February 25, 2003


Scandal hits Dutch food giant Ahold (Anthony Deutsch, February 25, 2003, AP)

With WorldCom and Enron still fresh in investors' minds, Europe was confronted with its own corporate accounting scandal Monday when the world's third biggest food retailer Ahold admitted vastly overstating earnings over the past two years.

Ahold's top two executives resigned, and several senior U.S. managers were suspended while investigations focused on whether income was booked prematurely at the company's U.S. Foodservice arm. Ahold also owns Stop & Shop; Skokie-based Peapod Inc., the online grocery, and other U.S. supermarket chains. Ahold's problems won't have a material affect on Peapod, a spokesman said.

Ahold shares plunged 63 percent in Amsterdam trading after the company said it had inflated earnings in the last two years by at least $500 million, and will restate earnings for 2001. Merrill Lynch estimated the restatement could wipe 10 to 30 percent off 2002 per-share earnings.

A great deal of nonsense has been written recently about the loss of confidence in American markets and the rising strength of the euro--but while we've worked through our scandals, the Europeans, with looser rules to begin with and greater cronyism, have yet to face the fact that all our problems are multiplied in their system. This is just the tip of the European iceberg and it's going to be very ugly watching the money that 's been flowing there--on the basis of emotion rather than reason--get yanked out and returned to America.

Posted by Orrin Judd at February 25, 2003 10:40 AM

This is very big news in the Washington, DC area, because Ahold owns Giant Food, the region's biggest supermarket chain, and also U.S. Food Service, a company which provides institutional food services to numerous local businesses and organizations. Two top executives at U.S. Food Services have already been removed in connection with the building scandal. I recommend you keep a close eye on the Washington Post http://www.washingtonpost.com
) for further developments.

Posted by: Joe at February 25, 2003 6:47 PM