Former U.S. Foodservice CEO Miller, Ahold reach $8M settlement deal

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Royal Ahold NV, the Dutch owner of Giant Food Stores, will get $8 million from a settlement with James L. Miller, who ran the company’s Columbia-based U.S. Foodservice unit during a three-year accounting scandal that started in 2000.

The agreement consists of Miller’s bonuses and a “small part” of his salary while he ran the division, Ahold spokesman Walter Samuels said in Amsterdam Tuesday. In reaching the accord, Miller didn’t acknowledge liability, the retailer said.

Ahold admitted in 2003 that it overstated three years of profit by $1.4 billion, mostly because of fraud at U.S. Foodservice, which distributes food to restaurants and hospitals. The Dutch company agreed to sell the unit, which it acquired in 2000, in July.

The settlement is an “adequate remedy for the failings at U.S. Foodservice,” Samuels said. The Miller settlement is “the last important legal case for Ahold,” he said. Earlier this year, the Dutch retailer settled with former Chief Executive Officer Cees van der Hoeven.

In February 2004, Miller sued Ahold in Baltimore County Circuit Court, claiming the company reneged on its promise to extend post-termination benefits and a severance payment after he resigned his position. Ahold filed counterclaims, contending that Miller breached his fiduciary duties of care, good faith and loyalty, as well as his employment agreement.

The case was removed to the U.S. District Court in Baltimore in April 2004 after it was determined Miller’s claims under the Employee Retirement Income Security Act pre-empted his state law claims, which included fraudulent inducement, breach of contract and negligent misrepresentation.

In his complaint, Miller claimed U.S. Foodservice made him the scapegoat for a financial scandal over inflated earnings. The Securities and Exchange Commission charged more than two dozen people over the scandal, but Miller was not charged.

The fraud cost investors more than $800 million. In May, Mark P. Kaiser of Ellicott City, former chief marketing officer of U.S. Foodservice, was sentenced to seven years in prison for his role in the scheme.

Miller claimed he was not aware of the overstated earnings that were at the heart of the scandal. However, as the scandal unfolded, he said Ahold officials coerced him into resigning. He claimed he was told it was “necessary for him to fall on his sword for the good of the company,” according to the lawsuit.

In return for leaving, Ahold promised he would get extensive post-termination benefits and a severance payment, and be vested in the retirement plan, Miller claimed. Instead, he said, he received a letter telling him his post-termination benefits would end on Feb. 29, 2004. He was also told to return all bonus payments made to him since Ahold bought U.S. Foodservice in 2000.

Last month, just days before the case was scheduled to head to a jury, the sides announced a settlement, but the terms were not disclosed.

Ahold shares rose 12 cents, or 1.3 percent, to 9.50 euros in Amsterdam. UBS AG raised its recommendation on the stock to “neutral” from “sell” before Ahold announced the Miller settlement.

Ahold in October said van der Hoeven would pay 5 million euros to settle a dispute over severance, four years after he was ousted and then charged with fraud. It also settled with former Chief Fnancial Officer Michiel Meurs. Neither man admitted liability.

The retailer sold U.S. Foodservice in July for $7.1 billion to Clayton Dubilier & Rice Inc. and Kohlberg Kravis Roberts & Co., two U.S. buyout firms.

Bloomberg contributed to this article.