The US Securities and Exchange Commission (SEC) and the US Department of Justice reportedly have widened their investigations into the Ahold and its US Foodservice division, requesting information from at least six major food manufacturers -- Kraft Foods, General Mills, and HJ Heinz, in addition to the previously reported Sara Lee, ConAgra, and Tyson. There also have been reports that Kellogg Co. has been contacted by investigators.
Ahold has been under investigation since it admitted that US Foodservice had overstated its 2001 and 2002 profits by a half-billion dollars. The probe reportedly is focusing on how Ahold used and accounted for manufacturer promotions and rebates in inflating its profit numbers.
Reuters reports that all six food makers are cooperating fully with the investigations.
Executives with both Sara Lee and General Mills have said they believe their accounting practices with regard to US Foodservice have been accurate.
ConAgra spokesman Chris Kircher told The Washington Post that his company believes "we're a witness, not a target."
However, The Wall Street Journal reports this morning that two ConAgra sales employees “signed off on inaccurate documents” from US Foodservice, but that the ConAgra accounting department caught the errors and alerted both US Foodservice and Ahold’s auditor, Deloitte & Touche.
The inaccurate documents sought to verify the amount of promotional money or rebates that US Foodservice said ConAgra owed, according to the WSJ.
The Washington Post reports this morning that ConAgra actually received a total of five documents from US Foodservice containing inaccurate information about rebates owed, but that the company was more concerned about the amounts owed than the accounting procedures being used.
A subsequent letter Deloitte & Touche about owed rebates was closer to correct, but still erroneous, according to the Post.
"When you get one and there's an error, you don't think much. You get another and a third, you get suspicious. When you see [the accounting scandal] on television, you go from being suspicious to being angry," ConAgra’s Kircher told the Post.
USAToday reports this morning that both the US Department of Justice and the SEC believe that “executives at some big food manufacturers might have colluded with US Foodservice to inflate supplier rebates and pump up profits,” even to the point of issuing false confirmations of rebates owed so that US Foodservice could use to inflate its own worth.
“The implications of these allegations go well beyond federal securities laws and appear to reach into the world of criminal antitrust violations,” former SEC lawyer and prosecutor Jacob Frenkel tells USAToday.
In other Ahold-related news, Deloitte & Touche yesterday announced that it would wait until the various investigations of the company are complete before giving final approval to its audit numbers.
According to at least one report, a delay by the auditor could complicate matters for Ahold, since its ability to get $3 billion (US) in financial aid is dependent on the completion of its audits. However, The Financial Times says that the refinancing plan may not be affected by the delay.
Ahold has been under investigation since it admitted that US Foodservice had overstated its 2001 and 2002 profits by a half-billion dollars. The probe reportedly is focusing on how Ahold used and accounted for manufacturer promotions and rebates in inflating its profit numbers.
Reuters reports that all six food makers are cooperating fully with the investigations.
Executives with both Sara Lee and General Mills have said they believe their accounting practices with regard to US Foodservice have been accurate.
ConAgra spokesman Chris Kircher told The Washington Post that his company believes "we're a witness, not a target."
However, The Wall Street Journal reports this morning that two ConAgra sales employees “signed off on inaccurate documents” from US Foodservice, but that the ConAgra accounting department caught the errors and alerted both US Foodservice and Ahold’s auditor, Deloitte & Touche.
The inaccurate documents sought to verify the amount of promotional money or rebates that US Foodservice said ConAgra owed, according to the WSJ.
The Washington Post reports this morning that ConAgra actually received a total of five documents from US Foodservice containing inaccurate information about rebates owed, but that the company was more concerned about the amounts owed than the accounting procedures being used.
A subsequent letter Deloitte & Touche about owed rebates was closer to correct, but still erroneous, according to the Post.
"When you get one and there's an error, you don't think much. You get another and a third, you get suspicious. When you see [the accounting scandal] on television, you go from being suspicious to being angry," ConAgra’s Kircher told the Post.
USAToday reports this morning that both the US Department of Justice and the SEC believe that “executives at some big food manufacturers might have colluded with US Foodservice to inflate supplier rebates and pump up profits,” even to the point of issuing false confirmations of rebates owed so that US Foodservice could use to inflate its own worth.
“The implications of these allegations go well beyond federal securities laws and appear to reach into the world of criminal antitrust violations,” former SEC lawyer and prosecutor Jacob Frenkel tells USAToday.
In other Ahold-related news, Deloitte & Touche yesterday announced that it would wait until the various investigations of the company are complete before giving final approval to its audit numbers.
According to at least one report, a delay by the auditor could complicate matters for Ahold, since its ability to get $3 billion (US) in financial aid is dependent on the completion of its audits. However, The Financial Times says that the refinancing plan may not be affected by the delay.
- KC's View:
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This just gets uglier and uglier. It is remarkable how much attention the national media is paying to this story, as questions of accounting and ethics are being asked daily in the country’s most prominent newspapers.
It is hard to know at this point whether this is just a US Foodservice problem, or whether it encompasses other companies both in the foodservice and grocery businesses.
We keep hearing that while most people think the actual damage will be limited to US Foodservice, there is a perception problem being created by all this negative publicity, a negative perception that could taint the rest of the industry.
The other thing we keep trying to figure out is how Royal Ahold’s CEO and CFO in the Netherlands lose their jobs over this whole scandal, and yet US Foodservice CEO Jim Miller manages to keep his. He was, after all, the man in charge as all this nonsense was going on; how can he not be culpable?
A new scenario that could explain this was presented to us yesterday. What if Miller gets to keep his job because he, in fact, was the whistle-blower? What if he informed Ahold’s top management about the overstatement of profits, they tried to cover it up, and he went to the board.
That could explain how he gets another chance to run the company, to try and resurrect its reputation.
This is all speculation. But we can’t figure out any other reason he’s still in charge.
In business, captains rarely get the opportunity to go down with the ship.
