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Salyer indicted on additional charges as others cooperate

by Tim Linden | May 02, 2010
Frederick Scott Salyer, who was the owner and chief executive officer of SK Foods as well as the owner of many related enterprises, including Salinas, CA-based Salyer American Fresh Foods, a grower-shipper of vegetables, was hit with additional criminal charges in late April.

Mr. Salyer, who was commonly referred to as Scott Salyer and is the son of the founder of the Salyer agricultural conglomerate, was indicted in February on two counts of racketeering under the Racketeer Influenced and Corrupt Organizations Act. He was charged with being involved in various schemes to defraud SK Foods' corporate customers through bribery and food misbranding and adulteration. The indictment also charged him with four counts of wire fraud and one count of obstruction of justice.

This latest indictment adds counts dealing with his alleged participation in a conspiracy to suppress and eliminate competition in the tomato processing industry by raising and fixing prices and rigging bids.

The U.S. Justice Department announced the new indictment in a press release, which stated that the "case is the product of a joint investigation by the Federal Bureau of Investigation, the Internal Revenue Service-Criminal Investigation, the FDA Office of Criminal Investigations, and the U.S. Department of Justice’s Antitrust Division."

The five new counts allege that Salyer conspired with others to fix prices or rigged bids for the sale of processed tomato products to three of SK Foods’ domestic customers -- McCain Foods USA Inc., ConAgra Foods Inc. and Kraft Foods Inc. -- and to include certain terms in those contracts for the sale of processed tomato products, which were in violation of the Sherman Antitrust Act.

The maximum statutory penalty on the racketeering charges against Mr. 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 antitrust charges carry a penalty of up to 10 years in prison and a fine of up to $1 million. The wire fraud and obstruction charges are punishable by up to 20 years in prison.

Marion Quesenbery, a partner in the law firm of Rynn & Janowsky, does not expect the newest indictment to impede the progress being made in the bankruptcy case of SK Foods and the deliberations with regard to the distribution of funds in the Salyer American receivership case.

However, Ms. Quesenbery said that Mr. Salyer’s lawyers did file a brief April 28 in U.S. Bankruptcy Court in support of their position that a temporary stay be granted in the bankruptcy proceedings because of the criminal charges filed against Mr. Salyer. In essence, they are asking the bankruptcy court to suspend the proceedings until the criminal case is settled.

In the brief, the lawyers laid out the criminal case against Mr. Salyer by including numerous exhibits revealing plea agreements that many other defendants have made with the government. A reading of the numerous pages makes it clear that many of the other buyers and sellers involved in the processing tomato case agreed to cooperate with the investigation against Mr. Sawyer in an effort to reduce their individual sentences.

For example, Exhibit G details how Randall Lee Rahal, a sales broker for SK Foods and a defendant in the case, “engaged in mail fraud, wire fraud and bribery” to expand SK Foods customers base and to ensure that those customers paid inflated prices for the firm’s products. In great detail, it lays out the many ways in which he perpetrated the fraud and engaged in illegal activity.

Exhibit G goes on to discuss the “Plea and Cooperation” agreement with Mr. Rahal in which the defendant will plead guilty to three counts of conspiracy, money laundering and price fixing, pay fines and restitution to victims of his crimes if so ordered, and give the government his complete cooperation in their investigations and prosecutions. In return, the government agreed to recommend that Mr. Rahall “be sentenced to the bottom of the applicable guideline range for his offense.”

A handful of other exhibits detailed similar plea bargains with other defendants.

Ms. Quesenbery said that despite the brief filed by Mr. Salyer’s lawyers, the Bankruptcy Court proceedings are moving forward. “One client of mine received a large check the other day and another one is expected to be paid in full any day now,” she said.

She added that the clients she is representing are vegetable growers that provided SK Foods with vegetables it used in its processing operations.

Ms. Quesenbery said that the receivership proceedings against Salyer American Fresh Foods have moved much more slowly, but she was confident that all PACA claims will eventually be paid in full.

She said that the receiver has about $10 million in assets, while there is only $3 million to $4 million in PACA claims. Banks, however, are owed far more and have been delaying the proceedings with their many court filings.

While the PACA Trust law puts agricultural creditors first in line providing they followed proper procedures, Ms. Quesenbery said the banks that did business with Salyer American Fresh Foods are doing everything possible to disqualify those creditors. The banks have not won any big victories yet, but they have delayed the payments of those PACA funds. The longtime produce industry attorney expressed optimism that the PACA Trust creditors will prevail in the long run.