The former owner of a now defunct tomato company with sites in the Central Valley has pled guilty to racketeering and price fixing charges.
Frederick Scott Salyer, 56, of Pebble Beach, the former owner and CEO of SK Foods, pleaded guilty to one count of racketeering, under the Racketeer Influenced and Corrupt Organizations Act, or RICO, and one count of conspiracy in restraint of trade, which is an antitrust offense.
Between 1990 and 2009, Salyer was the CEO and owner of SK Foods LP, a grower, processor, and international seller of tomato paste and other processed agricultural products with facilities in Monterey, Lemoore, Williams, and Ripon.
In his plea, Salyer admitted that he operated SK Foods as a racketeering organization. According to the plea agreement, from January 2004 to April 2008, Salyer encouraged food broker Randall Rahal to pay bribes and kickbacks to purchasing officers employed by SK Foods’ customers Kraft Foods, Frito-Lay, and B&G Foods. The intent was to induce Kraft’s Robert Watson, Frito-Lay’s Richard Wahl, and B&G’s Robert Turner to promote the interests of SK Foods over their employers’ interests, the Department of Justice reported.
Salyer also admitted that at his direction, SK Foods routinely falsified the lab test results for its tomato paste. Salyer ordered former employees 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, mold count, production date, and whether the tomato paste qualified as “organic.”
Finally, Salyer admitted that he had discussed an illegal target price agreement with other sellers of tomato paste and, when another co-conspirator offered a lower price, Salyer got the co-conspirator to agree to withdraw that offer to a customer, according to the DOJ.
“Food grown in California’s Central Valley feeds people all over the United States; agriculture and food processing are critical to this region’s economy,” said U.S. Attorney Benjamin Wagner. “This case of corporate corruption was met with the government’s full arsenal of law enforcement tools, which included grand jury process, an informant operation, wiretaps, search warrants, computer forensics, and arrests. This office and its partners will continue to use these tools to attack fraud and corruption wherever it is detected in this district.”
Salyer’s plea caps an investigative effort that began in August 2006, when federal agents executed a search warrant at the home of Turlock resident Anthony Manuel, an SK Foods employee who had embezzled approximately $1 million from his former employer, Morning Star Co., a competitor of SK Foods. According to DOJ spokesperson Lauren Horwood, Manuel promptly confessed to the embezzlement and later told agents about the crimes occurring at SK Foods.
In 2007 and 2008, Manuel recorded conversations with SK Foods executives, including Salyer, and provided documents corroborating his account of the crimes being committed at SK Foods.
Manuel pled guilty in 2009 to wire fraud and filing a false tax return. His sentence is pending.
Wiretaps of Rahal’s telephones revealed that Rahal was discussing bribery and food mislabeling with Salyer and other senior officers of SK Foods. The wiretap also confirmed that Rahal was bribing Watson, Wahl, Turner, and Safeway employee Michael Chavez. On April 18, 2008, federal agents from the different agencies involved in the investigation executed search warrants at the offices of SK Foods and at Salyer’s residence in Pebble Beach, seizing documents and copying SK Foods’ computer servers.
In 2009, the bribe recipients and many of Salyer’s subordinates at SK Foods pleaded guilty. Also that year, creditors forced SK Foods into bankruptcy.
According to court documents, in late 2009, Salyer moved more than $3 million to Andorra and made a $50,000 deposit on a condominium there. Andorra is a small principality in the Pyrenees Mountains between France and Spain and has no extradition treaty with the United States. When agents learned of Salyer’s plans, they obtained an arrest warrant for him, which was executed on Feb. 4, 2010 when Salyer made what was to have been a short visit back to the United States. Salyer was jailed as a flight risk until Sept. 3, 2010, when he was released to house arrest after posting a $6 million bond.
Salyer is scheduled to be sentenced on July 10. The maximum statutory penalty for a RICO violation is 20 years in prison and $250,000 fine. The maximum statutory penalty for price fixing is 10 years in prison and a $1 million fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. In the plea agreement, Salyer may argue for a sentence as low as four years and the government may argue for a sentence up to seven years, Horwood said. Salyer also agrees to forfeit to the United States all of his interest in the $3 million that he transferred to Andorra.