International food retailer Royal Ahold will pay $1.1 billion to settle a shareholder lawsuit accusing the company of violating securities laws in 2001 and 2002.
The payments will amount to between $1 and $1.30 a share for investors who bought stock between July 1999 and February 2003, when the company announced accounting problems that required the restatement of its 2001 and 2002 fiscal years as well as its interim results for 2002. The errors led to $ 1.14 billion in profit overstatements.
Royal Ahold operates or provides food services to more than 5,000 stores, including the Stop & Shop supermarket chain. The company admitted no wrongdoing in the settlement, and said that it made the deal to avoid further legal expenses.
The settlement is the biggest securities class-action settlement by a European company in the United States, and Royal Ahold said that it would draw on cash reserves to fund the settlement. The agreement must be approved by the U.S. District Court in Baltimore and signed off by the lawsuits' lead plaintiffs -- the Public Employees' Retirement Association of Colorado and Generic Trading of Philadelphia.
Most of Royal Ahold's earnings inflation took place at U.S. Foodservice, which distributes food to military bases, civil governments, restaurants and caterers. The company improperly booked revenue from joint ventures. In October 2004, Ahold reached an accord with the U.S. Securities and Exchange Commission and avoided paying any fines.
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