Securities and Exchange Commission v. Linda Chatman Thomsen, et al.
raw: Nine Individuals Charged by the Securities And Exchange Commission with Aiding and Abetting Financial Fraud at Royal Ahold's U.S. Foodservice Subsidiary for Signing and Returning False Audit Confirmations
summary
Nine vendor employees aided and abetted a $700 million financial fraud at U.S. Foodservice, Royal Ahold's subsidiary, by signing false audit confirmations, leading to SEC charges and penalties.
paragraph
The SEC charged nine individuals with aiding and abetting a financial fraud at U.S. Foodservice by signing and returning false audit confirmations that overstated promotional allowance income by over 100% during fiscal years 2001-2002. U.S. Foodservice inflated its promotional allowance income by at least $700 million, causing Royal Ahold to report false operating and net income. Five defendants settled with the SEC, agreeing to permanent injunctions and $25,000 penalties without admitting guilt.
narrative
The SEC charged nine vendor employees or agents with aiding and abetting a massive financial fraud at U.S. Foodservice, a subsidiary of Royal Ahold, by signing and returning materially false audit confirmations. These confirmations overstated promotional allowance income by millions of dollars and over 100% during fiscal years 2001 and 2002. U.S. Foodservice personnel pressured or provided side letters to the vendors to sign the false confirmations, which were used in the annual audit. The fraud allowed U.S. Foodservice to meet earnings targets and caused Royal Ahold to report materially false financial results. Five of the defendants - Mark Bailin, Michael Hannigan, John Nettle, Gordon Redgate, and Michael Rogers - settled with the SEC without admitting guilt, consenting to permanent injunctions and $25,000 penalties each. The U.S. Attorney's Office for the Southern District of New York also filed criminal charges against the defendants. The SEC's action highlighted the importance of the audit confirmation process and how third-party collusion can enable large-scale financial misstatements.
Classified financial-fraud(confidence 100%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →
Parties
linda chatman thomsenSecurities and Exchange Commissionsusan markelthe securities and exchange commissionthe u.s. attorney's office for the southern district of new york
Keywords
foodservicefraudconfirmationsindividualsfinancialfalseauditnine individualssecurities exchangeexchange commissionfinancial fraudsigning returningfalse auditaudit confirmationsdivision enforcement
Extracted insights
Dollar amounts 2
- $700.00M $700 million $100M–$1B
- $25K $25,000 $10K–$100K
Entities 5
- person linda chatman thomsen
- agency Securities and Exchange Commission
- person susan markel
- agency the securities and exchange commission
- agency the u.s. attorney's office for the southern district of new york
Triples 22
- The Securities and Exchange Commission Filed Enforcement Actions Nine Individuals
- Nine Individuals Aided and Abetted A Massive Financial Fraud
- U.S. Foodservice Personnel Contacted Vendors And Urged Them To Sign And Return False Audit Confirmations
- U.S. Foodservice Pressed Vendors To Sign And Return False Confirmation Letters
- U.S. Foodservice Provided Side Letters To Vendors Assuring Them That They Did Not Owe The Amounts Reflected As Outstanding In The Confirmation Letters
- The Letters Stated That The Confirmations Were Being Used In Connection With The Annual Audit
- The Letters Directed Defendants To Return The Confirmations Directly To The Company's Auditors
- Each Of The Individuals Aided And Abetted The Fraud By Signing And Sending To The Company's Independent Auditors Confirmation Letters That They Knew Materially Overstated The Amounts Of Promotional Allowance Income Paid Or Owed To U.S. Foodservice
- The Amounts Overstated In The Confirmations Were Inflated By Millions Of Dollars And By More Than 100 Percent
- Bailin, Hannigan, Nettle, Redgate, And Rogers Agreed To Settle The Commission's Action By Consenting To Permanent Injunctions And Payment Of A $25,000 Penalty
- The U.S. Attorney's Office For The Southern District Of New York Announced Criminal Charges In This Matter
- Linda Chatman Thomsen Stated That Financial Frauds Often Depend On The Assistance Of Outsiders To Succeed And Remain Undetected
- Linda Chatman Thomsen Stated That The Individuals And Salespersons Charged Helped The Company Commit A Fraud And Helped Hide That Fraud From Ahold's Auditors
- Linda Chatman Thomsen Stated That The Defendants Corrupted The Audit Process And Helped U.S. Foodservice Commit And Hide A Fraud
- Susan Markel Stated That Third Party Confirmations Are An Integral Part Of The Auditing Process
- Susan Markel Stated That Confirmations Are Intended To Provide An Auditor With Independent Corroboration Of Financial Statement Assertions Made By Management
- Susan Markel Stated That Undermining The Confirmation Process Increases The Risk That The Public Can Be Misled By The Reporting Of Inaccurate Financial Results
- The Complaints Allege That U.S. Foodservice Engaged In A Scheme To Report Earnings Equal To Or Greater Than Its Targets Regardless Of The Company's True Performance
