Guilty Plea in Food-Service Accounting Fraud

     MANHATTAN (CN) – The former chief marketing officer for U.S. Foodservice, then a subsidiary of Royal Ahold, pleaded guilty to conspiracy to commit accounting fraud; Royal Ahold shares plunged by 60 percent when the book-juggling was revealed in 2003, knocking $6 billion off the company’s market capitalization.
     Mark Kaiser, 54, of Ellicott City, Md., was convicted by a federal jury on all six counts he faced in 2004. He appealed and the case was remanded for a new trial. Kaiser pleaded guilty Monday to conspiring to commit securities fraud, to file false statements with the SEC, and to keep false books and records, the U.S. Attorney’s Office said in announcing the plea.
     Kaiser and others overstated the company’s “promotional allowance income” by more than $800 million from 2000 to 2003, the U.S. Attorney’s Office said in a statement.
     Three other executives have pleaded guilty to similar charges: Michael J. Resnock, Timothy J. Lee and William F. Carter.
     U.S. Foodservice was a leading distributor of food to restaurants. Because it was such a big player, its suppliers kicked back to it part of the purchase price, “in the form of negotiated rebates known as ‘promotional allowances,'” prosecutors said in the statement. “Promotional allowances reduced USF’s cost of sales and thereby increased the company’s earnings.”
     Kaiser will be sentenced on Dec. 7. He faces a maximum term of 5 years in federal prison, a fine of $250,000 and a stipulated forfeiture of $352,329.

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