Ahold's Ex-CEO to Pay Firm $7 Million Settlement
Saturday, October 6, 2007
AMSTERDAM, Oct. 5 -- The former chief executive of Dutch retailer Royal Ahold, the owner of Giant Food, is to pay the company $7 million to settle claims stemming from one of Europe's worst financial scandals, Ahold said Friday.
Under the agreement, Cees van der Hoeven would also drop his counterclaim of more than $6.4 million in payments he said Ahold owed him and not admit any liability, Ahold said in a written statement.
The settlement comes more than four years after Ahold went to the brink of bankruptcy in February 2003. A major part of the scandal involved exaggeration of sales at Ahold's U.S. Foodservice subsidiary in Columbia, Md. Ahold sold U.S. Foodservice in July to Kohlberg Kravis Roberts and Clayton, Dubilier & Rice for $7.1 billion.
Van der Hoeven and Chief Financial Officer Michiel Meurs resigned in 2003, saying the company's earnings reports from 1999 to 2002 were not reliable. Ahold shares quickly lost two-thirds of their value, and it eventually emerged that the company had overstated earnings by more than $1.4 billion in those years.
Meurs also settled Friday, agreeing to pay the company $850,000 and drop claims of more than $2.8 million, Ahold said.
Last year, Van der Hoeven and Meurs were fined by a Dutch court and given nine-month suspended sentences in a criminal case, a decision under appeal by both sides. They reached a settlement with the U.S. Securities and Exchange Commission in which they admitted no guilt but accepted a lifetime ban from holding office in a publicly traded company. The SEC said the case was "deplorable," but did not seek criminal penalties, to avoid double-jeopardy issues in the Dutch case.
The Ahold affair was multifaceted, but the exaggeration of the U.S. Foodservice sales figures accounted for much of the problem. The SEC brought charges against more than 30 people for falsifying records. Many of them settled. Marketing director Mark Kaiser was convicted of civil fraud and is appealing.
Chief Financial Officer Michael Resnick pleaded guilty to one count of criminal conspiracy and was sentenced to six months of home detention and three years' probation. Chief executive Jim Miller was not charged.
Ahold, under new management, is recovering from the scandal. It avoided U.S. prosecution by cooperating with the SEC and promising reforms. It received a reprimand from the Dutch financial watchdog AFM, and settled with Dutch prosecutors for about $11 million.
In November 2005, the company agreed to pay $1.1 billion to settle shareholder lawsuits.