European markets were yesterday hit by a new accounting scandal, when Ahold, the world's third largest food retailer, disclosed that earnings in its US division had been overstated by $500m (£315m).
Shares in the Dutch supermarket company lost two-thirds of their value on the news. It is the first significant accounting irregularity to surface for some months and the largest European company to have been impacted.
Chief executive Cees van der Hoeven and chief financial officer Michael Meurs both said they would step down in the wake of the announcement.
The company is delaying its 2002 results, due next week, pending an investigation into its US, South American and European operations. Ahold had annual revenues of $79bn last year and has operations in 27 countries including the Albert Heijn chain in the Netherlands.
Ahold said 2002 profits would be "significantly lower" than expected in 2002 and that it would have to restate earnings for 2000 and 2001.
The accounting misstatement is focused on US Food service, a distribution business that delivers food to restaurants, schools and prisons. A number of senior executives have been suspended at the division.
But Ahold is also looking at certain transactions at its Argentine subsidiary, Disco. Ahold's accounts are audited by Deloitte Touche Tohmatsu.
Henry De Ruiter, the supervisory board chairman who will take over the running of the company on an interim basis, said the problems had only been discovered recently. "All these things arose from the 2002 audit," he said. "My priority will be to stabilise the business and get to the bottom of the problems."
European Union internal market commissioner, Frits Bolkestein, has warned that Europe is not immune to corporate scandals and is soon planning to announce proposals to strengthen corporate governance.
But there were fears that the announcement could trigger a spiralling loss of confidence in the business, which has built debts of €12bn during an aggressive acquisition spree over the past few years.
Standard & Poor's, the credit rating agency, cut the company's credit rating to "junk" status.