Court in NY tosses conviction for former chief marketing officer of food products distributor

New trial ordered in NYC for ex-food service boss

NEW YORK — A federal appeals court ordered a new trial Thursday for the former chief marketing officer of one of the nation’s biggest food products distributors, saying errors by a judge make it necessary to dissolve the conviction and the seven-year prison term that followed.

The 2nd U.S. Circuit Court of Appeals ordered the new trial for Mark Kaiser after concluding that the trial judge erred in his instructions to the jury in November 2006, resulting in a flawed trial.

Kaiser, 55, of Ellicott City, Md., has been free on bail since he was sentenced three years ago to seven years in prison.

A lawyer for Kaiser did not immediately return a telephone message for comment. Prosecutors also did not immediately comment.

Kaiser was convicted of securities fraud, conspiracy and false filing after prosecutors said he and others enhanced their own bonuses by boosting the company’s earnings $800 million from 2000 to 2003 by reporting fake rebates from suppliers.

Kaiser worked for U.S. Foodservice Inc., a former subsidiary of supermarket giant Royal Ahold NV. Ahold sold U.S. Foodservice Inc. in 2007 to a group of buyout firms led by KKR & Co. LLP. Defense lawyers argued at trial that Kaiser was kept in the dark about any financial misdeeds that occurred at the company.

Netherlands-based Ahold’s U.S. properties include the Stop & Shop and Giant supermarket chains. U.S. Foodservice is one of the largest distributors of food products in the country, providing to restaurants and cafeterias.

U.S. Foodservice routinely buys products from suppliers at full price, and the suppliers refund some of the price in rebates known as promotional allowances.

Ahold said in 2003 that it had overstated its earnings by more than $1 billion, mostly because of the fraud at U.S. Foodservice. Its stock lost 60 percent of its value, shaving $6 billion from its market capitalization.

Ahold has said it cooperated with U.S. investigators and had taken measures to ensure such activity could not happen again.

Online:

U.S. Foodservice: www.usfoodservice.com

Royal Ahold NV: www.ahold.com

(This version CORRECTS that Ahold sold U.S. Foodservice Inc. in 2007.)