- U.S. Foodservice Inflated Its Promotional Allowance Income By At Least $700 Million For Fiscal Years 2001 And 2002
- U.S. Foodservice Caused Ahold To Report Materially False Operating And Net Income For These Periods
- The Annual Audit Confirmation Process At U.S. Foodservice Was Systematically Corrupted To Help Keep The Fraud From Being Discovered
- The SEC Filed A Complaint In The United States District Court For The Southern District Of New York Alleging That Michael Resnick, Mark P. Kaiser, Lee And Carter Engaged In Or Substantially Participated In A Scheme To Overstate Ahold's Income In SEC Filings And Other Public Announcements For At Least Fiscal Years 2001 And 2002
Extracted body text (4,793c)
NINE INDIVIDUALS CHARGED BY THE SECURITIES AND EXCHANGE COMMISSION WITH AIDING AND ABETTING FINANCIAL FRAUD AT ROYAL AHOLD'S U.S. FOODSERVICE SUBSIDIARY FOR SIGNING AND RETURNING FALSE AUDIT CONFIRMATIONS FOR IMMEDIATE RELEASE 2005-7 Washington, D.C., Jan. 13, 2005 - The Securities and Exchange Commission today filed enforcement actions against nine individuals alleging they aided and abetted a massive financial fraud by signing and returning materially false audit confirmations sent to them by the auditors of the U.S. Foodservice, Inc. subsidiary of Royal Ahold (Koninklijke Ahold N.V.). The actions filed name as defendants Mark A. Bailin, Kenneth H. Bowman, Timothy Neal Daly, Michael J. Hannigan, Peter O. Marion, John Nettle, Gordon Redgate, Bruce Robinson and Michael Rogers. All of these individuals were employees of or agents for vendors which supplied U.S. Foodservice. The Commission's complaints allege that U.S. Foodservice personnel contacted vendors and urged them to sign and return the false confirmation letters. In some cases U.S. Foodservice pressured the vendors; in other cases they provided side letters to the vendors assuring the vendors that they did not owe U.S. Foodservice the amounts reflected as outstanding in the confirmation letters. The letters clearly stated that the confirmations were being used in connection with the annual audit and the letters directed the defendants to return the confirmations directly to the company's auditors. Each of the individuals aided and abetted the fraud by signing and sending to the company's independent auditors confirmation letters that they knew materially overstated the amounts of promotional allowance income paid or owed to U.S. Foodservice. The amounts overstated in the confirmations were often inflated by millions of dollars and by more than 100 percent. Bailin, Hannigan, Nettle, Redgate, and Rogers have each agreed to settle the Commission's action, without admitting or denying the allegations in the complaint, by consenting to permanent injunctions and payment of a $25,000 penalty. Also today, the U.S. Attorney's Office for the Southern District of New York announced criminal charges in this matter. "Financial frauds often depend on the assistance of outsiders to succeed and remain undetected. The individuals and salespersons charged today, while not employed by Ahold, helped the company commit a fraud and helped hide that fraud from Ahold's auditors. By verifying as true information they knew to be false, the defendants corrupted the audit process and helped U.S. Foodservice commit and hide a fraud," said Linda Chatman Thomsen, Deputy Director of the Commission's Division of Enforcement. "Third party confirmations are an integral part of the auditing process. Confirmations are intended to provide an auditor with independent corroboration of financial statement assertions made by management. Undermining the confirmation process increases the risk that the public can be misled by the reporting of inaccurate financial results," said Susan Markel, Chief Accountant of the Commission's Division of Enforcement. The complaints allege that U.S. Foodservice engaged in a scheme to report earnings equal to or greater than its targets, regardless of the company's true performance. U.S. Foodservice inflated its promotional allowance income by at least $700 million for fiscal years 2001 and 2002 and thereby caused Ahold to report materially false operating and net income for these periods. The annual audit confirmation process at U.S. Foodservice was systematically corrupted to help keep the fraud from being discovered. On July 27, 2004, the SEC filed a complaint in the United States District Court for the Southern District of New York alleging that Michael Resnick, Mark P. Kaiser, Lee and Carter engaged in or substantially participated in a scheme to overstate Ahold's income in SEC filings and other public announcements for at least fiscal years 2001 and 2002. Resnick, Kaiser, Lee, and Carter were top executives at Columbia, Maryland based wholesale food distributor U.S. Foodservice, a major subsidiary of Ahold (Litigation Release No. 18797). The Commission also filed actions against Royal Ahold and others on Oct. 13, 2004 (Litigation Release No. 18929). The Commission's investigation is continuing. The Commission acknowledges the assistance and cooperation of the Office of the United States Attorney for the Southern District of New York, and the New York Office of the Federal Bureau of Investigation. Contacts: Linda Chatman Thomsen, Deputy Director, SEC Division of Enforcement, (202) 942-4501 James T. Coffman, Assistant Director, SEC Division of Enforcement, (202) 942-4574 http://www.sec.gov/news/press/2005-7.htm Home | Previous Page Modified: 01/13/2005
