Note 34
Legal proceedings
Ahold and certain of its subsidiaries are involved in a
number of legal proceedings, which include litigation as a
result of divestments, tax, employment and other litigation.
The legal proceedings discussed below, whether pending,
threatened or unasserted, if decided adversely to or settled
by the Company, may result in liability material to the
Company's financial condition or results of operations.
The Company may enter into discussions regarding
settlement of these and other proceedings, and may enter
into settlement agreements, if it believes settlement is in the
best interests of the Company's shareholders. In accordance
with IAS 37 "Provisions, Contingent Liabilities and
Contingent Assets" the Company has recognized provisions
with respect to these proceedings, where appropriate, which
are reflected in the Company's consolidated balance sheets.
Proceedings in connection with events as announced on
February 24, 2003
On February 24, 2003 Ahold announced that it would be
restating its financial position and results for the years 2001
and 2000 as a result of certain accounting irregularities at
U.S. Foodservice, the improper consolidation of certain of
Ahold's joint-venture subsidiaries and certain other
accounting-related matters (the "February 24
Announcement"). Following the February 24
Announcement, numerous lawsuits were filed and civil and
criminal investigations of Ahold were initiated by both U.S.
and non-U.S. governmental and regulatory authorities. Most
of these proceedings have been concluded. Below is an
update on the relevant proceedings.
U.S. Securities Class Action and VEB proceedings
On June 17, 2006, the U.S. District Court for the District of
Maryland entered a final order and judgment approving
Ahold's agreement with the lead plaintiffs to settle the
Securities Class Action entitled "In re Royal Ahold N.V.
Securities ERISA Litigation" (the "Securities Class
Action"). The final order and judgment approving the
settlement, which was announced on November 28, 2005,
are no longer subject to appeal. On November 28, 2005,
Ahold also announced that it had reached an agreement to
settle litigation with the Vereniging van Effectenbezitters
("VEB") (the Dutch Shareholders' Association).
Under the terms of the settlement agreement in the
Securities Class Action, the lead plaintiffs agree to settle all
claims in the Securities Class Action against Ahold, its
subsidiaries, the individual defendants and the underwriters
for the sum of USD 1,109 (EUR 937). This amount includes
USD 9 (EUR 8) as compensation to the VEB for facilitating
the global settlement. The settlement is worldwide and
applies to all qualifying common shares of Ahold. The term
"qualifying shares" refers to all those common shares, which
were purchased or received as dividends between July 30,
1999 and February 23, 2003.
Ahold has contributed to the settlement fund in two
instalments: two thirds of the settlement amount, USD 733
was funded into escrow on January 11, 2006, following the
preliminary court approval of the settlement by the District
Court and the remaining one third, USD 367 was funded into
escrow on January 29, 2007. In addition, in January 2006,
Ahold made a payment of USD 9 into an escrow account for
payment to (an entity designated by) the VEB within
10 days following final court approval of the settlement
as compensation to the VEB for facilitating the global
settlement. As a consequence of the settlement and as
further discussed below, Ahold received an amount of
approximately USD 112 from its Director Officer ("D&O")
insurers in addition to payments it had previously received to
cover legal expenses. The USD 112 was used for Ahold's
payment to the settlement fund.
On November 13, 2006, Ahold's Corporate Executive Board
resolved to allocate 50 percent of the Securities Class Action
settlement amount, after subtraction of insurance proceeds,
to U.S. Foodservice prior to year-end 2006. The total amount
of the Securities Class Action settlement, after subtraction of
insurance proceeds, is USD 988.
Ahold entered into an agreement on June 14, 2006 with the
ERISA lead plaintiffs to settle the ERISA action in exchange
for USD 2.5 (EUR 2). Following the settlement of the ERISA
action, on September 29, 2006 Ahold, Ahold USA, Inc. and
U.S. Foodservice, Inc. entered into the Partial Settlement
Agreement and Release with Royal Indemnity Company
("RIC"), as successor to Royal Insurance Company of
America, which had provided Fiduciary Insurance under
which Ahold claimed coverage with respect to the ERISA
action. Pursuant to the Partial Settlement Agreement and
Release, RIC deposited the sum of USD 2.5 (EUR 2) on
behalf of Ahold with an escrow agent to fund the settlement
on December 14, 2006. On February 12, 2007 the
District Court issued its Order approving the settlement of
the ERISA action.
Director Officer liability insurance
Following the February 24 Announcement, a number of
insurance coverage disputes arose between Ahold and its
D&O insurers, some of which led to litigation or arbitration.
In 2004 and 2005, Ahold reached settlements with all but
three of its excess D&O insurers. In April 2006, Ahold
reached settlement with one of the three remaining excess
D&O insurers, resulting in Ahold receiving USD 1.5 (EUR 1)
of insurance proceeds. Ahold remains in litigation before the
District Court of Haarlem, the Netherlands, with the two
remaining excess D&O insurers that have denied coverage
to Ahold. The combined limits of liability currently in dispute
with these two insurers are approximately USD 21 (EUR 16).
Governmental/regulatory investigations
On September 25, 2006, the U.S. Department of Justice
(the "DOJ"), through the U.S. Attorney's Office for the
Southern District of New York (the "U.S. Attorney")
confirmed in connection with a non-prosecution agreement
that it will not be criminally prosecuting Ahold and U.S.
Foodservice in connection with the events leading to the
February 24 Announcement. From 2004 to 2006, the DOJ
brought securities fraud and other criminal charges against
certain individuals, all of them either former U.S. Foodservice
em ployees or former em ployees of vendors that sold food
and food-related products to U.S. Foodservice.
Ahold Annual Report 2006 113
