US regulators launch Ahold probe
Supermarket giant faces official investigation
February 26 2003
The US authorities have launched an official investigation into the accounting irregularities at supermarket operator Ahold.
The US Attorney’s Office in Manhattan and the US Securities and Exchange Commission have opened an investigation after Netherlands-based Ahold announced earlier this week that problems relating to promotional allowances from suppliers to its US Foodservice business meant its earnings had been overstated by as much as $500m.
The SEC is to request documents from the company and work papers from Ahold’s auditor, Deloitte & Touche. The investigation will focus on whether fraud was involved in the improper accounting at US Foodservice. There is no suggestion that Deloitte and Touche had any involvement in or knowledge of the irregularities.
An Ahold spokeswoman told news agnecy Reuters: “The SEC opened an inquiry into accounting irregularities at Ahold and U.S. Foodservice and other matters related to disclosure. We have been working with the SEC for a little while now providing them with the information they require.”
Quoting sources at the SEC, the Wall Street Journal said that as well as investigating the manner in which US Foodservice booked supplier rebates, the SEC will take a broader look at the parent company, including acquisition accounting. Ahold has expanded rapidly through acquisition in the US over the past decade. It operates supermarket chains Stop & Shop, Giant, Tops, BI-LO and Bruno’s, as well as internet grocer Peapod, with the US accounting for a significant proportion of its income.
US lawyers are also planning court action on behalf of shareholders who have lost money as Ahold’s share price collapsed to a 15-year low over the past two days. Lawsuits seeking class-action status on behalf of all shareholders have been filed both in New York, and in Virginia where Ahold’s US head office is located.
In the post-Enron environment, US regulators are anxious to be seen to be fully addressing any suggestion of corporate malpractice. A long investigation may affect the goodwill of the banks which are currently extending credit lifelines to cash-strapped Ahold, increasing the likelihood of a sale or break up of the world’s third biggest retailer.
President and chief executive officer Cees van der Hoeven and chief financial officer Michael Meurs are to resign as a result of the irregularities.
