Dutch prosecutors raided the corporate offices of Royal Ahold NV in the Netherlands over the weekend, removing boxes of documents in a widening criminal probe into false accounting at the world's third-largest food retailer.
A spokeswoman for Ahold, the owner of Giant Food Inc. and five other U.S. supermarket chains, said yesterday that the company, based in Zaandam, Netherlands, is cooperating with investigators.
"They did a search in our headquarters, and they took documents," said Carina Hamaker, a spokeswoman, who said she could not comment further. "It's under investigation, so we'll have to await the outcome."
Investigators from the Dutch public fraud prosecutor's fiscal and economic crime unit also searched the Dutch offices of Deloitte & Touche Tohmatsu, Ahold's accountant.
The prosecutor's office said yesterday that it is investigating what it suspects are false documents and incorrect information in annual reports relating to Ahold joint ventures in Brazil, Guatemala, Argentina, Sweden and Norway.
"The suspicions [of falsification] are based on some side letters [supplements to contracts] presented by Ahold concerning the consolidation of joint ventures in Sweden/Norway, Brazil, Guatemala and Argentina," the prosecutor's office said in a press release.
Dutch prosecutors said they have not launched a probe into Columbia-based U.S. Foodservice, the Ahold foodservice subsidiary at the center of the accounting scandal first disclosed by Ahold in February. U.S. Foodservice overstated its profit by $856 million over three years, Ahold's internal investigation originally found.
Last week, Ahold said an internal probe had unearthed an additional $84 million in accounting irregularities, though it did not disclose where those irregularities occurred, bringing the total value of improperly booked profit in 2001-2002 to about $1.1 billion.
U.S. Foodservice is, however, under investigation by the U.S. Securities and Exchange Commission and the Justice Department.
U.S. results awaited
In their statement, the Dutch prosecutors said they are awaiting results of the U.S. investigations before deciding whether to expand their probe to U.S. Foodservice.
"Ahold deems it inappropriate to give any further information concerning these investigations while their outcomes are pending," the company said in a statement yesterday.
It was too early to say yesterday how damaging the latest potential irregularities could be to Ahold, experts said.
"It's obviously bad news, and possibly very bad news, because we don't know how deep this is going to go," said Edward Ketz, a professor of accounting at Penn State University and author of the soon-to-be published book Hidden Financial Risk. "At this stage, what the new managers are going to have to do is make sure everything is fully investigated -- and as quickly as possible."
In the wake of the financial scandal, Ahold replaced its chief executive and chief financial officers and has been selling off non-core subsidiaries.
Though Ahold announced yesterday that the criminal investigation is under way, it was unclear whether it had just begun or was launched three months ago.
In April, Ahold turned over documents to prosecutors that reportedly showed that it had management control of its Scandinavian joint venture ICA, which allowed it to fully consolidate 100 percent of ICA's sales and boost revenue by several billion euros.
The probe will likely focus on how Ahold accounted for sales at its joint ventures, experts said.
Ahold's U.S. shares fell 79 cents yesterday to close at $8.36 on the New York Stock Exchange.