US food company Sara Lee announced today that an internal review of its relationship with Royal Ahold’s US Foodservice unit has revealed that three salespeople independently confirmed to US Foodservice’s auditor, Deloitte & Touche, inaccurate amounts payable to the Ahold unit.
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The company said these amounts were inconsistent with the formal reporting of rebate balances that Sara Lee provided on a monthly basis to US Foodservice. Documents indicate that these individuals improperly responded to direct requests from senior US Foodservice executives to confirm rebates and balances due from Sara Lee that were inaccurate and higher than what was owed.
Sara Lee is providing its findings and related materials to the Securities and Exchange Commission (SEC) in conjunction with the SEC’s ongoing investigation into this matter.
“While this is a serious matter, we want to emphasise that Sara Lee is not the focus of this investigation, and this discovery in no way affects our financial results. Sara Lee’s accounting for our business with US Foodservice is both accurate and appropriate,” said C. Steven McMillan, chairman, president and chief executive officer of Sara Lee Corporation.
“We will continue to cooperate fully with the SEC’s investigation into accounting practices at the US Foodservice unit of Royal Ahold.”
Sara Lee emphasised that these three salespeople, who have been relieved of their sales responsibilities, were not authorised to make these confirmations. The company acknowledged that the letters could have been used improperly by certain US Foodservice personnel to indicate higher than actual earnings.
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