business news in context, analysis with attitude

Dow Jones offered a fascinating look at the business dealings that helped land Ahold’s US Foodservice subsidiary in the current accounting mess that has enveloped the entire company.

Apparently, it worked like this…

Anglia Oils Ltd., a British edible-oils unit of Aarhus Olie Group of Denmark, for years had provided a premium extra virgin olive oil to US Foodservice. Dow Jones reports that in addition to providing the oil, Anglia created at a great deal of expense a clear plastic jug for the company, as well as paid a listing fee to get the produce accepted by US Foodservice.

In October 2001, however, US Foodservice Purchasing Vice President Tim Lee told the company that he could get an equal olive oil cheaper, and asked for an $80,000 payment saying that Anglia overcharged him by that much. Anglia said it wouldn’t pay, US Foodservice stopped ordering oil from it, which left Anglia with thousands of empty jugs it couldn’t use.

Anglia then analyzed the so-called equal oil, and found it didn’t even meet European Union standards for extra virgin olive oil. The company offered to pay lesser fees to get the product back into US Foodservice, but Lee was unresponsive – except that he deducted $60,904 from payments due to Anglia Oils for received goods.

Anglia later concluded that US Foodservice had taken more than $111,000 in unauthorized deductions, and decided not to pay more than $45,000 in earned rebates to US Foodservice.

Amazingly, the two companies still do business with other products. Lee, however, has been suspended as part of the accounting investigation.
KC's View:
This, of course, isn’t about retailing…but virtually every food retailer in the country probably has a story that could be told about its dealings that would be remarkable similar.

Which is why, if the government gets involved, they’ll have nobody but themselves to blame.