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Ahold Settles SEC Fraud Charges

Dutch Grocer Is Not Fined Because of Its Cooperation

By Carrie Johnson
Washington Post Staff Writer
Thursday, October 14, 2004; Page E03

Dutch grocery giant Royal Ahold NV yesterday settled Securities and Exchange Commission charges that its Columbia food distribution unit, U.S. Foodservice Inc., and other subsidiaries fraudulently inflated earnings by nearly $830 million between 2000 and 2002.

Ahold paid no fines in part because of its "extraordinary" cooperation with investigators, said Thomas C. Newkirk, an SEC enforcement official. The company last month agreed to pay Dutch authorities $10 million to cover irregularities in the way its overseas units handled joint ventures on their books. Ahold also controls Giant Food LLC, which was not involved in the SEC investigation.

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In a related action, the SEC filed and settled charges yesterday against Ahold's former chief executive, Cees van der Hoeven; its former finance chief, A. Michiel Meurs; and former board member Roland Fahlin. The company and the three former officials settled the charges without admitting or denying wrongdoing. Jan Andrae, a former executive vice president at Ahold, is fighting the charges. Van der Hoeven and Meurs resigned last year as a result of the accounting scandal.

SEC officials said they did not seek financial penalties against van der Hoeven and Meurs at the request of the Dutch Public Prosecutor's Office, which is leading its own criminal investigation and had expressed concern about possible double jeopardy issues under Dutch law.

The Ahold fraud drew widespread attention when it was uncovered early last year, at the height of the debate over international companies' duties under U.S. corporate reform laws. Ahold's American depositary receipts (ADRs) trade on the New York Stock Exchange.

Federal prosecutors in Manhattan criminally charged U.S. Foodservice's former chief financial officer and former marketing chief in July for the roles they allegedly played in the fraud. Both Michael Resnick and Mark P. Kaiser have pleaded not guilty. A third official, former purchasing executive Timothy J. Lee, pleaded guilty to securities fraud and insider trading and is cooperating with investigators.

A joint Justice Department and SEC probe of food company suppliers to determine whether they helped U.S. Foodservice manipulate its earnings through promotional payments continues.

"The settlement with the SEC is another important step for the company to continue to move forward," said Lawrence Byrne, a lawyer at New York's White & Case LLP who represented Ahold.

Defense lawyers said the Ahold settlement is unusual because regulators have been levying increasingly large fines against companies embroiled in financial scandals. The SEC's Newkirk stressed that Ahold had voluntarily analyzed accounting practices at 17 operating units, made current employees available for interviews and fired workers who took part in the alleged fraud.


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