Ahold's Legal Woes Continue
NEW YORK -- Royal Ahold said it has uncovered "intentional accounting irregularities" at Tops Markets, marking a widening of the Dutch grocery company's accounting scandal to its U.S. retail operations. The company said it had discovered an additional $29 million in accounting irregularities, "principally" at Tops, its Buffalo, N.Y.-based supermarket chain. It did not say at which of its other operations it had found accounting problems, according to The Buffalo News.
Tops operates 159 supermarkets and 204 convenience stores under three different banners, as well as eight B-Kwik Food Markets in New York State, Pennsylvania and Ohio. Among Ahold's U.S. retail chains, Tops ranked fourth in sales in 2001, with $3 billion in sales. Royal Ahold purchased Tops in 1991. Three years ago, Tops and sister chain Giant of Carlisle, Pa., entered a "shared services" strategy, under which a number of Tops' functions and jobs have been moved to Carlisle, but that may have led to some financial reporting problems.
Royal Ahold, the world's third-largest food retailer, has been rocked by an accounting scandal involving its U.S. Foodservice subsidiary. U.S. Foodservice, which supplies customers such as restaurants and schools, overstated its profits by $880 million over three years. The scandal has forced the departures of Royal Ahold's CEO and chief financial officer, as well as the CEO of U.S. Foodservice.
Until now, Royal Ahold officials had said there were no indications that accounting problems had touched its U.S. retail operations, which are under Ahold USA. In addition to Tops, Royal Ahold owns Stop & Shop, Giant of Landover, Md., Bi-Lo, Giant of Carlisle, Pa., and Bruno's.
"It seems the fraud aspect was not only at U.S. Foodservice but also outside of it in retail," Lukas Daalder, head of research at Oyens & Van Eeghen, told Bloomberg News. "That underscores the lack of oversight by the management."
Royal Ahold said it won't finish auditing its 2002 books by a June 30 deadline. Instead, Ahold said lenders agreed to give it until Aug. 15 to issue its financial statements. Internal investigations at 14 of its operating and joint venture companies were "substantially complete." Investigations at the other three entities should be finished within the next two weeks, Royal Ahold said. A Tops spokeswoman, Stefanie Zakowicz, referred questions to Royal Ahold's headquarters in The Netherlands.
In the case of U.S. Foodservice, Royal Ahold said it found irregularities in how money was handled under a promotional allowances program, in which food companies give rebates to wholesalers and retailers to promote their products. The discounts must be linked to estimated sales volumes, and at U.S. Foodservice some became disconnected from those amounts.
Tops operates 159 supermarkets and 204 convenience stores under three different banners, as well as eight B-Kwik Food Markets in New York State, Pennsylvania and Ohio. Among Ahold's U.S. retail chains, Tops ranked fourth in sales in 2001, with $3 billion in sales. Royal Ahold purchased Tops in 1991. Three years ago, Tops and sister chain Giant of Carlisle, Pa., entered a "shared services" strategy, under which a number of Tops' functions and jobs have been moved to Carlisle, but that may have led to some financial reporting problems.
Royal Ahold, the world's third-largest food retailer, has been rocked by an accounting scandal involving its U.S. Foodservice subsidiary. U.S. Foodservice, which supplies customers such as restaurants and schools, overstated its profits by $880 million over three years. The scandal has forced the departures of Royal Ahold's CEO and chief financial officer, as well as the CEO of U.S. Foodservice.
Until now, Royal Ahold officials had said there were no indications that accounting problems had touched its U.S. retail operations, which are under Ahold USA. In addition to Tops, Royal Ahold owns Stop & Shop, Giant of Landover, Md., Bi-Lo, Giant of Carlisle, Pa., and Bruno's.
"It seems the fraud aspect was not only at U.S. Foodservice but also outside of it in retail," Lukas Daalder, head of research at Oyens & Van Eeghen, told Bloomberg News. "That underscores the lack of oversight by the management."
Royal Ahold said it won't finish auditing its 2002 books by a June 30 deadline. Instead, Ahold said lenders agreed to give it until Aug. 15 to issue its financial statements. Internal investigations at 14 of its operating and joint venture companies were "substantially complete." Investigations at the other three entities should be finished within the next two weeks, Royal Ahold said. A Tops spokeswoman, Stefanie Zakowicz, referred questions to Royal Ahold's headquarters in The Netherlands.
In the case of U.S. Foodservice, Royal Ahold said it found irregularities in how money was handled under a promotional allowances program, in which food companies give rebates to wholesalers and retailers to promote their products. The discounts must be linked to estimated sales volumes, and at U.S. Foodservice some became disconnected from those amounts.