By Anthony Deutsch
The Associated Press
AMSTERDAM, Netherlands - With WorldCom and Enron still fresh in investors' minds, Europe was confronted with its own corporate accounting scandal Monday when the world's third-biggest food retailer Ahold admitted vastly overstating earnings over the past two years.
Ahold's top two executives resigned, and several senior U.S. managers were suspended while investigations focused on whether income was booked prematurely at the company's U.S. Foodservice arm. Ahold also owns Stop & Shop and other U.S. supermarket chains.
Its shares plunged 63 percent in Amsterdam trading after the company said it had inflated earnings in the last two years by at least $500 million.
It will restate earnings for 2001 and delay its 2002 earnings report, pending results of ongoing investigations at its operations in the United States, South America and Europe. Merrill Lynch estimated the restatement could wipe 10-30 percent off 2002 per share earnings.
The news dragged down shares in the European retail food sector, but analysts said there didn't seem to be an industry-wide problem. Delhaize of Belgium sank 5.3 percent, and Carrefour and Casino of France fell 0.2 percent and 3.6 percent respectively.
However, analysts said the disclosure hurt investor confidence in the Netherlands as it called into question the soundness of accounting practices used by a well-known and widely-held company.
Standard & Poors lowered its credit rating for Ahold bonds as prices tumbled on international markets.
Ahold, which uses U.S. and Dutch accounting standards, generates more than half its sales in the United States, where it owns the regional chains Giant-Landover, Giant-Carlisle, Tops, BI-LO and Bruno's as well as Stop & Shop.
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