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Food Processor’s Moldy Business

November 6, 2009

This week, federal prosecutors announced that Alan Huey, a former top executive from SK Foods, will plead guilty to conspiracy related to the company sales of “adulterated and misbranded” tomato paste sold to major food makers and retailers. For at least four years, California tomato processor SK Foods was supplying tomato paste in violation of federal food quality and/or safety standards to leading food companies, including Kraft and Frito-Lay, whose buyers accepted bribes for sales that artificially inflated prices to consumers.

According to U.S. Attorney Lawrence Brown, SK Foods and their food company buyers engaged in the conspiracy “to provide lower quality processed tomato products at inflated prices.” Investigators had previously referred to SK Foods as a “a “racketeering enterprise” that engaged with its food industry partners (in addition to Kraft and Frito-Lay, FBI agents say buyers at Safeway, B&G Foods, ConAgra and Agusa Foods accepted bribes) in a scheme to fix prices, mislabel products, and gouge consumers.

Huey was a Senior Vice President at SK Foods during the scandal and is to date the most senior executive from the firm to be charged. However, Huey says he acted on the “instruction and direction of a senior leader of SK Foods,” and reports have indicated that the scheme was conducted with the knowledge of company CEO Scott Salyer. Another SK employee who pled guilty earlier this year stated that the illegal practices were routine and were directed by “senior leaders and directors of SK Foods.”  The U.S. Attorney notes that their investigation of the company is ongoing.

When confronted about the products earlier this year, a lawyer for SK Foods stated that the tomato products “were all appropriately labeled and of excellent quality.” But Brown rebuked that claim, stating “To describe the adulterated tomatoes as being of ‘excellent quality’ is its own form of mislabeling. The fact of the matter is that the products … contained illegal levels of mold.”

But Brown’s office has stated that the adulterated tomatoes carried no health risk, though no information was given on the mold levels or how it was determined that there was no safety threat. Mold on food can cause allergic reactions and respiratory problems, and can produce “mycotoxins” that can be severe poisons, and in some cases, can cause cancer. According to the USDA, mycotoxins can be produced from molds growing on produce.

Earlier this year, SK Foods was charged in a class-action suit with hiring undocumented workers in an illegal attempt to depress wages at its tomato processing plant. The Salyer family business, with annual sales in excess of $100 million, has been plagued by internal strife. A 2006 lawsuit by CEO Scott Salyer against his sister, father and three company officers was dismissed, but a court record of the case includes a litany of allegations from both sides, including use of company computers for surfing pornographic websites, use of company funds for Lake Tahoe and Vegas gambling trips and a “romantic tryst,” paying exorbitant executive salaries and “golden parachutes,” as well as destroying financial records and engaging in conspiracy, fraud and unfair business practices. The company filed for bankruptcy in May and in June was purchased by Singapore-based Olam International.

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