Friday, February 19, 2010

White Collar: Former Owner of Food Company Charge with Fraud and Racketeering

A federal grand jury in Sacramento, California, has indicted the former owner of SK Foods on charges of conspiracy, racketeering, wire fraud, and obstruction of justice. The indictment stems from a decade long scheme to bribe company employees of tomato sellers and artificially inflate the prices of tomato products.

The indictment alleges that Frederick Scott Salyer, a former owner and chief executive of SK Foods led a 10 year conspiracy to pay more than $330,000 in bribes to sell his company's products and to subvert the sales efforts of SK's competitors. The scheme involved deals to sell SK's tomato paste, peppers, and other foods. Some of the companies involved in purchasing these SK products were Kraft Foods, Frito-Lay North America, Gerber Products, and Safeway.

In addition to the bribes the indictment alleges that Salyer and others at SK tricked customers into buying lower quality tomato paste at inflated prices. The government claims that SK mislabeled its products to make them appear to be of higher quality. Ultimately, SK was able to sell its tomato paste at a markup of at least 30%. SK Foods and three other California firms process almost 95% of all tomatoes grown in the United States.

The indictment charges Salyer with obstruction of justice for altering the minutes of the board of directors to hide a connection between the company and a director who had pleaded guilty to racketeering and money laundering charges in connection with the investigation.

The government first broke the case in late 2008. Since December of that year, 10 people have pleaded guilty. Six worked for SK and four worked for customers of the company. After the case broke, SK's financial situation declined, and it went into bankruptcy. Last year a Singapore company purchased SK out of bankruptcy.

Salyer's family is one of the largest land owners in California's history. His grandfather built an agricultural empire of more than 65,000 acres.

Salyer will be arraigned in federal court in Sacramento next week.

For more about the charges please see The Los Angeles Times, "Ex-Owner of SK Foods Indicted in Tomato Scandal," February 19, 2010,,0,3396464.story.

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