The fate of scandal-tinged U.S. Foodservice, the Columbia food distributor that inflated profits by $880 million over three years, will be among the first issues confronting Anders C. Moberg this week when he arrives in the Netherlands as the new head of Dutch food retailing giant Royal Ahold NV.
Under normal circumstances, Moberg's job would be daunting as chief executive officer of a huge international retailer that runs thousands of stores in more than two dozen countries.
But times are far from normal at Ahold.
The company said Thursday that its U.S. Foodservice subsidiary will have to take pretax charges of nearly $1 billion because of alleged accounting fraud it blames on at least two former senior executives who incorrectly booked rebates and discounts from suppliers.
Moberg, a 53-year-old Swede known as a thrifty, but innovative retailer whose consumer-centric viewpoint helped shape big chains such as Ikea and Home Depot, is considered one of global retailing's biggest management stars.
His appointment was viewed as a coup for Ahold just two months after the company first disclosed earnings overstatements then estimated at $500 million.
Now, as head of the world's third-biggest retailer, Moberg has been given the task of untangling the accounting web in Columbia at a time when the company is looking to trim its huge debt.
Investors and observers say they're looking to Moberg for a new vision that will help restore confidence in the company, owner of six East Coast grocers including Landover-based Giant Food Inc.
One of the first questions Moberg is expected to face - possibly as early as Tuesday when Ahold's supervisory board meets in the Netherlands - is just what to do about U.S. Foodservice.
Food industry experts believe that Moberg and other board members will likely consider a range of options, among them improving the checks and balances in the vendor rebate programs - where the accounting abuses occurred - canceling contracts, replacing top mangers or selling the division.
A spokeswoman for Ahold, Carina Hamaker, said last week that U.S. Foodservice would be on the agenda.
"The supervisory board will come together and decide on possible actions that have to be taken," Hamaker said.
Dealing quickly with the crisis at U.S. Foodservice will be key to restoring investor confidence, analysts said.
"They need to make sure that all the bad news is out as quickly as possible," said Gus A. Valen, chief executive officer of the Valen Group LLC, a Cincinnati consumer products and retailing consulting firm. "Being able to assure investors that you have it in a box and it's under control is No. 1."
During a conference call Thursday, when Ahold released findings of its internal forensic accounting probe by PricewaterhouseCoopers, interim Chief Financial Officer Dudley Eustace declined to comment on the likelihood of management changes at U.S. Foodservice. "This is a question which we will address," he said.
The company cleared U.S. Foodservice's top management, including Chief Executive Officer James L. Miller, and placed blame on Mark P. Kaiser and Tim Lee, managers in marketing and purchasing.
On Friday, however, Ahold appeared to backtrack, issuing a statement saying the internal legal investigation is continuing in cooperation with PricewaterhouseCoopers.
"The investigation continues to probe the possible involvement by U.S. Foodservice personnel other than the two individuals identified so far," the company said.
U.S. Foodservice is also being investigated by the Justice Department and the Securities and Exchange Commission.
While he will need to deal with the fallout of the investigations, Moberg will also be faced with a delicate balancing act in rebuilding Ahold and U.S. Foodservice, food retailing experts said.
Moberg is expected to reverse Ahold's longtime strategy of pushing into new markets and gobbling up the best supermarket chains. He's also expected to trim capital expenses, work to get the best deals on assets that are already up for sale and consider others to put up for sale. (The company has said it intends to sell non-core assets while holding on to key assets in Northern and Western Europe and in the United States, where its six supermarket chains account for more than half its worldwide sales.)
Analysts said Moberg needs to yield enough from asset sales to trim debt while not hurting the company's overall buying power.
He'll need to pare capital expenses, which could mean opening fewer new stores or making fewer upgrades to stores, without driving customers away. CFO Eustace said the company will be reducing capital expenses this year and next by several hundred million dollars.
In addition to overseeing the previously announced sale of supermarket chains in Latin America and Malaysia, which are not expected to yield enough to make a sizable dent in the company's $13 billion debt, Moberg will have to consider other asset sales, analysts said.
