The Enron of Europe? : In sheer size and audacity, the Ahold scandal does not compare, but it too could be a sign of things to come.(Royal Ahold N.V.)

Europeans watched smugly as a plague of corporate scandals broke out across America following the fall of Enron. They seemed to feel immune, even above it all, until the news from Royal Ahold last week. The 116-year-old Dutch grocer said it had overstated profits of its U.S. Food Services unit by at least $500 million and uncovered potentially illegal transactions in Argentina. Ahold's share price plunged by two thirds, infuriating millions who had bought the stock on its blue-chip name. CEO Cees Van der Hoeven and his CFO resigned. Albert Heijn, 76-year-old grandson of the founder, appeared on Dutch television to reassure countrymen that the local supermarket chain belonging to Ahold, the third largest food retailer in the world, was safe despite being "shafted." Across the continent, newspapers were calling his company "the Enron of Europe."

Is that fair? Compared with Enron, the Ahold scandal pales in size and sheer audacity. The Texas energy giant collapsed in 2001 when it could no longer keep secret the sham subsidiaries in which it was hiding some $6 billion in debt. From what we know so far, there is no Ahold figure in the same league as Jeffrey Skilling, the CEO who created the culture of artifice at Enron. Enron shattered confidence in U.S. capitalism and inspired a global assault on accounting chicanery, which would uncover even greater losses at WorldCom and Tyco. Those multibillion-dollar companywide schemes make the half billion missing from the account of one Ahold subsidiary look like small change. The American scandals also fired up auditors like Deloitte & Touche, which is why they caught the trouble at Ahold in a matter of months. Enron had fooled the system for years, notes Peter Wyman, head of the Institute of Chartered Accountants in England and Wales: "Ahold is not the Enron of Europe."

Still, Ahold does have much in common with celebrated American companies that lost their way in the late-1990s bubble. Like Tyco and WorldCom, Ahold became a serial acquirer, embarking on a $19 billion shopping spree. Van der Hoeven aspired to be the global retail leader and was praised for playing the mergers and acquisitions game well. But Ahold began to struggle in sluggish markets, and had to borrow heavily to stay in the game. "It's a vicious circle," says Hans Schenk, M&A expert at Utrecht University in the Netherlands. "Whether by pseudo fraud or real fraud, an acquirer needs financial wizardry to keep the share price up so it can pursue the next ...