Ahold accounting scandal worse than expected

Related tags Ahold Fraud

The extent of the accounting fraud at US Foodservice, a subsidiary
of Dutch group Ahold, was greater than originally thought, the
company reported yesterday. Initial estimates of $500m were low:
the actual figure is nearer $880m.

Ahold​, the troubled Dutch food retail group, has announced the results of an investigation of the accounts at its US Foodservice arm, and they do not make for pleasant reading.

When the company first reported that profits at the US business had been overstated, it estimated the figure to be around $500 million (€434.8m). But a thorough examination of the accounts by PricewaterhouseCoopers (PwC) shows that the figure is nearer $880 million. This figure refers only to the period between 1 April 2000 and 28 December 2002, during which time US Foodservice was part of the Ahold group.

In a statement, Ahold said that its board would be meeting soon to determine what actions should be taken with respect to US Foodservice. One such action is likely to be the dismissal of Jim Miller, the head of the business, who is likely to carry the can for the fraud, even if he himself is not implicated in it.

The two senior US Foodservice executives believed to be behind the fraud, vice-president of marketing Mark Kaiser and vice-president of purchasing Tim Lee, were dismissed last week.

Ahold said that investigations into the accounts of other subsidiaries - notably Albert Heijn, Stop & Shop, Santa Isabel in Chile, Ahold's operations in Poland and the Czech Republic, and the ICA Ahold Scandinavian joint venture - were still ongoing, but that there was no evidence thus far of any similar fraudulent activities.

These audits will be completed by 30 June, Ahold stressed.

Even before the US Foodservice fraud was unveiled, Ahold had been going through a pretty torrid period, with problems at its Latin American operations dragging it into the red.

The group subsequently embarked on a programme of divestments, including the Latin American units and several Asian operations, and has been the source of much speculation about a possible takeover bid from rival companies such as Carrefour or Tesco.

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