ANOTHER Reason to Eat Organic!Posted: June 25, 2011
Bribery, but Nobody Was Charged
By JAMES B. STEWART via the NYTIMES
In late June 2004, a plant manager for one of Tyson Foods’ poultry processing plants in Mexico sent a memo to company headquarters in Springdale, Ark.: two women who “most definitely do not work for Tyson Foods in Mexico” each were paid 30,700 pesos, or about $2,700, a month and had been for years.Tyson is one of the world’s largest producers of poultry, pork and beef products, a ubiquitous presence in American supermarkets that has been trying to increase foreign sales. The memo set off an ethics scandal that reached into Tyson’s executive suite and raises questions about who, if anyone, is being held accountable for high-level corporate crime.
The women happened to be the wives of two veterinarians stationed at the plants as part of Mexico’s effort to meet high sanitary and processing standards. The veterinarians certified products as suitable for export, a step required by countries like Japan and increasingly sought after by Mexican consumers as an assurance of quality and safety for locally produced processed meats.
A few days later, senior Tyson executives convened a meeting at headquarters. Someone pointed out the obvious. The purpose of the payments was “to keep the veterinarians from making problems,” according to a subsequent memo — in short, bribes. Participants at this meeting — who included the president of Tyson International, the vice president for operations, and the vice president for internal audit — evidently agreed the payments to the wives had to stop. A company lawyer said he was seeking advice on “possible exposure” from the payments, evidently referring to potential liability for maintaining fraudulent records and bribing foreign officials, which are felonies under the Foreign Corrupt Practices Act.
And then, having identified the serious ethical and legal lapses, and the need to stop the bogus payments, this group of executives “were tasked with investigating how to shift the payroll payments to the veterinarians’ wives directly to the veterinarians,” according to a subsequent statement of facts negotiated by Tyson’s lawyers and the Department of Justice.
Written in the passive voice typical of such documents, the statement raises the question of who “tasked” such an undertaking.
A subsequent memo written by Tyson’s audit department concluded that the “doctors will submit one invoice which will include the special payments formally [sic] being made to their spouses along with there [sic] normal consulting services fee.” The invoices would be identified as “professional honoraria.”
What were these Tyson officials thinking? It’s hard to see how simply shifting the payments did anything to mitigate the bribery scheme or the false descriptions of the payments. If anything, it seems even more brazen. There’s no indication anyone gave serious consideration to stopping the payments — only to finding a new way to make them. The president of Tyson International, the highest-ranking official at the meeting, communicated this “resolution” to Tyson’s chief administrative officer by e-mail on July 14, further pushing the issue up the chain of command.
The payments continued. When another Mexican plant manager complained to an accountant at headquarters that he was “uncomfortable” with this, the accountant spoke to the president of international — who again tried to squelch the issue. “He agreed that we are O.K. to continue to make these payments against invoices (not through payroll)" until we are able to get [the Mexican inspection program] to change, the accountant informed the plant manager.
The issue of the payments resurfaced in November 2006, and this time, Tyson did what it should have done two years earlier: it retained an outside law firm, Kirkland & Ellis, conducted an internal investigation and, under a government program intended to encourage voluntary disclosure of white-collar crime, turned the results over to the Justice Department and the Securities and Exchange Commission. The government’s investigation ended this February, when Tyson was charged with conspiracy and violating the Foreign Corrupt Practices Act. Tyson agreed to resolve the charges with a deferred prosecution agreement in which it “admits, accepts and acknowledges” the government’s statement of facts, and paid a $4 million criminal penalty. The company paid an additional $1.2 million and settled related S.E.C. charges that it maintained false books and records and lacked the controls to prevent payments to phantom employees and government officials.
But what about those at Tyson responsible for the bribery scheme?
Corporations may have assets and liabilities, but they don’t commit crimes — their officers, executives and employees do. And the 23-page letter agreement between Tyson and the Department of Justice, the criminal information, and the S.E.C.’s public statement of facts all withheld names, identifying the participants only as “senior executive,” “VP International,” “VP Audit” and so on.
It would seem self-evident that if Tyson engaged in a conspiracy and violated the Foreign Corrupt Practices Act, then someone at Tyson did so as well. The statute specifically provides for fines of up to $5 million and a prison term of up to 20 years for individuals, as well as fines of up to $25 million for companies.
I assumed the names were withheld because the investigation was continuing and further charges might be forthcoming. I was wrong.
When I called this week, press officers for both the Justice Department and S.E.C. said the investigation was over and no one would be named or charged. This seems to reflect the belief that the deferred prosecution agreement, penalty and S.E.C. settlement largely achieved the government’s objectives, which were to stop the illegal conduct at Tyson and deter future instances. The decision not to pursue cases against individuals seems also to reflect budgetary constraints at both agencies (cases involving foreign witnesses can be especially costly) and, for the Justice Department, the burden in a criminal case of proving guilt beyond a reasonable doubt. But surely bribery, not to mention other forms of corporate wrongdoing, would be more effectively deterred if someone was actually held accountable for it.
The Justice Department says, “In every case, we review the facts, evidence and the law to determine if criminal conduct by individuals occurred, and whether charges can be brought.” And it points out that in 2009 and 2010 it filed charges against 50 individuals under the Foreign Corrupt Practices Act, up from just two in 2004. This is surely progress, but the Tyson case suggests the problem persists, and not just in bribery cases: witness the widespread public frustration that so few people, as opposed to impersonal financial institutions, have faced criminal charges for actions that contributed to the financial crisis.
Companies seem all too willing to go along with this, passing settlement costs on to the shareholders while sweeping the details — and names — under the rug. Gary Mickelson, a Tyson spokesman, also declined to name any company officials involved, but said, “They are either no longer with the company or were disciplined.” (Tyson has stressed that none of the products that were certified by the Mexican veterinarians taking the bribes made it to the United States. No sickness or fatalities have been traced to products processed at the plants, but such concerns underscore why bribing officials charged with protecting the public health is especially serious.)
The “senior executive” and president of Tyson International, who was at the pivotal meetings which resulted in direct payments to the veterinarians, was Greg Huett. Tyson announced in May 2006 that he would be named to “another leadership position within the company.” S.E.C. filings indicate he left in 2007. He is currently a director of publicly traded Yuhe International, which describes itself as China’s largest producer of day-old broiler chicks, where he serves on the audit and compensation committees and heads the nominating committee.
Paul Fox was the “VP International.” He was promoted to vice president for processed meats operations in July 2005 and left a year later to become chief executive of Dickinson Frozen Foods in Idaho. He is currently a managing director of the Marfrig Group, based in Brazil and one of the world’s largest meat and poultry producers.
Tyson’s chief administrative officer, who received the e-mail regarding the resolution of the improper payments issue, was Greg Lee. Tyson announced in April 2007, the month Tyson disclosed the misconduct to the government, that Mr. Lee would retire early. Tyson’s chairman, John Tyson, praised Mr. Lee’s “dedicated service to the company over the last three decades” and said “he has been a stalwart team member whenever he was needed.” Tyson paid Mr. Lee nearly $1 million when he retired and awarded him a 10-year consulting contract providing an additional $3.6 million in compensation.
Mr. Lee continues to be reimbursed for country club dues and use of a car, and enjoys “personal use of the company-owned aircraft for up to 100 hours per year,” according to his employment agreement.
None of the three former Tyson executives responded to messages asking for comment.