Ex-U.S. Foodservice CEO settles case

Miller to pay $8 million to parent Royal Ahold

December 19, 2007|By Andrea K. Walker | Andrea K. Walker,Sun reporter

Dutch food conglomerate Royal Ahold NV has settled the final major case involving its former Columbia-based U.S. Foodservice division.

Under the settlement announced yesterday, James L. Miller, the former U.S. Foodservice chief executive, will pay the company $8 million for bonuses and salary he earned during an accounting scandal that surfaced four years ago.

Miller did not admit liability under the settlement. Ahold also agreed to pay Miller more than $4.6 million in retirement and health benefits as part of the agreement, said his attorney, Benjamin Rosenberg of Rosenberg, Martin, Funk & Greenberg LLP.

Miller, 59, founded and ran U.S. Foodservice for 14 years. The division was a Royal Ahold subsidiary until it was sold this year. Miller's case was one of several stemming from the accounting irregularities at the food distributor between 2000 and 2002.

"It's the last important court case to be handled by Ahold," said company spokesman Walter Samuels. "It's settled. It's done."

Samuels said the $8 million reflected bonuses and a small portion of Miller's salary from 2000 to 2002.

Accounting irregularities surfaced at U.S. Foodservice in 2003, plunging the company into crisis. The scandal prompted the resignations of the parent company's top two executives, causing it to restate profits, undergo major restructuring and pay shareholders more than $1 billion in damages.

U.S. Foodservice's profit had been exaggerated by $880 million over three years, Ahold said.

Investigations found that the food distributor booked more rebates and discounts than it received from vendors and improperly counted them as revenue.

More than a dozen vendors and executives were convicted of criminal charges because of the scandal.

Foodservice's Chief Financial Officer Michael Resnick pleaded guilty to a single count of conspiracy last year and was sentenced to six months of home detention. Former chief marketing officer Mark P. Kaiser was convicted of securities fraud, conspiracy and making false filings and sentenced to seven years. Kaiser was the only executive to go to trial.

Miller, who was asked to resign his CEO post in 2003, was not charged. He has maintained that he was never aware of the overstated earnings.

"There has never been a hint of suggestion that he was involved in any way," said his attorney Rosenberg.

Rosenberg said his client was comfortable with the settlement. The attorney said Miller is involved in other business ventures in the Baltimore area. He declined to give details and said Miller did not want to comment yesterday.

"Miller took the position all along that if any of his bonus or other compensation was based on erroneous earnings that he was willing to return them and that is what he did in this agreement," Rosenberg said. "Now he can get on with his life, which has been on hold for the last four years while we've been thrashing this out."

In October, Ahold settled a case with its former Chief Executive Officer Cees van der Hoeven for $7 million.

Ahold, which also owns the Giant Food supermarket chain in the Baltimore area, sold U.S. Foodservice for $7.1 billion earlier this year. The buyers were private equity firms Clayton, Dubilier & Rice and Kohlberg Kravis Roberts & Co.

andrea.walker@baltsun.com

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