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Food processing CEO facing jail after guilty plea in tomato paste racketeering case

By Mark Astley , 27-Mar-2012

A former US food processing company CEO is facing up to seven years in prison after pleading guilty to racketeering and price fixing charges relating to the sale of processed tomatoes.

Frederick Scott Salyer, founder and former-CEO of now-bankrupted California-based SK Foods, pleaded guilty to two counts of a 12 count indictment as part of a plea agreement at the US District Court for the Eastern District of California in Sacramento.

The two counts – one of racketeering and one of price fixing - relate to the payment of bribes to purchasing officers at companies including Kraft Foods, the falsification of quality testing results, and an illegal price fixing agreement.

The plea bargain will see him imprisoned for anything between four and seven years.

Salyer was originally charged with 12 counts including racketeering, price fixing, wire fraud and the alteration, destruction or falsification of records in a federal investigation, and faced up to 20 years in prison if found guilty of the charges.

“Racketeering organisation”

“In his plea, Salyer admitted that he operated SK Foods as a racketeering organisation,” said a statement from US attorney for the eastern district of California Benjamin Wagner.

According to the statement, between January 2004 and April 2008, Salyer encouraged food broker Randall Rahal to pay bribes to purchasing officers at Kraft Foods, Frito-Lay, and B&G Foods to promote the interests of SK Foods over their employers’.

“Salyer also admitted that at his direction, SK Foods routinely falsified the lab test results for its tomato paste. Salyer order former employee Alan Huey and Jennifer Dahlman to falsify tomato paste grading factors, and SK Foods lied about its product’s percentage of natural tomato soluble solids, mould count, production date, and whether the tomato qualified as ‘organic’,” added the statement.

The former SK Foods boss also admitted that he discussed an illegal target price agreement with other sellers of tomato paste.

The bribe recipients and many of Salyer’s subordinates at SK Foods pleaded guilty to similar charges before Judge Karlton in 2009.

In the same year, creditors forced SK Foods into bankruptcy.

Sentencing 

Under the plea agreement, the “government and the defendant agree that the total term of imprisonment in this case should be not less than four years and no more than seven years.”

But if the judge seeks to sentence Salyer to more than seven years, he may opt-out of the agreement.

Under the plea agreement, a fine could be implemented and restitution may be paid to the victims of the offences to which the defendant pleaded guilty, which could include Kraft Foods and B&G.

Salyer has also agreed to hand over all funds ever in accounts in Liechtenstein and Andorra including $3.23m transferred between the accounts in January 2005.

“The only agreement related to the appropriate term of incarceration in this case is that the government will not ask for a sentence in excess of seven years and the defendant will not ask for a sentence of less than four years. Each party reserves the right to make any argument of any kind in support of its position as to the appropriate amount of incarceration,” said the signed agreement.

Following the guilty plea, Judge Karlton scheduled sentencing for 10 July 2012.

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