- The Washington Times - Monday, November 28, 2005

AMSTERDAM (AP) — Royal Ahold NV, which owns the Stop & Shop and Giant Food supermarket chains in the United States along with other retail operations worldwide, said yesterday it has agreed to pay $1.1 billion to settle a class-action lawsuit brought by U.S. shareholders after its 2003 accounting scandal.

Peter Paul de Vries of the Dutch Shareholders’ Association, which helped broker the deal, said the proposed settlement “was not of such a size that it will hurt Ahold” but it would help the company “leave a black chapter behind it.”

Ahold’s top lawyer, Peter Wakkie, said it was a coincidence that the amount of the settlement paralleled that of the scandal, in which Ahold overstated earnings by $1 billion from 1999 through 2002, mostly by inflating sales at its U.S. Foodservice subsidiary.

Ahold’s former top management resigned in February 2003 after the company made the fraud known, and its shares lost two-thirds of their value overnight. The company eventually restated earnings for 2002 to a loss of $5 billion. It avoided bankruptcy by selling assets and by obtaining emergency credit lines from its banks.

The agreement requires approval from a court in the Baltimore district, where the case was filed, and from holders of at least 180 million shares out of about 800 million shares that qualify.



Allocation of the payout will be worked out between the plaintiffs’ lawyers and the court.

Ahold said a rough estimate of the compensation would be up to $1 to $1.30 per share. Lawyer Andrew Entwistle, whose firm is leading the class-action suit, said payouts would depend on the size of the loss the shareholder suffered.

Ahold shares rose 0.8 percent to $7.10 per share in Amsterdam trading. Its U.S. shares rose 9 cents, or 1.3 percent, to close at $7.11 on the New York Stock Exchange.

Mr. Wakkie said the settlement struck a balance between the chance of winning in court versus the consequences if Ahold lost. The settlement also was made with an eye on recent hefty settlements in the Enron Corp. and WorldCom cases.

“The stakes were too high to just gamble,” he said.

Ahold said the settlement represented the last “significant” civil cases it faces in the scandal. But Mr. Entwistle said he would push ahead with plans to sue Ahold’s former accountants, Deloitte & Touche, for $2 billion to $3 billion for its actions.

“It’s our view that they are very much responsible for everything that took place,” Mr. Entwistle said. “None of this would have happened if they were doing their job properly.”

Deloitte has denied wrongdoing in the past, and Ahold’s Mr. Wakkie supported the firm yesterday.

“We have a different opinion than Andrew [Entwistle],” he said. “We do not believe Deloitte is culpable in the fraud — they were misled as much as anybody else.”

Since 2003, Ahold gradually has regained firm financial footing and posted net profit of $162 million in the second quarter on sales of $13 billion.

Ahold’s debt is $7.6 billion, half what it was at the height of the company’s crisis in 2003.

The company said it will take a charge of $687 million related to the settlements when it reports third-quarter results today.

The U.S. Securities and Exchange Commission has settled civil fraud charges against Ahold and top executives without fining them.

In ongoing criminal cases, U.S. Foodservice’s former Chief Financial Officer Michael Resnick and former Chief Marketing Officer Mark Kaiser are awaiting trial. They have said they are not guilty of wrongdoing.

Two other former vice presidents of the Columbia, Md.-based subsidiary, Timothy Lee and William Carter, pleaded guilty.

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