BAKERSFIELD, Calif. -- United States Attorney Benjamin B. Wagner announced Thursday that a federal grand jury has returned a seven-count indictment charging Fredrick Scott Salyer, 54, of Pebble Beach, 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, was charged this morning 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 Feb. 4, 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, Feb. 5. 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.

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.

REMARKS BY US ATTORNEY BENJAMIN WAGNER REGARDING NEW CRIMINAL CHARGES IN THE SK FOODS INVESTIGATION

My name is Benjamin Wagner, I am the United States Attorney. I am joined here today by Drew Parenti, the Special-Agent-in-Charge of the Sacramento Field Office of the FBI; Scott O’Briant, the Special-Agent-in-Charge of the Northern California office of the IRS-Criminal Investigations; Thomas W. Emerick, Special-Agent-in-Charge, FDA Office of Criminal Investigations; Barbara Nelson, and Richard Cohen, Senior Trial Attorneys with DOJ Antitrust Division, FBI Special Agents Paul Artley and Tim Lester, IRS-CI Special Agent Steve Delaney; and Assistant US Attorney Sean Flynn, lead prosecutor in this case.

Three and a half years ago, this office, together with the agencies represented here today, launched an investigation into corruption and fraud involving SK Foods, one of the leading producers of tomato products in the nation. That investigation involved the use of wire intercepts, cooperating witnesses, and the collection and analysis of huge number of documents.

On April 16, 2008, over 100 federal agents executed search warrants at seven locations -- SK Foods facilities and offices throughout California, and also at Intramark USA, Inc., facilities in New Jersey. The agents also conducted interviews in multiple locations in California, Texas, Illinois, New Jersey, and elsewhere. That operation was followed by further investigation.

Since December 2008, nine former employees of SK Foods, or of customers of SK Foods, have pleaded guilty to felony offenses as a result of this investigation. The investigation has exposed a web of corruption and fraud in the tomato products industry, centered at SK Foods. That conduct resulted in SK Foods’ customers being induced to overpay for tomato products, and also resulted in the shipment of millions of pounds of substandard product to customers all over the United States.

As has been described in charging documents and plea agreements that have already been made public, tomato product was sold by SK Foods that had unlawfully excessive mold, which had altered production dates, and which had been falsely relabeled as organic. As we have said consistently, while the conduct of those defendants defrauded customers and affected the market processed for tomato products, it did not create a health hazard for the ultimate consumers of these products.

Our investigation is not yet complete, but we are entering the final stages of the investigation. Today I am announcing two developments:

First, Steven King, of Visalia, the former plant manager for SK Foods, is the most recent former SK Foods employee to agree to plead guilty to a felony offense in connection with the conduct I have described. He was charged in an Information filed today, with one count of causing the introduction into interstate commerce of adulterated and misbranded food, with the intent to defraud or mislead. He has signed an agreement to plead guilty and cooperate, and is expected to appear in U.S. District Court soon to enter his plea.

Second, a grand jury in Sacramento returned an indictment this morning charging Frederick Scott Salyer, the former owner and CEO of SK Foods, with:

One count of conducting the affairs of an enterprise, SK Foods, through a pattern of racketeering activity, commonly called a RICO charge; one count of RICO conspiracy; four counts of wire fraud; and one count of falsification of corporate records in a federal investigation.

The RICO counts allege that Salyer operated SK Foods through a pattern of racketeering activity, including fraud in violation of federal law, and commercial bribery in violation of state laws.

The wire fraud counts relate to specific communications in which it is alleged that Salyer was arranging for the shipment of mislabeled tomato product to customers.

The obstruction of justice count alleges that, in December 2008, after Salyer became aware of the fact that Randall Rahal had pleaded guilty and was cooperating with the government, Salyer directed a subordinate to alter minutes of a 2007 SK Foods Board meeting, to delete references to Rahal as a director of the company.

These are all felony charges, and Salyer faces up to 20 years in prison on each count. The charges in the indictment are only allegations, and Salyer is presumed innocent unless and until proven guilty beyond a reasonable doubt.

As has previously been reported, Mr. Salyer had been living in Europe since last October. He was arrested by FBI Special Agents on February 4, 2010, at JFK airport in New York.

