Royal Ahold will not face criminal prosecution over an US$800m accounting fraud at its US Foodservice subsidiary, the US District Court of New York revealed yesterday (28 September).
The Dutch retailer was forced to restate income of more than $800m in 2003, when it emerged that executives at US Foodservice had systematically inflated promotional allowances and overstated the value of rebates the company received from suppliers to meet earnings targets. When the fraud was exposed Ahold stock dropped by more than 60%.
Ahold reached a settlement with the Securities and Exchange Commission in 2004 and agreed last year to pay $1.1bn to settle a shareholder class action suit.
Michael J. Garcia, the U.S. attorney for the Southern District of New York, said in a news release that he had taken into account Ahold’s cooperation, the shareholder settlement and that the company reported the problems to authorities upfront.
Sixteen former executives have been charges with criminal offences and 13 of them pleaded guilty. This judgement removes one of the only remaining legal stumbling blocks threatening the company itself.
