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U.S. Foodservice Suppliers Surrender to Federal Authorities in Financial Fraud Case

WASHINGTON -- Seven suppliers to Ahold's Columbia, Md.-based U.S. Foodservice division this week surrendered to federal authorities and agreed to plead guilty to conspiracy charges for helping the company overstate its earnings targets, according to published reports. The men could face up to five years in prison and a $250,000 fine each. The charges were brought by the U.S. Attorney for the Southern District of New York.

At the same time the suppliers and the Securities and Exchange Commission reached a settlement regarding related civil charges. Under the settlement, all seven have agreed to pay $25,000 each without admitting or denying the allegations.

The defendants are Brian Crowley, president of Food Services Division of Ken's Foods; Robert Henuset, director of sales, East Foodservice at Crowley Foods; Frank Lysiak, formerly director, national distributor sales at Rich Products Corp.; Ernie Rosenberg, key account manager at J.R. Simplot Co.; and independent food brokers Ritchie Langfield, Dale Schulz, and Larry Stone.

They allegedly sent falsified letters to U.S. Foodservice's independent auditors, in which they lied about how much the company had earned in rebate payments or how much the suppliers owed it. The scandal broke in February 2003, when the activity was discovered.

So far criminal charges have been brought against 16 suppliers for their part in U.S. Foodservice's overstatement of its earnings, the U.S. prosecutor said. The nine other suppliers were accused of conspiracy in January 2005. In July 2004 former U.S. Foodservice marketing executive Mark Kaiser and former finance chief Michael Resnick will face trial on charges of conspiracy and securities fraud related to the earnings overstatement. They have entered not guilty pleas.

Parent company Ahold cooperated with investigators and not been charged.
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