“We pack garbage for them anyway, and they always take it, but we’ve hit new lows.”

Industrial food has always tended towards lowest cost ingredients. No matter what marketers tell you about their “all-natural” or “premium-quality” ingredients, when you are producing a product made from dozens of commodity ingredients,  cost is king.

A recent example involves the US owners of NZ’s largest tomato processors. Apart from distorting the market, bribery seems to override any concerns over quality. The article from stuff.co.nz is reproduced below as stories tend to disappear after a short while.

NZPA | Monday, 18 August 2008

Bribery claims against broker

A former broker for the American owner of New Zealand’s biggest tomato-processing operation, SK Foods, is under investigation for allegedly offering bribes to sell tomato-based products to buyers for food giants including Kraft, Frito-Lay and Safeway, according to court documents.

An FBI agent said in an affidavit filed in a United States court that SK Foods chief executive officer Scott Salyer encouraged New Jersey-based broker Randall Rahal to offer bribes to buyers over a four-year period, the Monterey Herald reported.

SK Foods bought a 55 per cent stake in Gisborne-based processor Cedenco in May 2001, purchasing the shares of Brierley Investments and Mangatu Investments for $NZ1.52 a share, and in 2003 acquired a 90% stake and forced a compulsory purchase of the rest of the shares at $2.30 each.

The bribery allegations are outlined in a 36-page sworn statement filed by FBI Special Agent Paul Artley in a US District Court in Sacramento in support of the US Government’s seizure of $US600,000 ($NZ870,953.69) from two of Rahal’s bank accounts.

Money used to bribe food buyers flowed through the accounts, Artley said.

The case is being investigated by the FBI, and an Internal Revenue Service spokeswoman, Arlette Lee, said: “Instead of having to bid for and getting people to buy your product from you, you allegedly pay bribes to guarantee the other company will purchase the product from SK Foods.”

SK Foods declined comment beyond a prepared statement that said the company “continues to co-operate fully in the Government’s investigation”.

While the company’s corporate headquarters are in Monterey, California, it is part of the SK Foods Group, which owns Salyer American Fresh Foods, SK Frozen Foods and Cedenco Foods Ltd, of New Zealand, with two processing plants in this country and Australia.

A former SK Foods employee, identified as a witness in the affidavit, told investigators that SK Foods paid bribes to increase its market share, and that Salyer was present during conversations in which Rahal talked about bribes he paid through his company, Intramark, to protect SK Foods from fallout if Rahal was caught.

Payouts from Intramark to several individuals included $US157,000 to a Kraft employee and $US81,000 to an employee of Frito-Lay, according to Artley’s affidavit.

FBI agents intercepted a conversation with an SK Foods employee in which Rahal talked about a discussion he had with a purchaser about the quality of the product being supplied, saying, “We pack garbage for them anyway, and they always take it, but we’ve hit new lows.” NZPA

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