Charges Against Deloitte & Touche Dismissed in Ahold Matter
Deloitte & Touche is off the hook in a class action suit brought by investors of Dutch retailer Ahold NV, thanks to a federal judge's move to dismiss claims that Deloitte engaged in deceptive conduct and recklessly disregarded misstatements in Ahold's financial documents, the Baltimore Business Journal reported.
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On Dec. 21, U.S. District Court Judge Catherine C. Blake dismissed the claims brought by plaintiffs that Deloitte should be held accountable for the company's $1.1 billion earnings restatement last year because it signed off on Ahold's financial statements.
Fraud at the company's U.S. Foodservice unit resulted in $880 million of the restatement, the Journal reported. The restatement in February 2003 sent the company's stock into a tailspin of more than 60 percent on both U.S. and Dutch exchanges.
Blake disagreed with plaintiff's claims, writing that Deloitte stepped up oversight of Ahold audits after finding weaknesses in Ahold's fraud prevention systems, the Journal reported. Blake ruled that the plaintiffs did not prove that Deloitte knew of any deliberate wrongdoing, and, in fact, Deloitte's work uncovered inflated rebates from vendors, a major part of the Ahold fraud, the Journal reported.
"We are pleased that a U.S. District Judge granted the motions to dismiss the charges against the Deloitte US and Netherlands firms," Deloitte said in a statement.
In a 1994 ruling, the Supreme Court made it more difficult to prove liability against company accountants in securities fraud cases, Lyle Roberts of Wilson Sonsini Goodrich & Rosati in Virginia, who defends public companies in securities fraud suits, told the Journal.
Of the 175 securities class actions filed in 2003, only 5 percent named auditors as defendants, according to a report by Cornerstone Research.
Blake also dismissed claims against Henny de Ruiter, former chair of Ahold's supervisory board, and former board members Cor Boonstra and Roland Fahlin. Blake dismissed some claims against former executives with Ahold operations in the United States, including former Ahold USA CEOs William J. Grize and Robert G. Tobin; former U.S. Foodservice Chief Financial Officer Michael Resnick; and former U.S. Foodservice CEO James L. Miller. Miller and Ahold are locked in their own legal battle over his severance and benefits, the Journal reported.
Lead plaintiffs are the Public Employees' Retirement Association of Colorado and Generic Trading of Philadelphia. The case is expected to be ready for trial in 2006, the Journal reported.