Ahold troubles continue as new CFO is appointed
scandal, has appointed an interim CFO to try and stabilise the
business. But claims that it knew of the US accounting
irregularities as early as 2001, and that other parts of the
business could also be affected, will not help matters.
The controversy over the accounting irregularities at Dutch retail group Ahold continued this week with revelations in the press that the company was aware of the problem as early as 2001.
Ahold, which today appointed Dudley Eustace as its new interim chief financial officer to "stabilise the financial fundamentals" of the company, has also been rocked by claims made by Jim Miller, head of the US Foodservice arm, that the financial irregularities did not in fact stem from his part of the business.
A report in the Financial Times newspaper claims that an unnamed former senior executive at Ahold had revealed that the senior finance officer at US Foodservice had told the Dutch company's management about the $500 million hole in the company's accounts two years ago.
The report said that Ernie Smith, who had worked with Ahold's US retail business for many years before being appointed chief financial officer at US Foodservice, had resigned from the company less than three months after his appointment because he was "allegedly uncomfortable with US Foodservice's accounting standards".
The former Ahold executive claimed that the concerns had not been correctly addressed by the company's management, leading to the revelation earlier this year and the eventual resignation of CEO Cees van der Hoeven along with CFO Michael Meurs.
But Miller's letter last week, also reported by the FT, claims that the departure of the executives was not in fact related to the problems at the US Foodservice business which he had built up but from some other part of the Ahold business - claims strongly denied yesterday by the Dutch management.
"Their resignations had nothing to do with our company" the paper cites him as saying. "[They were] the result of events that occurred outside the United States."
While the investigation into accounting irregularities has focused only on US Foodservice and Ahold's Argentine unit Disco (with the latter being cleared last month after an internal investigation), Ahold told the FT that it had never linked the departure of the directors directly to the accounting scandal.
Could the resignations be linked to another part of the Ahold business, then? Well, press speculation is already concentrating on ICA Ahold, the Scandinavian retail joint venture in which Ahold has a 50 per cent stake, and which has also been linked to accounting irregularities. Ahold has already said that it will partially deconsolidate ICA Ahold's results, but ICA Ahold's CEO Kenneth Bengtsson has said that the business is healthy and will not be affected by Ahold's own financial concerns.
Whatever the reasons for the departure of the executives, and whoever is to blame for the accounting scandal at US Foodservice (since Miller himself has already distanced himself from the affair, blaming a handful of senior executives instead), the ramifications on Ahold's business are likely to be felt for some time.
The vultures are already gathering around the dying body, it seems, with a number of Ahold's biggest European rivals said to be contemplating the prospect of building their business by buying chunks of the Dutch company as it struggles to recover from the scandal (Carrefour and Tesco have already been mentioned). What is clear is that Ahold will not be the same group when it finally emerges from the scandal - it will inevitably be smaller and more streamlined, but the question is will it be wiser and more cautious as well?