SK Foods' former owner and CEO indicted in Sacramento

United States Attorney Benjamin B. Wagner announced February 19 that a federal grand jury has returned a seven-count indictment charging Frederick Scott Salyer, 54, of Pebble Beach, Calif., with violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), in connection with his direction of various schemes to defraud SK Foods’ corporate customers through bribery and food misbranding and adulteration, and with wire fraud and obstruction of justice.

Additionally, SK Foods former vice president for operations Steven James King, 46, of Visalia, Calif., was charged on February 19 with one count of food adulteration and misbranding. He has agreed to plead guilty and to cooperate in the ongoing investigation and prosecution.

These cases are the product of a joint and extensive investigation by the FBI, the IRS-Criminal Investigation, the Food and Drug Administration Office of Criminal Investigations, and the United States Department of Justice’s Antitrust Division.

According to Assistant United States Attorney Sean C. Flynn, who is prosecuting the case with Barbara Nelson and Richard Cohen of the San Francisco Field Office of the Antitrust Division, between 1990 and 2008, Salyer was the owner and served as chief executive officer of SK Foods LP, a grower, processor, and distributor of tomato products and other food products for sale nationwide. SK Foods declared bankruptcy in May 2009, and its assets were purchased by the Singapore-based Olam International.

According to the indictment, SK Foods and its related corporate entities constituted a racketeering enterprise, an organization that Salyer directed, and other SK Foods leaders and employees helped to further through a variety of illicit activities. It is alleged that over a period of 10 years, Salyer orchestrated a number of wide-ranging schemes whereby SK Foods regularly paid bribes to the purchasing managers of many of its customers such as Kraft Foods Inc., Frito-Lay Inc., B&G Foods Inc., and Safeway Inc. to ensure that those customers purchased processed tomato products from SK Foods rather than from its competitors, and that they purchased the product from SK Foods at elevated, above-market prices. The indictment alleges that some bribes were made in order to wrongfully obtain its competitor’s proprietary bid information.

As the racketeering enterprise’s leader and primary decision maker, Salyer is also alleged to have directed a widespread practice of selling and shipping processed tomato product that did not meet contractual specifications, contained mold levels in excess of the thresholds established by the FDA and was thus unsaleable domestically. The indictment alleges that at Salyer’s direction, various individuals at SK Foods falsified both internal and customer-bound documentation to make the product appear as if it were legal and contractually compliant when, in fact, it was not.

Salyer is also charged with obstructing justice by ordering the alteration and falsification of certain SK Foods’ corporate records after the government’s investigation of the company became known. Specifically, the indictment alleges that two weeks after former SK Foods sales broker and director Randall Lee Rahal pleaded guilty to racketeering, money laundering, and antitrust charges in December 2008, Salyer ordered certain individuals to alter the minutes of a December 14, 2007, SK Foods board of directors meeting to eliminate any reference to Rahal as a director of the company.

On February 4, 2010, FBI Special Agents arrested Salyer at Kennedy International Airport in New York City, based on a criminal complaint charging him with 20 counts of mail and wire fraud. According to that complaint, Salyer left the United States in October 2009, following the guilty pleas of several employees of SK Foods and some of its customers, intending to relocate abroad permanently. Salyer had instructed a subordinate to sell many of Salyer’s belongings and had transferred millions of dollars from bank accounts formerly associated with SK Foods entities to bank accounts in the Carribean and Liechtenstein. The complaint alleged that Salyer spoke with a former SK Foods employee about obtaining permanent residence status in Uruguay, Paraguay, Andorra and France because he believed he would not be extradited from these countries. Salyer had booked a flight back to Europe the next day, February 5, 2010. Instead, Salyer made his initial appearance before U.S. Magistrate Judge Steven Gold in Brooklyn, N.Y., that afternoon. Judge Gold denied Salyer bail, stating that Salyer’s efforts constituted one of the “most elaborate schemes to flee he had ever seen.”

According to the charges filed against King, between 1994 and 2009, he served in a variety of positions, most recently as SK Foods’ vice president for operations. In that role, he was responsible for overseeing and managing SK Foods production facilities in Williams and Lemoore. He also assisted in managing SK Foods’ inventory of processed tomato and other food products, and arranging for the shipment of those food products to SK Foods customers. King has agreed to plead guilty to falsifying and directing other SK Foods employees to falsify various SK Foods’ quality control documents and to ship adulterated and misbranded tomato product to various SK Foods customers. He has admitted that his actions were conducted at the express instruction and direction of Salyer, and with the assistance of other senior leaders and directors of SK Foods, and were intended to make it appear to customers as if particular shipments of processed tomato product were compliant with USDA and FDA standards, and with customer specifications, when in fact they were not. King is expected to appear in U.S. District Court in Sacramento in the near future to enter his guilty plea.

The current charges against Salyer and King are the latest in the ongoing investigation of conduct at SK Foods. See attached chart for details. That investigation has not yet been concluded.

The maximum statutory penalty on racketeering charges against Salyer is 20 years in prison, a fine of up to $250,000, and the forfeiture of any interest, property or proceeds acquired or maintained as a result of the racketeering activity. The wire fraud and obstruction charges against Salyer also are punishable by up to 20 years in prison. The food misbranding and adulteration charges against King carry a three-year maximum sentence. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.