US probes price fixing by tomato processors

Tag : tomato

A lawyer for one major processor, SK Foods of Lemoore (KingsCounty), said the government had sought information aboutprice-fixing at the same time FBI and Internal Revenue Serviceagents served a series of search warrants in the Central Valley inApril and seized millions of pages of documents from tomatoprocessors.
The government later alleged in court filings that a broker hiredby SK Foods had paid more than $185,000 in bribes to purchasingagents at some of the nation's largest food companies, includingSafeway and Kraft, in order to secure their business.
Justice Department spokeswoman Gina Talamona said only that "theantitrust division is investigating the possibility ofanti-competitive practices in the tomato processing industry." Noarrests have been made.
Brian Maschler, an attorney for SK Foods, said investigators werealso interested in a partnership the company formed in 2006 withIngomar Packing of Los Banos (Merced County) and Los Gatos TomatoProducts of Huron (Fresno County).
Maschler said the companies, collaborating as the California TomatoExport Group, had joined up to sell tomato paste and sauce andother products overseas. That effort did not violate U.S. antitrustlaw, he said.
Still, the partnership was disbanded after the federal raids to"avoid even the appearance of impropriety," Maschler said.
It was not clear Tuesday whether the export group was the mainfocus of the investigation.
U.S. law prohibits business competitors from agreeing on a price tocharge consumers. However, there are some exemptions to the lawthat shield agricultural groups and cooperatives, said John McLean,a Tiburon attorney who has argued major antitrust cases.
No one has been arrested or charged in the government's briberyinvestigation. But in a sworn affidavit, FBI Special Agent PaulArtley said Randall Rahal, a New Jersey broker working for SKFoods, had paid off employees of Safeway, Kraft, ConAgra,Frito-Lay, B&G Foods and Agusa.
The affidavit was filed last month as part of a civil case in whichfederal prosecutors in Sacramento reported seizing nearly $600,000from bank accounts controlled by Rahal.
The broker did not return a telephone message left at his homeTuesday.
The affidavit said investigators had tapped Rahal's telephones andintercepted calls in which he spoke with SK Foods' co-owner andchief executive, Scott Salyer, about the possibility of paying abribe to a purchaser.
The affidavit also said investigators had spoken to a former SKFoods employee who said Salyer had been present while Rahaldiscussed paying bribes. The employee was identified by the FBIonly as "Witness No. 1."
According to the FBI, the former employee said Rahal had told himhe identified customers open to bribes by dropping a $100 bill,then picking it up and saying, "You must have dropped this, is ityours?"
Salyer could not be reached for comment. Maschler said theexecutive was cooperating fully with investigators, and said theFBI affidavit had cited "isolated conversations" that may have hada different meaning when heard in context.
"SK Foods immediately and permanently broke off all relations withthat broker" after learning of the allegations in April, Maschlersaid. "Any notion of payments, or paying customers under the table,are fundamentally contrary to SK Foods' policies, procedures andvalues. We have a zero tolerance policy for that."
Spokespeople for some of the corporations whose employees allegedlytook bribes said the companies had been victimized as well. BrianDowling of Safeway said an employee accused by the FBI of takingbribes was no longer with the Pleasanton-based supermarket chain.
"The alleged behavior would have been a clear violation of ourcompany policies," Dowling said.
E-mail Demian Bulwa at dbulwa@sfchronicle.com .
This article appeared on page B - 2 of the San Francisco Chronicle