Former SK Foods Vice President Charged in Tomato Industry Corruption Case

SACRAMENTO, CA—United States Attorney Lawrence G. Brown announced today that JEFFREY SHERMAN BEASLEY, 63, of Lockeford, Calif., has been charged with participating in conspiracies involving honest services fraud and causing the introduction and delivery for introduction of misbranded food into interstate commerce with the intent to defraud and mislead as a vice president for the Monterey-based SK Foods LP. He has agreed to plead guilty to the conspiracy charges and to cooperate in the government’s ongoing investigation.

The case is the product of a joint and extensive investigation by the Federal Bureau of Investigation, the Internal Revenue Service, Criminal Investigation, and the United States Department of Justice’s Antitrust Division.

According to Assistant United States Attorneys Benjamin B. Wagner, Sean C. Flynn and Anne E. Pings, who are prosecuting the case together with Barbara Nelson, Richard Cohen and Lara Kroop of the San Francisco Field Office of the Antitrust Division, a one-count felony charge was filed today in U.S. District Court in Sacramento against BEASLEY, who between 2004 and 2008 served as the Vice President for Industrial Sales for SK Foods LP. During that period, SK Foods was a grower, processor and distributor of tomato products and other food products for sale to food product manufacturers, food service distributors and marketers and retail outlets nationwide.

BEASLEY is the latest individual, and the first SK Foods senior executive, to be charged in connection with the government’s tomato industry probe. According to the information, between January 2004, and April 2008, BEASLEY, along with other leaders, employees and associates of SK Foods, engaged in a scheme to defraud and deprive certain of SK Foods’ customers of their respective rights to the honest services of certain of their own employees through acts of bribery, which were intended to ensure that those customers – including Kraft Foods, Inc., Frito-Lay, Inc. and B&G Foods, Inc. purchased processed tomato products from SK Foods rather than from its competitors, and that those customers paid an inflated price for such products. The bribes also induced customer purchasing agents to disclose to SK Foods the bidding and other proprietary information of certain of its competitors. BEASLEY and his coconspirators used the proprietary information to set prices, often higher than they would have otherwise.

“The effect of this conspiracy was to provide lower quality processed tomato products at inflated prices,” said Brown. “This office will continue to vigorously prosecute those who commit this type of widespread fraud in the American marketplace.”

ROBERT L. WATSON, 59, of White Plains, N.Y., JAMES RICHARD WAHL, 58, of Dallas, and ROBERT TURNER, 59, of Randolph, N.J., former purchasing managers at Kraft, Frito-Lay and B&G Foods, respectively, have already pleaded guilty to receiving illicit payments from former SK Foods’ sales broker and director RANDALL LEE RAHAL, 61, of Ramsey, N.J. RAHAL also pleaded guilty in December 2008, to participating in racketeering, bid rigging and contract allocation conspiracies, among other charges. WATSON was sentenced in federal court in Sacramento last week to two years and three months in prison to be followed by two years of supervised release. He was also ordered to pay $1,858,000 in restitution to his former employer, Kraft.

According to the charges, bribes paid to customer purchasing managers on behalf of SK Foods were made with the knowledge of BEASLEY and his co-conspirators, and at the direction of SK Foods’ senior leadership.

The information further alleges that BEASLEY and other senior leaders of SK Foods routinely falsified, and directed other SK Foods employees to falsify, the various grading factors and data contained on Certificates of Analysis and other quality control documents that accompanied customer bound shipments of tomato product that was produced, purchased and sold by SK Foods. According to the charges, these falsifications were undertaken in order to make it appear to customers as if the tomato product they were receiving from SK Foods was in compliance with contractual specifications when, in fact, it was not.

One SK Foods employee whom BEASLEY and his co-conspirators directed in this fashion was former Records and Business Analyst, JENNIFER LOU DAHLMAN, 48, of Lemoore, Calif. DAHLMAN pleaded guilty on February 18, 2009, to causing the shipment to SK Foods’ customers of processed tomato products that were adulterated and unsaleable domestically due to their excessive mold content. She admitted to routinely falsifying the various grading factors and results of required laboratory testing contained on the Certificates of Analysis and other quality control documents. DAHLMAN admitted that her actions were conducted at the express instruction and direction of senior leaders and directors of SK Foods.

ANTHONY RAY MANUEL, 57, of Turlock, Calif., formerly an employee of Morning Star Packing Company and then of SK Foods, pleaded guilty on January 27, 2009, to embezzling approximately $975,000 from Morning Star and to filing a false tax return.

BEASLEY is expected to appear in U.S. District Court in Sacramento in the near future to enter his guilty plea, which is subject to court approval.

The maximum statutory penalty on the conspiracy charges is five years in prison, and a criminal fine of $250,000. However, the actual sentence will be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and will be imposed at the discretion of the court.