FOOD LION PROFITS STILL ON A BANANA PEEL

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, April 10, 1993                   TAG: 9304100058
SECTION: BUSINESS                    PAGE: A6   EDITION: METRO 
SOURCE: Knight-Ridder/Tribune
DATELINE:                                 LENGTH: Medium
FOOD LION PROFITS STILL ON A BANANA PEEL
Food Lion's profits fell 55.8 percent in the first quarter of 1993 from the 1992 quarter, as the company's performance continued a slide that began last year.
The decline is the steepest in recent times at the embattled Salisbury, N.C.-based supermarket chain. In the fourth quarter of 1992, earnings fell 55.1 percent from the previous year.
Food Lion reported earnings of $21.9 million in the first 12 weeks of 1993, down from $49.6 million. Sales in the period rose 3.8 percent to $1.66 billion over year-earlier $1.56 billion.
Although chain's stock price began falling early last year, it blames much of its sales and earnings losses on a November broadcast by the ABC television newsmagazine "PrimeTime Live," which used undercover footage to report that stores repackaged out-of-date meat and redated other expired products.
Food Lion also is negotiating with the government over allegations that it underpaid hundreds of employees.
The supermarket chain filed a federal fraud lawsuit against the television network, and last week added an unprecedented claim that ABC has run afoul of the Racketeer Influenced and Corrupt Organizations Act, known as RICO.
The new complaint details allegations that two ABC producers and the network committed numerous acts of mail fraud and wire fraud in order to get the story. RICO says that if companies are "ongoing criminal enterprises," they can be forced to pay victims huge amounts.
The network called the RICO allegations outrageous and legally baseless. In February, ABC asked the court to throw out Food Lion's original fraud complaint on First Amendment grounds. That request is pending.
Food Lion's suit, in U.S. District Court in Winston-Salem, N.C., says the producers got jobs at Food Lion with faked applications and job references, and communications concerning the applications and references crossed state lines.
The network has admitted deceiving Food Lion in order to get its producers jobs there. The producers used hidden cameras and worked briefly in at least three Carolinas stores.
"It's unusual. It's probably the first time" that such a strategy has been used against the media, said Food Lion attorney John Walsh, who practices law in New York.
But he said the First Amendment "has been held over and over again not to be an excuse for criminal activity."
Food Lion is asking for more than $90 million and an order barring ABC from any future undercover investigations that involve fraud or deception.
If the supermarket chain wins, it could change the way much of the media investigates suspected wrongdoing. Food Lion's suit does not claim anything in the broadcast was fabricated or staged, although it says the network's sources were known to be biased.

by Bhavesh Jinadra by CNB