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Dutch Food Retailer Won't Be Prosecuted in Accounting Case

September 29, 2006|From Reuters

NEW YORK — Federal prosecutors said Thursday that Dutch food retailer Ahold would not be prosecuted in an $800-million accounting scandal involving its U.S. FoodService Inc. unit.

Michael Garcia, the U.S. attorney for the Southern District of New York, said a non-prosecution deal was reached with Ahold because the retailer cooperated fully with its investigation and entered into a $1.1-billion settlement with investors.

According to the agreement, Ahold must continue to cooperate with the U.S. government's investigation to avoid prosecution and a related civil lawsuit filed by the U.S. Securities and Exchange Commission.

In July 2004, a grand jury in Manhattan charged two U.S. FoodService executives with conspiracy and securities fraud, accusing them of manipulating the company's books to inflate earnings.

On Sept. 18, one of the men, former Chief Financial Officer Michael Resnick, pleaded guilty to a conspiracy charge related to his role in the accounting scandal. He will be sentenced Dec. 11.

Mark Kaiser, U.S. FoodService's former marketing director, was also charged in the July indictment. He pleaded not guilty and is scheduled to go on trial Oct. 10.

Criminal charges have also been brought against 16 vendors for their role in the fraud that caused U.S. FoodService and Ahold to overstate earnings by about $800 million from 2000 to 2003, according to the government.

In May, a Dutch court sentenced the former chief executive and the chief financial officer of Ahold to suspended jail terms over their roles in one of Europe's largest financial scandals.

The 2003 scandal, which involved accounting irregularities at U.S. FoodService and other companies, pushed the Dutch retailer to the brink of collapse.

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