Alleged Bribery Scheme Put Moldy Tomatoes in Processed Foods

Feb. 26, 2010— -- An alleged, long-running bribery scheme apparently resulted in tainted tomato products being added to foods processed by some of the nation's biggest companies, including Kraft Foods Inc., Frito-Lay and Nabisco, federal prosecutors say.

Giant tomato processor SK Foods has been accused of paying off buyers at large food companies to accept mold-riddled tomato products for above-market prices.

The scheme was allegedly cooked up by Frederick Scott Salyer, the former owner and CEO of SK Foods. A federal grand jury indicted Salyer, charging him of violating anti-corruption laws. Salyer has denied the charges, but five other people connected to Salyer's alleged plan have already pleaded guilty to their involvement, including four of his own former employees.

SK Foods Had Large Share of U.S. Tomato Paste Market

SK Foods went bankrupt last year but, according to the company that acquired it, it was once the second largest California tomato processor, with 14 percent of the U.S. market. The Monterey-based company processed tomatoes into paste and sold it to major food companies.

"This went to the highest levels of SK Foods and it involved multiple companies," U.S. Attorney Benjamin Wagner told ABC News. "Within SK Foods, there was a whole conspiracy to mislabel tomato product, relabeling sub-standard product as product that was acceptable."

Wagner said that Salyer's scheme went on for 10 years, with SK Foods paying somewhere between $350,000 to $400,000 in bribes to purchasing managers of its customers. The end goal, according to Wagner, was to jack up prices for the company's tomato products -- costs that may have been passed along to consumers in supermarkets.

Accused CEO Says He's Innocent

Prosecutors said Salyer, 54, had attempted to flee the country but was scheduled to be in court today in Sacramento for a bail hearing.

His attorney, Malcolm Segal, questioned the bribery allegation, saying that such a plan is implausible. "Those who are knowledgeable about the industry know that prices for tomatoes in season are generally set by the company that purchases the product. It is inconceivable to me that payments to a buyer could have affected that price," he said.

Some of the company's tomato products failed to meet quality standards established by the U.S. Food and Drug Administration, prosecutors said. The foods contained mold levels so far above guidelines that they shouldn't have been sold in the United States.

Contaminated Tomato Products May Have Impacted Food Taste

The poor quality tomatoes may have affected foods' taste but posed no health risks for consumers, food safety experts say. "One should not be using moldy tomatoes, it's a quality issue but there's a minimal safety risk" when processed properly, Elliot Ryser, a professor at Michigan State University's Department of Food Science, said.

The government has also taken aim at people who allegedly accepted bribes from SK Foods. James Richard Wahl, 58, a buyer for food giant Frito-Lay , a subsidiary of PepsiCo Inc., pleaded guilty last February to accepting about $160,000 in bribes.

Robert Watson, a buyer for the nation's largest food company, Kraft, has also admitted to accepting $158,000 in bribes from SK Foods. Employees at food manufacturer B&G Foods Inc. and supermarket chain Safeway Inc. have also admitted guilt in the case.

Kraft's director of corporate affairs Susan Davison said that the company was dissapointed by the SK Foods situation. "This is an anomaly because we do have a focus on quality. We did visual inspections of the product from SK Foods and rejected some in 2007," she said. Kraft sent its own quality expert to do an inspection of SK Foods facilities in 2007 and 2008.

Teena Massingill, Safeway's director of public affairs, said in an e-mail that the company did routine inspections on products from SK Foods and "found nothing to cause concern."

Case a Sign of Bigger Problems in Food Industry

The tainted tomato case underscores a widespread problem in the processed food industry, experts say.

"I am confident that these types of deals, whether they are direct cash or other things, go on all the time," Seattle-based attorney Bill Marler said.

Marler has represented victims of numerous E. coli and salmonella outbreaks in recent years.

"Our system is built on the presumption that companies wouldn't knowingly sell crappy food," he said. "That isn't true because there are other pressures; limited suppliers and production quotas" and demands from giant retailers such as Walmart.

A Lot on the FDA's Plate

Part of the problem is a lack of manpower at the FDA to handle food oversight and inspections, Marler said.

The FDA said in a statement, "This is an example of the ongoing work of the FDA to protect the nation's food supply. The FDA will continue to vigorously investigate, and where appropriate, prosecute those who would compromise the health and safety of our food supply."