FORMER AHOLD EXECUTIVES RECEIVE SUSPENDED SENTENCES

AMSTERDAM - The case against four former Ahold executives came to a close last week as a Dutch court handed down three suspended jail sentences and one acquittal in one of the largest financial scandals in Europe.The court gave nine-month suspended sentences to Cees van der Hoeven and Michiel Meurs, Ahold's former chief executive officer and chief financial officer, respectively, who were both convicted

AMSTERDAM - The case against four former Ahold executives came to a close last week as a Dutch court handed down three suspended jail sentences and one acquittal in one of the largest financial scandals in Europe.

The court gave nine-month suspended sentences to Cees van der Hoeven and Michiel Meurs, Ahold's former chief executive officer and chief financial officer, respectively, who were both convicted of fraud in the case. The court also fined each 225,000 euros ($286,800).

Jan Andreae, former Ahold board member for Europe, was convicted of forgery and given a suspended sentence of four months and fined 120,000 euros, or about $153,000. Roland Fahlin, former supervisory board member, was acquitted.

Ahold, parent of the Stop & Shop, Giant-Landover, Giant-Carlisle and Tops supermarket chains in the U.S., revealed in February 2003 that profits had been overstated by almost 1 billion euros ($1.28 billion) mainly in its U.S. Foodservice subsidiary.

The executives previously settled charges in the U.S. related to the U.S. Foodservice overstatements without admitting guilt. The charges in the Netherlands related to accounting for sales at overseas subsidiaries and joint ventures.

Before the start of the sentencing, the defendants looked optimistic, displaying a confident disposition with journalists, and they appeared relaxed, unlike previous court appearances. Former audit chairman Roland Fahlin was acquitted and was not present for the sentencing.

Prosecutors said they are considering appealing the sentences, which were also criticized by a prominent shareholder activist as being too lenient.

"It's incredibly low," Peter Paul de Vries, director of Dutch shareholder advocate VEB, told reporters. "Especially if you consider the amount of points the court considered proven, then it's incomprehensible there were no non-suspended sentences."

Dutch public prosecutors were seeking jail sentences of up to 20 months - plus six months suspended - each for van der Hoeven and Muers.

"In this case the trust in Dutch business in general and in Ahold in particular was very seriously damaged to an extent never heard of before - billions of euros were lost," said Dutch prosecutor Hendrik Jan Biemond at a hearing last month.

The executives were found guilty of deceiving accountants in an effort to magnify sales by improperly consolidating the results of several retail subsidiaries and adding sales of joint ventures in Scandinavia and South America to Ahold's accounts.

Judge Frans Bauduin explained the leniency by saying that the laws in the Netherlands are less strict than those in the U.S. with regard to the issues in question, and unlike in cases such as Enron, there had been no question of personal enrichment at Ahold.

"The sentences are to show disapproval of fraudulent behavior by people occupying important roles in society, whose behavior should really act as an example to others," he said.

Defense attorney Mischa Wladimiroff maintained van der Hoeven's innocence. "My client deeply regrets that the shareholders, Ahold and its people have been victims of catastrophic events of February 2003. However, it would be a distortion of reality to think that it was caused by a consolidation issue; it can be attributed to many other factors," he wrote in a statement given to reporters at the start of the trial.

Three of the former executives were found guilty of forging documents in which they presented letters to auditors stating Ahold had controlling stakes in four joint ventures and keeping secret "side letters" in which validity of total control was contested by joint ventures.

While Ahold itself was not involved in charges brought against the former executives, the scandal nearly ruined its reputation.

Van der Hoeven and Meurs resigned shortly after Ahold's disclosure of accounting irregularities.

A former in-house counsel to Unilever, who asked to remain anonymous, agreed with the court's verdict and said the sentence may reflect distancing from American practices.

"I think the unsuspended jail sentence would have been very harsh," he said. "Firstly, they were first-time offenders, the economic harm they've caused was not enormous, and as the court stated, Ahold's financial reports were not false or misleading according to Dutch accounting standards."