Suzanne Brown
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19961 / January 8, 2007
Accounting and Auditing Enforcement Release No. 2536 / January 8, 2007
SEC v. Suzanne Brown, Civil Action No. 07-0038 (CKK) (D.D.C.) (January 8, 2007)
SEC Settles Financial Fraud Action Against Former Controller of U.S. Foodservice
The Securities and Exchange Commission today filed a settled civil action against Suzanne Brown, alleging that she and others at U.S. Foodservice, Inc. ("USF"), a subsidiary of Royal Ahold (Koninklijke Ahold N.V.) ("Ahold"), engaged in a large-scale fraud that, for fiscal years 2001 and 2002, materially overstated income by approximately $700 million in Commission filings and other public announcements. Brown's illegal acts and failures to act occurred when Brown was USF's Corporate Controller.
The Commission's complaint alleges that, at the instruction of USF executives who supervised her, Brown directed that materially overstated promotional allowance entries be recorded in the books and records of USF. The complaint alleges that these entries did not reflect the company's actual operating performance; instead, they were determined solely by what USF required to make its budgeted earnings. The complaint also alleges that Brown knew, or was reckless in not knowing, that the entries improperly inflated operating income reported on USF's financial statements, which were consolidated into Ahold's Commission filings and other public statements.
According to the complaint, Brown made or directed others to make entries in USF's books and records that she knew, or was reckless in not knowing, were false, without basis in fact, and did not comply with Generally Accepted Accounting Principles. The complaint alleges that these entries included releases of reserves and accruals to make up for earnings shortfalls. Finally, the complaint alleges that Brown provided Ahold's independent auditors with false and/or misleading information in connection with their reviews and audit of USF's financial statements.
Brown has agreed to settle the Commission's action, without admitting or denying the allegations in the complaint, by consenting to a judgment permanently enjoining her from violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 and 13b2-1 thereunder and from aiding and abetting any violation of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13b2-2 thereunder. The judgment also orders Brown to pay a civil penalty of $100,000 and imposes a five-year officer and director bar.
Brown has also consented to the issuance of an Order Instituting Administrative Proceedings Pursuant to Rule 102(E) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions, which suspends her from appearing or practicing before the Commission as an accountant for a period of no less than five years.
The Commission's investigation is continuing. The Commission acknowledges the assistance and cooperation of the Office of the United States Attorney for the Southern District of New York and the New York Office of the Federal Bureau of Investigation.
For additional information on related actions, see Litigation Release No. 19721 (June 7, 2006), Administrative Release No. 34-53326 (February 16, 2006), Litigation Release No. 19454 (November 2, 2005), Litigation Release No. 19034 (January 13, 2005), Litigation Release No. 18929 (October 13, 2004), and Litigation Release No. 18797 (July 27, 2004).
Last Reviewed or Updated: June 27, 2023