Tomato processing, egg products industries probed

Tag : tomato

SAN FRANCISCO— Federal investigators say food broker Randall Rahal liked to use asimple little test to see whether he could bribe purchasing agentsat the country's biggest food companies to buy from the tomatoprocessor he represented.
Rahal would drop a $100 bill and then pick it up and ask thepotential bribe recipient: "Is it yours?" If the agent said yes,Rahal knew they were open to a "business offer," he would boast,according to an FBI search warrant affidavit filed last month inSacramento federal court as part of a bribery and fraud inquirythat also involves Rahal's client, tomato processor SK Foods ofLemoore, Calif.
That investigation was launched in August 2005 and has sinceexpanded into a price-fixing probe of tomatoes, 95 percent of whichare processed in California.
At the same time, Justice Department spokeswoman Gina Talamona saidTuesday that investigators also were looking into price-fixingallegations in the egg industry.
Federal prosecutors already had been looking at possibleprice-fixing in the citrus industry as food companies wrestle withincreasing costs of key food ingredients. Prices for vitalingredients such as corn and oil are soaring as demand rises aroundthe world. And the cost pressures aren't expected to abate anytimesoon.
Although federal law bars competitors from collaborating whensetting their prices, Congress has created antitrust exemptionsintended to help small farm groups and cooperatives bargain withlarge food processors. There are also exemptions for exports.
Inquiries into whether food producers overstepped those limits arebeing run by federal prosecutors in Sacramento and an antitrustdivision of the Justice Department based in Philadelphia.
In Sacramento, FBI agents tapped Rahal's telephones late last yearand allege to have uncovered buyers at six food companies takingpayments from him. Federal investigators also raided SK Foods onApril 16. Investigators say they subsequently coaxed admissionsfrom purchasers receiving payments at Agusa Inc., Kraft Foods Inc. , Safeway Inc. and Frito-Lay, which is a division of Pepsico Inc.
Kraft Foods declined comment about the investigation.
Frito-Lay spokeswoman Aurora Gonzalez said the buyer who admittedtaking payments no longer works for the company.
"We have been working with federal authorities since we firstbecame aware of the investigation," Gonzalez said.
Investigators also say they have bank records and other evidencethat buyers at B&G Foods Inc. and ConAgra Foods Inc. also took payments from Rahal, allegedly to ensure that thecompanies bought tomato products from SK Foods.
ConAgra spokeswoman Stephanie Childs said the company was not atarget of the investigation and that the employee suspected oftaking bribes was placed on administrative leave in April. Safewayspokesman Brian Dowling said the purchaser there accused of takingbribes is no longer employed by the grocery chain.
Investigators also allege that Rahal paid the bribes in exchangefor bid information submitted to the companies by SK's competitors.
Rahal owns Westwood, N.J.-based Intramark USA. He could not bereached for comment because the company's telephones appear to havebeen disconnected.
Brian Maschler, an attorney for SK, confirmed the company was beinginvestigated for possible price-fixing practices. He denied that SKwas involved in any bribery scheme and fired Rahal in April. FBIagents allege in a court filing that they eavesdropped on telephoneconversation in which SK founder and chief executive Scott Salyerencouraged Rahal's behavior.
No charges have been filed in the tomato investigation.
Two egg producers in Minnesota -- Golden Oval Eggs and MichaelFoods -- noted in filings with the SEC this spring that they hadbeen subpoenaed by the U.S. attorney's office in the Easterndistrict of Pennsylvania.
The subpoenas requested documents for the period between Jan. 1,2002, through March 27, 2008, relating "primarily to the pricing,marketing and sales of our egg products," both companies wrote intheir 10-Q filings.
Both companies said in the SEC filings that they intended tocooperate.
Sandie Wohlman, executive assistant of Golden Oval Eggs ofRenville, Minn., referred questions on Tuesday to an attorney, whodid not immediately respond to an e-mail seeking an interview.
Mark Witmer, treasurer and secretary of Michael Foods Inc. inMinnetonka, Minn., said: "We have fully responded to the requestfor information."
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Associated Press writers Amy Forliti in Minneapolis, Emily Fredrixin Milwaukee and Lara Jakes Jordan in Washington contributed tothis report.