Calif. exec pleads guilty to tomato price-fixing
SACRAMENTO, Calif. (AP) — A former California food company owner pleaded guilty to racketeering Thursday in a tomato price-fixing plot that authorities said drove up costs to consumers across the nation.
Frederick Scott Salyer, 56, was charged with bribing purchasing managers at food giants including Kraft Foods Inc. and Frito-Lay to buy tomato products from his company, Monterey-based SK Foods. Prosecutors said he and his co-conspirators fixed prices and rigged bids for the sale of tomato products to McCain Foods USA Inc., ConAgra Foods Inc. and Kraft.
Salyer pleaded guilty in federal court in Sacramento to two charges: racketeering and price fixing. Racketeering carries a maximum 20-year prison sentence and price-fixing 10 years, although under a plea agreement Salyer is expected to face four to seven years behind bars. He remains under house arrest at his Pebble Beach estate on $6 million bail until his sentencing, which is scheduled for July 10.
Salyer and his lawyer, Malcolm Segal, declined to comment outside the courtroom.
Salyer was accused of being at the center of price-fixing ring that helped SK Foods capture 14 percent of the processed tomato market and rise to the second largest tomato processor in the state before investigators raided the company in 2008.
He also admitted that SK Foods routinely falsified lab test results for its tomato paste and that he ordered former employees to falsify information including the product's mold content, production date and whether it qualified as "organic," the U.S. attorney's office said.
"Salyer and his co-conspirators manipulated prices on millions of pounds of processed tomatoes and improperly influenced supermarkets and big food companies into buying substandard tomato products put into brands found in almost every American home," said Rick Goss, the assistant special agent in charge of the Internal Revenue Service's criminal investigations unit. "Salyer and the defendants' scheme ripped off consumers and reaped big profits."
Herbert M. Brown, special agent in charge of the FBI's Sacramento field office, said it took authorities more than six years to unravel the "web of lies and bribes that Salyer and his cohorts wove."
Salyer was indicted in 2010 on 12 counts, including bribery, conspiracy and obstruction of justice.
Buyers from Kraft, PepsiCo Inc.'s Frito-Lay unit, Safeway Inc. and B&G Foods Inc. have pleaded guilty to accepting bribes in the case. In all, 10 former employees or customers of SK Foods have pleaded guilty in the investigation. U.S. Attorney Benjamin Wagner said about $100,000 in bribes changed hands.
Salyer's guilty plea essentially ends the government's prosecution, Wagner said. However, several lawsuits have been filed against SK Foods, which filed for bankruptcy protection in May 2009. Olam International of Singapore purchased the company two months later for $39 million.
As part of Friday's plea, Salyer agreed to forfeit at least $3.25 million in foreign bank accounts where prosecutors say he moved funds after SK Foods filed for bankruptcy.
According to court documents, Salyer moved the money to Andorra, a small country in the Pyrenees Mountains between France and Spain that has no extradition treaty with the U.S. He made a $50,000 deposit on a condominium there.
California produces more than 90 percent of tomato products in the U.S., and SK Foods was one of the largest producers of tomato products in the nation, Wagner said.
Salyer himself is the product of one of the West's oldest land dynasties, a multi-generation enterprise that started with cotton farming and branched into tomatoes under Salyer and his father. Just a handful of companies controlled the tomato products industry, Wagner said, which made it possible for several of the companies to conspire to drive up prices to food processors.
Food companies lost more than $2 million, mainly through overpayments, as a result of the price-fixing scheme, Wagner said. Authorities have seized about $600,000 stemming from the investigation, including fines and restitution, Goss said.
Prosecutors said there was no evidence that consumers became ill because of SK Foods' substandard and outdated products, some of which had mold contents above federal guidelines.