SCHEVENINGEN, Netherlands -- Ahold executives, who were contrite and apologetic, confronted angry shareholders at its annual meeting here last week, and pledged to bring the company back on an even keel.
As early as the first half of 2001, Ahold principals were already aware of problems that resulted in an $880 million overstatement of its pretax earnings from 2000 to 2002 due to overbooking of promotional allowances at U.S. Foodservice, Ahold Chairman Hendrikus de Ruiter told the gathering.
Puzzled and angry shareholders peppered de Ruiter and members of the Ahold management and supervisory boards with questions regarding U.S. Foodservice, a wholly owned subsidiary in Columbia, Md. Ahold is based in Zaandam, Netherlands. The meeting, held at the Fortis Circustheater, definitely had its operatic moments.
"This meeting is taking place in a circus, and I think that's appropriate because it's more about theater than it is about the truth," said one shareholder to de Ruiter. "I have the impression that you have knowingly been misleading us."
Shareholders mainly took issue with what they called an obvious oversight on the part of Ahold managers. P.P.F. De Vries, speaking on behalf of the Dutch Association of Shareholders, asked de Ruiter how Ahold principals could have missed such a gross overstatement of profit over the years.
The chairman responded: "The volume of promotional allowances at our competitor Sysco was higher, so it didn't strike us as unusual. We imagined that our margins would more or less look like Sysco's. In the end, I think all of this is related to the word fraud. A number of people at U.S. Foodservice booked allowances that were not a material thing." During his opening remarks, de Ruiter had apologized to shareholders.
"Feb. 24 was an all-time low for each and every one of us, and I offer you my sincere apologies," he said.
Anders Moberg, Ahold's acting chief executive who was appointed earlier this month, promised shareholders he would get the company back on track. "Allow me my 120 to 150 days of honeymoon to get back to you with a long-term and short-term plan for the company. I promise you that things will be different and that we will restore value and common sense to the company," he told shareholders.
De Ruiter said internal forensic investigations were continuing at U.S. Foodservice, and that those investigations would be completed by next month. He said he hoped the company's fourth-quarter and year-end results -- the auditing of which has been suspended until the investigations finish -- would be released by June 30 at the latest.
Before the meeting began, Ahold said Jim Miller, the president and chief executive officer of U.S. Foodservice and a member of the corporate executive board of Ahold, had resigned and been replaced temporarily by Robert G. Tobin, the former president and chief executive officer of Ahold USA, Chantilly, Va. On the following day two other U.S. Foodservice executives resigned: Michael Resnick, chief financial officer, and David Amramson, executive vice president and general counsel.
Peter Wakkie, an attorney for Ahold, told reporters after the meeting that no fraudulent acts had been discovered with regard to Miller.
