Royal Ahold is sued by securities purchasers
Mar 6, 2003 12:00 PM, staff and wire reportsA class action lawsuit has been filed in the United States District Court for the Southern District of New York on behalf of all who purchased securities of Royal Ahold between May 15, 2001, and Feb 24, 2003.
Ahold is a Netherlands-based supermarket and foodservice operator with major holdings in the United States. It disclosed Feb 24, 2003, that operating earnings for fiscal year 2001 and expected operating earnings for fiscal year 2002 were overstated by an amount the company believes may exceed $500 million.
Overstatements of income discovered to date will require restatement of Ahold’s financial statements for fiscal year 2001 and the first three quarters of fiscal year 2002.
In response to the disclosure of Ahold’s true financial condition, its American Depository Receipts (ADRs) plummeted from a Feb 21, 2003, close of $10.69 to as low as $3.60 per ADR when trading resumed Feb 24, 2003. The decline represents a one-day loss of more than 65%.
Zwerling, Schachter & Zwerling LLP is handling the lawsuit, which alleges:
•Ahold materially overstated its earnings by improperly including far higher promotional allowances—provided by suppliers to promote their products— than the company actually received in payment.
•The company was experiencing a slowdown in consumer demand and that contrary to defendants’ representations, the company’s financial performance was not very strong.
•Ahold lacked adequate internal controls and was unable to determine accurately the true financial conditions of the company.