Note 34
On February 19, 2004, the AFIP issued Pré-vista de la
Determinación de Oficio ("Prévista") relating to the same
bonds based on similar allegations as in Vista for the period
from May 2002 to the respective repayment and redemption
dates of the bonds. The AFIP alleged that Disco improperly
failed to pay VAT on both bond issues and failed to withhold
tax on the interest paid to foreign holders of its allegedly
non-public bonds. During 2003 and 2004 Disco made
various defense filings stating that the bonds were placed
through a public offer and that taxes have been withheld and
paid in compliance with applicable Argentine laws and
regulations. On April 6, 2006, the AFIP agreed to withdraw
both the firm (Vista) and preliminary (Prévista) tax claim
against Disco for taxes allegedly owed in connection with
Disco bond issues in 1998. The withdrawal of these tax
claims needed in part to be ratified by the Argentine Tax
Court (Tribunal Fiscal de la Nación). On May 31, 2006, the
Argentine Tax Court ratified the withdrawal of the firm tax
claim. Lifting of the attachments has been completed for all
but one piece of real estate. The AFIP has resolved to archive
the Prévista. As a consequence, these tax claims are now
resolved. Under the terms of the share purchase agreement
with Cencosud on the sale of the Disco shares, Ahold was to
hold Cencosud and Disco harmless for the outcome of the
tax assessment claims related to the Disco Bonds.
D&S c.s. litigation
On April 28, 2003, the public companies Distribucion y
Servicio D&S S.A. and Servicios Profesionales y de
Comercializacion S.A. (together, "D&S c.s.") initiated civil
proceedings against DAIH in the Netherlands Antilles in
connection with Disco's acquisition in 2000 of
Supermercados Ekono S.A. ("Ekono"), which owned
supermarkets in Buenos Aires, Argentina. D&S c.s. sought
payment of approximately USD 47 (EUR 36) plus interest.
The Court of First Instance in the Netherlands Antilles in its
judgment of September 5, 2005 dismissed all claims filed by
D&S c.s. against DAIH. D&S appealed the judgment of
September 5, 2005. On August 22, 2006, the Joint Court of
Appeals of the Netherlands Antilles and Aruba upheld the
judgment of the Court of First Instance in the Netherlands
Antilles of September 5, 2005, in which all claims filed by
D&S c.s. against DAIH were dismissed. Since D&S has not
appealed with the Dutch Supreme Court within the set term,
this judgment is now firm.
On April 26, 2005, D&S has initiated legal proceedings in
relation to the aforementioned claim against Ahold before the
District Court of Haarlem in the Netherlands, seeking a similar
amount in damages. Currently, a judgment is expected in
2007. Ahold's assessment of this claim filed in Haarlem is not
different from the assessment in the Netherlands Antilles
proceedings, which assessment resulted in the release of
a provision.
D&S has taken initial steps to start arbitration proceedings
against Disco in Argentina but has to date not substantiated
its claim. An arbitration panel has not been appointed either.
Disco believes it has proper defenses in these proceedings.
As part of the sale of Disco to Cencosud in 2004, Ahold
has indemnified Cencosud and Disco against this claim
from D&S.
Stop Shop Bradlees Lease Litigation with Vornado
In connection with the spin-off of Bradlees Stores, Inc.
("Bradlees") discussed under Contingent Liabilities below,
Stop Shop, Bradlees and Vornado (or certain of its
affiliates, collectively "Vornado"), and a landlord on a
number of the assigned leases, entered into a Master
Agreement and Guaranty, dated as of May 1, 1992 (the
"Master Agreement") relating to 18 leases for which Vornado
was the landlord. Pursuant to the Bradlees Bankruptcies
(also discussed under Contingent Liabilities below) Bradlees
either rejected or assumed and assigned the leases subject
to the Master Agreement. On November 25, 2002, Vornado
sent a written demand to Stop Shop to pay certain
so-called "rental increases" allegedly due under the Master
Agreement in connection with certain leases, comprised of
USD 5 (EUR 4) annually through January 31, 2012, and, if
certain renewal options are exercised, USD 6 (EUR 5)
annually thereafter through the expiration of the last lease
covered by the Master Agreement, which Vornado alleges
could extend until 2031, depending upon whether renewal
options are exercised. On December 31, 2002, Stop Shop
instituted an action in the New York State Supreme Court
seeking a declaration that it is not obligated to pay the rental
increases demanded by Vornado. After a number of
procedural motions and decisions, on February 14, 2005,
Vornado filed a counterclaim seeking damages and a
declaration that Stop Shop is obligated to pay rental
increases. In 2005, both Vornado and Stop Shop filed
motions for summary judgment which were denied by the
New York State Supreme Court, and such denial was upheld
on appeal by the New York State Supreme Court, Appellate
Division pursuant to a Decision and Order on December 14,
2006. Vornado has sought reargument of the appeal.
Stop Shop continues to believe that it is not obligated to
pay the rental increases demanded by Vornado and intends
to vigorously pursue the litigation and defend against
Vornado's claims.
Waterbury litigation
In October 2006, two customers of U.S. Foodservice,
Waterbury Hospital and Cason, Inc., filed a putative class
action against U.S. Foodservice in the U.S. District Court for
the District of Connecticut. The complaint, which was
amended to add Frankie's Franchise Systems Inc. as a
plaintiff, alleges causes of action based on certain pricing
practices of U.S. Foodservice with respect to "cost plus"
agreements between U.S. Foodservice and some of its
customers. U.S. Foodservice filed a motion to dismiss the
action on February 2, 2007. U.S. Foodservice believes it has
meritorious defenses to the claims set forth in the complaint
and intends to defend vigorously against the lawsuit.
U.S. Foodservice cannot at this time provide a reasonable
estimate of any potential liability.
Ahold Annual Report 2006 115
