Shareholders who suffered losses in Royal Ahold’s 2003 fraud scandal plan to take the Dutch retailer’s auditors, Deloitte Netherlands, to court for damages that could total hundreds of millions of euros. In February 2003, Ahold’s share price crashed after investigations revealed large-scale fraud, primarily concerning the overstatement of vendor allowances, at its subsidiary, US Foodservice.
Following the revelation of the fraud, Dutch financial reporting watchdog the Foundation for Investigation of Business Information (Stichting Onderzoek Bedrijfs Informatie – SOBI) made a series of complaints against Deloitte before the disciplinary board in the Netherlands.
In March this year the board handed down its findings, which ruled against Deloitte in one part of the four-part case. SOBI chairman Pieter Lakeman said the ruling against Deloitte found the Big Four firm did a “bad job” auditing US Foodservice. Both Deloitte and SOBI are appealing the decisions.
Using the disciplinary board finding as a base, SOBI is now leading a damages claim on behalf of the shareholders. The claim is open to all shareholders who bought their shares after 7 March 2001, when Deloitte signed off on Ahold’s annual report for 2000, Lakeman said.
The 2000 report was the first that concealed the fraud at US Foodservice. Deloitte detected irregularities in its audit of Ahold’s 2001 report – at which point the fraud investigations commenced.
Deloitte is confident The Big Four firm said in a statement that it is “surprised to learn that the announced claim is being brought at a time when the appeal against the disciplinary committee’s decision is still pending”. “Deloitte is looking forward to the [appeal] decision with confidence,” the firm said.
The decision on the appeals is expected in March or April 2008. Lakeman said the reason the shareholders will not wait until that time to file the complaint is that under Dutch law a claim must be made within five years, and that period will expire on 24 February 2008.