NEW YORK -- The U.S. Attorney for the Southern District of New York here last week said it filed charges against nine individuals who worked for suppliers to Ahold subsidiary U.S. Foodservice in relation to that company's overstatement of vendor rebates.
The nine charged were Mark Bailin, president, Rymer International Seafood; Kenneth Bowman, an independent contractor for food brokerage Total Food Sales; Timothy Daly, former vice president, business development, Michael Foods; Michael Hannigan, former regional sales manager, Sugar Foods Corp.; Peter Marion, owner and president, Maritime Seafood Processors; John Nettle, former account manager, General Mills; Gordon Redgate, owner and president, Commodity Management and Private Label Distribution; Bruce Robinson, former divisional sales manager, Basic American Foods; and Michael Rogers, former vice president of Sales, Tyson Foods.
All were taken into custody last week on criminal charges of conspiring to create false accounting records. They are accused of assisting U.S. Foodservice in inflating its vendor rebates by signing letters provided to Ahold's auditors that "falsely and fraudulently" overstated the amount of rebates U.S. Foodservice was owed by the vendors. The nine also face civil charges from the Securities and Exchange Commission.
Ahold last year said it had overstated profits at U.S. Foodservice by more than $800 million from 2000 to 2003 through artificially inflated vendor rebates, part of a $1 billion-plus accounting scandal that also involved revenue recognition at some overseas subsidiaries.
In addition to the conspiracy to create false records charges, Marion and Bailin were charged with insider trading in connection with the Ahold acquisition of U.S. Foodservice. It was alleged that Marion and Bailin obtained profits of $363,894 and $1.14 million, respectively, by acting on insider tips to acquire U.S. Foodservice stock prior to the acquisition. They are also charged with obstruction of justice in that case.
Separately, two former purchasing executives for U.S. Foodservice last week agreed to pay more than $300,000 to settle civil charges of securities fraud related to the accounting scandal. Timothy Lee and William Carter settled without admission of wrongdoing, according to federal regulators in the action brought by the SEC.
In criminal charges brought last summer, Lee and Carter pleaded guilty to charges in connection with the scandal and agreed to cooperate with prosecutors. According to reports, Lee agreed to pay $235,000 and Carter $96,567 to settle the civil charges.
Marybeth Thorsgaard, a spokeswoman for General Mills, Minneapolis, said, "General Mills cooperated fully in this investigation. The former employee involved acted alone and in violation of company policy."
Mark Witmer, treasurer, Michael Foods, Minnetonka, Minn., said only that Daly had been dismissed soon after the investigation came to light.