U.S. won't try Ahold

Federal prosecutors praise its cooperation

September 30, 2006|By Andrea K. Walker | Andrea K. Walker,SUN REPORTER

Federal prosecutors will not pursue a criminal case against Dutch food conglomerate Royal Ahold NV related to a 2000 accounting scandal at its U.S. Foodservice division in Columbia.

U.S. Foodservice overstated income by about $800 million from 2000 to 2003. Ahold's market value plunged two-thirds after the accounting fraud was uncovered.

U.S. Foodservice, the nation's No. 2 distributor to restaurants and other food-service establishments, recorded false promotional allowances that inaccurately reduced its cost of sales and inflated its earnings.

The office of the U.S. attorney for the Southern District of New York said in a statement that it had come to an agreement with Ahold not to prosecute because the company had taken steps to clear up the wrongdoing. Under the agreement, Ahold also must continue to cooperate with investigators.

Ahold is the owner of the Giant Food supermarket chain, the largest in the Baltimore-Washington market. The company also owns the Giant Food Stores LLC, of Carlisle, Pa.; Tops Markets, of Williamsville, N.Y., and Stop & Shop Supermarket Co., the No. 1 chain in New England. It also owns Peapod, a grocery delivery business.

Ahold has cooperated with federal investigators and paid $1.1 billion to settle a shareholder lawsuit. The company also reported the fraud at U.S. Foodservice and conducted an extensive internal investigation, the U.S. attorney's statement said.

The U.S. attorney's office also said prosecuting the company would have a negative impact on innocent employees and would not serve the public interest.

"The public interest has been sufficiently vindicated," the statement read.

A spokesman for Ahold said yesterday that the agreement puts an end to its major legal troubles.

"It's great news because it means we can move on with business and focus on the future," said Walter Samuels, Ahold's spokesman.

Michael Resnick, U.S. Foodservice's former chief financial officer, pleaded guilty to conspiracy Sept. 8. Mark P. Kaiser, the company's former marketing chief, is scheduled to go on trial in New York on Oct. 10.

The scandal has continued to affect Ahold's stock, recently prompting two major investors to ask the company to sell its U.S. businesses. Hedge funds Paulson & Co. and Centaurus Capital Ltd., which together hold 6.4 percent of Ahold's stock, said a sale of U.S. assets would unlock the value of Ahold.

andrea.walker@baltsun.com

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