenaed a broad range of financial documents from Dutch food giant Royal Ahold NV as part of a probe that appears to go far beyond last week's revelations that the company's Columbia-based U.S. Foodservice subsidiary misstated earnings by at least $500 million.

The subpoenas were issued by the U.S. attorney's office in Manhattan, which is leading the investigation of U.S. Foodservice, a federal law enforcement official confirmed yesterday. A spokesman for Ahold in Zaandam, Netherlands, declined to comment on the investigation.

The company's method of accounting for acquisitions is among the issues investigators are probing. In addition to its food service unit, Ahold, the world's third-largest retailer, owns Giant Food Inc. and a string of other grocery chains on the East Coast.

Ton van Tielraden, Ahold's senior vice president and general counsel, told employees in an internal memo that the request for documents is "extremely broad," covering financial statements and other data going back to Jan. 1, 1999.

The letter instructs employees to cooperate with the investigation and not to destroy documents related to it.

In addition to U.S. Foodservice, the memo mentions documents related to Ahold's Disco subsidiary in Argentina and two other joint ventures.

"Of course that letter was sent to Foodservice employees," said John Prince, a spokesman for Ahold in the United States. "The company is absolutely determined to cooperate entirely with any investigation and this is just more evidence that they are doing so."

The U.S. Department of Justice and Securities and Exchange Commission are investigating whether executives at U.S. Foodservice deliberately inflated the value of rebates paid by vendors as part of high-volume purchase agreements. The company said last week that its 2001 and 2002 earnings were overstated by at least $500 million because such "promotional allowances" were improperly accounted for.

The disclosures resulted in the resignation of Ahold's top two executives and sent its shares down by more than 60 percent on both the New York Stock Exchange and the Amsterdam stock exchange. Two mid-level employees at U.S. Foodservice have been suspended indefinitely while the company conducts an internal investigation.

Sources close to the company say James Miller, the company's chief executive, could be removed at any time.

Documents related to U.S. Foodservice's promotional allowance program are among those mentioned in van Tielraden's letter to employees. The letter followed two similar employee memos sent out by Henny de Ruiter, Ahold's chairman and interim chief executive, and David M. Abramson, U.S. Foodservice's vice president and general counsel.

In addition to financial statements, the van Tielraden memo advises employees to save documents related to audits, budgets, promotional programs, advertising, shipping, marketing, warehousing and inventory, among others.

As is typical in such investigations, the sweeping request includes e-mail, tape recordings, telephone logs, employee datebooks - even work generated on home computers.

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