Ahold Arrests Unlikely to Stir U.S. Supermarkets
Last week’s indictment of four former Royal Ahold executives is unlikely to affect trade promotion practices in the U.S. supermarket industry.
The four, formerly executives of Royal Ahold’s U.S. Foodservice wholesale distribution division, were indicted by the Securities & Exchange Commission and the Department of Justice on charges of fraud. The four allegedly overstated fiscal 2001 and 2002 revenue by $700 million, largely by inflating U.S. Foodservice’s promotional allowance income.
The SEC alleges that the executives reported fictitious promotional rebates (based on purchase volume) to cover shortfalls in budgeted earnings, then lied to Ahold’s independent auditors about the rebates.
The complaint alleges that the executives induced several suppliers to submit false confirmations of promotional allowances. The four charged are former CFO Michael Resnick; former Chief Marketing Officer Mark Kaiser; former Executive VP-purchasing Timothy Lee; and former VP-purchasing William Carter. All left or were fired from U.S. Foodservice in 2003. The SEC investigation continues, with cooperation from U.S. Foodservice’s current CEO Lawrence Benjamin. Columbia, MD-based U.S. Foodservice has tightened its financial monitoring and formed an office of governance, ethics and compliance reporting to the CEO and to Ahold’s chief corporate governance counsel.
The criminal indictments are “part of the increased scrutiny of business in general, not a reflection on the grocery industry,” said Jack Ryder, president of trade marketing consultancy Cannondale Associates, Wilton, CT. “This is an extension of scandals like Enron, part of the background noise going on now.”