The complaint that was pending against him, and which was superseded by today’s indictment, alleged that Salyer has transferred millions of dollars to offshore bank accounts. At the bail hearing in New York, the Assistant US Attorney presented evidence that Salyer had booked a flight back to Europe the next day, and that he was exploring permanent residency in countries like Andorra and Paraguay, from which he believed he could not be extradited. The Magistrate Judge found that Salyer had formulated an “elaborate scheme to flee,” and ordered him detained. Salyer is currently being transported to Sacramento. He is expected to make his initial appearance here within a few days, and he will then be arraigned on the indictment returned today.

This case is far from over, and much work needs to be done. But it would not be premature to acknowledge the extraordinary efforts that have gone into this investigation, and which have already yielded nine guilty pleas. I want to particularly acknowledge the consistent hard work of FBI Special Agents Paul Artley and Tim Lester, and IRS -CI Special Agent Steve Delaney. I also want to salute Assistant US Attorney Sean Flynn, who has worked very long and hard to help the agents in the investigation and the litigation to date.

Finally, I should also commend the victim companies in this case, each of which took swift action when they became aware of the investigation, and each of which has been fully cooperative in our investigation.

I will now turn the podium over to Drew Parenti, FBI Special Agent in Charge.

REMARKS BY FBI SPECIAL AGENT IN CHARGE DREW PARENTI

Good afternoon and thank you for coming today. Mr. Wagner has already covered the underlying facts of this case, so I would like to briefly address the FBI’s continuing efforts to combat fraud in corporate America.

Fraud, succinctly defined as the art of deliberate deception for unlawful gain, is as old as history and, unfortunately, will undoubtedly be an ongoing problem facing our country and law enforcement. Often accompanying fraud is corruption that is defined as the misuse of power, office or authority for private profit. During this lengthy and complex investigation deep rooted and extensive fraud and corruption were uncovered at SK Foods where as many as two dozen employees, including CEO Frederick Scott Salyer, were aware of the numerous frauds occurring within the company.

Rooting out fraud and corruption in corporate America is extremely difficult but it is a mission for which the FBI is well suited. Corporate fraud remains a top priority of our White Collar Crime Program. We have the experience, skills and resources necessary to conduct these types of complex investigations and will continue to work closely with the United States Attorney’s Office and our law enforcement partners to ensure that those engaging in this type of illegal behavior are brought to justice.

Reckless disregard for the laws that govern corporate America makes a mockery of our free trade system. We, as law enforcement, must do everything we can to ensure that businesses operating in our great nation, regardless of size or industry, have an equal and fair chance to succeed. Thank you.

REMARKS BY IRS CRIMINAL INVESTIGATION SPECIAL AGENT IN CHARGE SCOTT O’BRIANT

I want to talk for a minute about the allegation of bribes being paid and financial aspects of this case.

The link between where the money comes from, who gets it, when it is received, and where it is stored or deposited, can provide evidence that a crime was committed. Finding and connecting those links is what IRS-CI brings to this cooperative effort.

The long hours of tracking and documenting financial leads allowed this investigation to go right to the door of these business executives and eventually to Mr. Salyer, the leader of this illegal enterprise. A complete financial analysis and reconstruction of the illegal activity was key in securing convictions on Mr. Salyer’s (nine) associates.

Hundreds of thousands of paper and electronic documents were obtained during the course of this investigation. Our agents traced the funds coming from SK Foods through Intramark to the bribe recipients at companies like Kraft, Frito Lay, B&G Foods and Safeway. Over $388,000 was paid out in personal bribes to four individuals.

As the result of this fraud scheme, to date the government has seized approximately $600,000 from two bank accounts held in the name of Intramark, USA.

Our agents also analyzed the large volume of falsified “quality control documents” that accompanied customer-bound shipments of tomato product.

Between 2004 and 2008, SK Foods billed its various customers, by way of invoice, between $2,500,000 and $7,000,000 for processed tomato product that was adulterated and unsaleable in the US due to its excessive mold content.

Recent information also suggests that Salyer has moved large amounts of money offshore to banks in Liechtenstein and the West Indies. As the investigation continues, we will use every means available to identify, seize and forfeit funds connected to this scheme.