Note 34
Financial statements - Notes to the consolidated financial statements
As previously announced the DOJ is also conducting a civil
investigation, which the Company believes relates to certain
billing practices of U.S. Foodservice with regard to contracts
with federal agency customers. The U.S. Attorney has
requested that the Company provide certain documents
generally related to (i) U.S. Foodservice's cost of products
purchased from certain vendors, including the Value
Added Service Providers, and the prices charged for such
products when sold to federal agency customers and
(ii) U.S. Foodservice's freight costs and the amounts
charged for freight costs for products sold to federal
agency customers.
Ahold continues to cooperate fully with the U.S. Attorney's
investigation. Although Ahold believes it is probable that
claims will be asserted in the civil investigation, Ahold
believes it may have meritorious defenses to such claims as
may be asserted. Due to the stage of the civil investigation,
Ahold cannot at this time provide a reasonable estimate of
any potential liability and, if so, the amount of such liability.
Following the February 24 Announcement, through
authority delegated to it under Section 504 of the ERISA, the
U.S. Department of Labor ("DOL") opened an investigation
into whether any criminal violations of ERISA were
committed by Ahold and certain of its current and/or former
officers, directors and employees in connection with the
401(k) plans of Ahold U.S.A., U.S. Foodservice and Stop
Shop. In addition, in 2003 the Employee Benefits Security
Administration of the DOL also commenced a civil
investigation relating to the U.S. Foodservice, Inc. 401(k)
Savings Plan Master Trust to determine whether any
violations under Title I of ERISA have occurred, including
breaches of fiduciary duty, which investigation remains
pending. To date, these investigations have not been
concluded. Ahold is fully cooperating with each of the
DOL investigations.
Dutch and U.S. proceedings regarding terminations
Ahold's former Chief Executive Officer, Cees van der Hoeven
and Chief Financial Officer A. Michiel Meurs, have each
agreed in the context of their separation that the
determination of their severance package, if any, must be
left to an impartial body, in this case an arbitration tribunal,
which is comprised of persons with experience in this area
and not having any relationship with either Ahold or the
former Chief Executive Officer and Chief Financial Officer,
to ensure complete objectivity of the proceedings. In
December 2003, the former Chief Executive Officer and
Chief Financial Officer initiated an arbitration proceeding
which is presently pending.
In February 2004, James L. Miller, former Chief Executive
Officer of U.S. Foodservice, filed an action in the U.S.
District Court for the District of Maryland, Northern Division
(the "Federal Court") against Ahold, Ahold U.S.A., U.S.
Foodservice and various executive officers and directors of
Ahold, asserting various causes of action in connection with
U.S. Foodservice's termination of his employment as of
October 1, 2003 and seeking compensatory damages of
USD 10 (EUR 8), punitive damages, attorneys' fees,
injunctive relief and a declaratory judgment that he is
entitled to post-termination benefits. The executive officers
and directors named in this case have been dismissed from
the case with prejudice. In May, 2004, Ahold and the other
named defendants filed a counterclaim alleging that
Mr. Miller had breached the fiduciary duties he owed to
Ahold and U.S. Foodservice and the terms of his
employment agreement with U.S. Foodservice, and seeking
compensatory and exemplary damages and restitution of
compensation paid to Mr. Miller during his tenure at
U.S. Foodservice. In December 2005, the Federal Court
issued a memorandum opinion directing U.S. Foodservice
to pay Mr. Miller's legal fees and expenses incurred in
connection with this litigation pursuant to the terms of a
letter agreement executed with U.S. Foodservice prior to his
termination. By order dated August 30, 2006, the Federal
Court awarded Mr. Miller advancement of legal fees and
expenses in the amount of USD 0.1 (EUR 0.1) and setting
guidelines for future payments of legal fees under the letter
agreement. U.S. Foodservice has filed replies to Mr. Miller's
interrogatories and the parties continue with written and
deposition discovery. Trial has been scheduled by the
Federal Court for the fall of 2007.
Uruguayan and Argentine litigation
Ahold, together with Disco S.A. ("Disco") and Disco Ahold
International Holdings N.V. ("DAIH"), is a party to certain
legal proceedings in Uruguay and Argentina related to
Ahold's acquisition of Velox Retail Holdings' shares in the
capital of DAIH in 2002. The plaintiffs, alleged creditors of
certain Uruguayan and other banks, have obtained
provisional remedies in Uruguay, which were executed in
Argentina and have affected the sale and transfer of the
remaining 15 percent of the outstanding shares of Disco to
Cencosud S.A. ("Cencosud"). The alleged damages by the
plaintiffs in the remaining proceedings amount to
approximately USD 72 (EUR 55) plus interest and costs.
The trials on the merits of these cases have yet to start.
Ahold continues to believe that these legal proceedings are
without merit and will continue to vigorously oppose
plaintiffs' claims.
On March 23, 2005 Ahold received from escrow the final
purchase amount for the approximately 85 percent of the
shares of Disco, after reaching an agreement with Cencosud
on the final purchase price adjustment resulting from the
closing balance sheet of Disco. The transaction still requires
Argentine antitrust approval, although this will not affect
Ahold's retention of the purchase amount. The purchase
amount for the remaining approximately 15 percent of the
Disco shares that currently have not been transferred by
Ahold to Cencosud remains in escrow until such shares can
legally be transferred to Cencosud. As referred to above,
these shares are subject to certain Uruguayan court orders
processed and executed in Argentina.
Argentine tax assessment claims
On July 17, 2003, the Administración Federal de Ingresos
Püblicos ("AFIP") served Disco with a Vista de la
Determinación de Oficio ("Vista") - a formal assessment
notice - for the period from 1998 through May 2002 for
taxes allegedly owed in connection with a USD 100 Disco
bond issue due May 2003, which was repaid at maturity,
and a USD 250 Disco bond issue due May 2008, which
was redeemed in July 2003 (the "Disco Bonds").
114 Ahold Annual Report 2006
