Charges Expected For Alleged Book Cooking

Jul 27, 2004

By George Anderson

Former executives at Ahold’s U.S. Foodservice unit will reportedly be charged this week for their participation in alleged acts of insider trading and conspiracy related to the company’s accounting scandal.

Federal prosecutors in the U.S. attorney’s office in New York, reports the Washington Post, will seek to prosecute Mark Kaiser, former marketing manager at U.S. Foodservice. Charges may also be filed against U.S. Foodservice’s former chief financial officer, Michael Resnick.

Timothy Lee, who previously worked in the company’s purchasing area under Mr. Kaiser, has already agreed to plead guilty to four charges connected to the case and to assist government prosecutors handling the investigation.

U.S. Foodservice was found to have overstated earnings in the past by falsely reporting the amount of rebates from suppliers.

An internal investigation by Ahold, conducted by the law firm of White & Case LLP, concluded that Messrs. Kaiser and Lee signed letters requiring food suppliers to pay U.S. Foodservice one amount for a rebate when the company’s accounting records falsely reported the income to be twice what it actually was.

U.S. Foodservice, it is alleged, was already engaged in this fraudulent activity before it was purchased by Ahold.

Moderator’s Comment: What are the business ethics lessons learned from the U.S. Foodservice/Ahold accounting scandal? Do you believe corporate responsibility
to stakeholders has improved since the problems at U.S. Foodservice and other companies made headlines?

No charges are expected against James Miller, the former chief executive of U.S. Foodservice who resigned from the company last year, although the Washington
reports investigators from both the U.S. and the Netherlands are continuing to look into any role he may have played in the scandal.

George Anderson – Moderator

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