Four former execs face fraud charges in US over Ahold

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The Independent Online

Four former executives with the US subsidiary of the Dutch supermarket giant Ahold faced fraud and insider trading charges yesterday after an 18-month investigation into overinflated earnings reports that put the company in the same ignominious category as Enron, WorldCom and other failed behemoths of the US corporate world.

Four former executives with the US subsidiary of the Dutch supermarket giant Ahold faced fraud and insider trading charges yesterday after an 18-month investigation into overinflated earnings reports that put the company in the same ignominious category as Enron, WorldCom and other failed behemoths of the US corporate world.

The former marketing director, chief financial officer, purchasing manager and a vice-president of US Foodservice, Ahold's US offshoot, stand accused of securities fraud. They are expected to surrender to the authorities today pending an initial court hearing.

According to prosecutors in New York, they lied to company auditors about the rebates the company was receiving from suppliers in exchange for preferential shelf space. The practice - denounced as a form of payola by some consumer advocacy groups - is widespread in the supermarket business in the US and elsewhere.

One of the four men, the former purchasing manager Timothy Lee, is also charged with insider trading in connection with the $3.5bn sale of US Foodservice to Ahold in 2000. He is accused of tipping off key US Foodservice suppliers so they could make money from stock transactions. Peter Marion, a supplier, is a fifth defendant in the case and is accused of making money from Mr Lee's tips.

Ahold disclosed last year that it had inflated its profits by about $1.2bn over three years, largely because of the fraudulent figures coming from the Maryland-based US Foodservice. When the scandal hit, it caused a run on Ahold shares amounting to a loss of some $6bn in market capitalisation.

About 40 senior staff members have since resigned or been fired in what was the first Enron-style scandal to hit a major European corporation. Ahold said in a statement that it and its US subsidiary were both co-operating fully with the authorities.

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