OCR text (4,793c · plain-text · 99% conf)
NINE INDIVIDUALS CHARGED BY THE SECURITIES AND EXCHANGE COMMISSION WITH AIDING AND ABETTING FINANCIAL FRAUD AT ROYAL AHOLD'S U.S. FOODSERVICE SUBSIDIARY FOR SIGNING AND RETURNING FALSE AUDIT CONFIRMATIONS FOR IMMEDIATE RELEASE 2005-7 Washington, D.C., Jan. 13, 2005 - The Securities and Exchange Commission today filed enforcement actions against nine individuals alleging they aided and abetted a massive financial fraud by signing and returning materially false audit confirmations sent to them by the auditors of the U.S. Foodservice, Inc. subsidiary of Royal Ahold (Koninklijke Ahold N.V.). The actions filed name as defendants Mark A. Bailin, Kenneth H. Bowman, Timothy Neal Daly, Michael J. Hannigan, Peter O. Marion, John Nettle, Gordon Redgate, Bruce Robinson and Michael Rogers. All of these individuals were employees of or agents for vendors which supplied U.S. Foodservice. The Commission's complaints allege that U.S. Foodservice personnel contacted vendors and urged them to sign and return the false confirmation letters. In some cases U.S. Foodservice pressured the vendors; in other cases they provided side letters to the vendors assuring the vendors that they did not owe U.S. Foodservice the amounts reflected as outstanding in the confirmation letters. The letters clearly stated that the confirmations were being used in connection with the annual audit and the letters directed the defendants to return the confirmations directly to the company's auditors. Each of the individuals aided and abetted the fraud by signing and sending to the company's independent auditors confirmation letters that they knew materially overstated the amounts of promotional allowance income paid or owed to U.S. Foodservice. The amounts overstated in the confirmations were often inflated by millions of dollars and by more than 100 percent. Bailin, Hannigan, Nettle, Redgate, and Rogers have each agreed to settle the Commission's action, without admitting or denying the allegations in the complaint, by consenting to permanent injunctions and payment of a $25,000 penalty. Also today, the U.S. Attorney's Office for the Southern District of New York announced criminal charges in this matter. "Financial frauds often depend on the assistance of outsiders to succeed and remain undetected. The individuals and salespersons charged today, while not employed by Ahold, helped the company commit a fraud and helped hide that fraud from Ahold's auditors. By verifying as true information they knew to be false, the defendants corrupted the audit process and helped U.S. Foodservice commit and hide a fraud," said Linda Chatman Thomsen, Deputy Director of the Commission's Division of Enforcement. "Third party confirmations are an integral part of the auditing process. Confirmations are intended to provide an auditor with independent corroboration of financial statement assertions made by management. Undermining the confirmation process increases the risk that the public can be misled by the reporting of inaccurate financial results," said Susan Markel, Chief Accountant of the Commission's Division of Enforcement. The complaints allege that U.S. Foodservice engaged in a scheme to report earnings equal to or greater than its targets, regardless of the company's true performance. U.S. Foodservice inflated its promotional allowance income by at least $700 million for fiscal years 2001 and 2002 and thereby caused Ahold to report materially false operating and net income for these periods. The annual audit confirmation process at U.S. Foodservice was systematically corrupted to help keep the fraud from being discovered. On July 27, 2004, the SEC filed a complaint in the United States District Court for the Southern District of New York alleging that Michael Resnick, Mark P. Kaiser, Lee and Carter engaged in or substantially participated in a scheme to overstate Ahold's income in SEC filings and other public announcements for at least fiscal years 2001 and 2002. Resnick, Kaiser, Lee, and Carter were top executives at Columbia, Maryland based wholesale food distributor U.S. Foodservice, a major subsidiary of Ahold (Litigation Release No. 18797). The Commission also filed actions against Royal Ahold and others on Oct. 13, 2004 (Litigation Release No. 18929). The Commission's investigation is continuing. The Commission acknowledges the assistance and cooperation of the Office of the United States Attorney for the Southern District of New York, and the New York Office of the Federal Bureau of Investigation. Contacts: Linda Chatman Thomsen, Deputy Director, SEC Division of Enforcement, (202) 942-4501 James T. Coffman, Assistant Director, SEC Division of Enforcement, (202) 942-4574 http://www.sec.gov/news/press/2005-7.htm Home | Previous Page Modified: 01/13/2005