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Friday, Feb. 05, 2010

Man in center of fraud case nabbed

Millionaire tomato processor arrrested at JFK.

SACRAMENTO -- Frederick Scott Salyer, heir of one of California's biggest land barons, was arrested Thursday in New York City after being secretly charged in Sacramento federal court with massive fraud in connection with the operation of his SK Foods LP.

His was the most-anticipated arrest in a far-reaching federal investigation of corruption in the food industry.

Salyer is charged in a criminal complaint and 59-page supporting affidavit of an FBI agent -- filed Jan. 5 and unsealed Thursday -- with 20 counts of mail and wire fraud linked to a maze of alleged schemes carried out between 1998 and 2008. They were purportedly designed to bilk corporate customers through bribery, misbranding and the sale of products so full of mold they were not legally saleable in the United States.

U.S. Attorney Benjamin Wagner said Salyer, a 54-year-old Pebble Beach resident, had planned to abscond in the wake of guilty pleas from several former SK Foods employees and customers.

Purchasing managers for a who's-who of the nation's food companies have pleaded guilty to bribing an SK Foods sales broker to ensure the companies purchased SK's products at elevated prices. Other times, bribes were paid to acquire SK competitors' proprietary bid information, according to plea agreements on file in federal court.

The broker, Randall Lee Rahal, 61, of Ramsey, N.J., pleaded guilty in December 2008 to bid rigging, racketeering and other charges.

He admitted the hundreds of thousands of dollars in bribe payments were ordered by Salyer.

Based in Monterey and with two Central Valley plants, SK Foods -- until it was sold out of bankruptcy in June -- was a grower, processor and distributor of tomato and other food products for nationwide sale to manufacturers, distributors, marketers and retail outlets. Salyer was the owner and chief executive officer of the partnership, which he set up in 1990.

Salyer was planning to flee the country and had already transferred millions of dollars from bank accounts formerly associated with SK Foods entities to accounts in the Caribbean and Liechtenstein, according to the affidavit of FBI Special Agent Paul Artley.

Salyer was arrested at John F. Kennedy International Airport in the late afternoon as he got off a flight from London.

Artley's affidavit says Salyer left the country in October and had instructed a subordinate to sell many of his belongings. It says Salyer spoke to a former SK employee about obtaining permanent residence status in Uruguay, Paraguay, Andorra and France because he would not be extradited from those countries.

"Mr. Salyer apparently intended to become a fugitive from justice," Wagner said. "We are pleased that he will now have his day in court, and we commend the FBI for its excellent work in apprehending him."

In a telephone interview, attorney Malcolm Segal fiercely denied that his client had any plans to skip the country. He said that allegation "makes no sense for a number of reasons."

Segal said he met Salyer in France last week to prepare for a settlement conference Tuesday in the still-pending SK Foods bankruptcy in Sacramento, and "develop his defense to criminal allegations."

Salyer is spending "thousands and thousands of dollars" defending a plethora of private anti-trust lawsuits growing out of the government's investigation, Segal said.

"Why would he spend 5 cents doing that if he intended to flee?" Segal demanded. "For that matter, why would you fly into one of the busiest airports in the world, with one of the longest watch lists, using your own passport if you were trying to hide? The answer is, you wouldn't. You would fly into East Podunk under an alias." He said the only money transferred out of the country belongs to Salyer's daughters, who did not want their funds attached because of their father's travails.

Segal said he discussed last month with Assistant U.S. Attorney Sean Flynn the government's concern that Salyer was a fugitive and assured the prosecutor "those rumors are simply false." He said he did not find out about the month-old charges against Salyer until Thursday after the arrest.

"It's pretty shocking, really," said Segal, a former federal prosecutor. "It's not what I expected from this (U.S. attorney's) office."

Salyer is the grandson of the late E. Clarence "Cockeye" Salyer, who carved out a vast land empire, one of the richest and most powerful in the state's history.

Artley's affidavit says the ongoing probe began in August 2005, when a private investigation firm approached the FBI with information about an embezzlement by a former employee of an SK competitor, who became an SK vice president. When agents squeezed Anthony Ray Manuel over $1 million stolen from his former employer, he began talking about SK.

His information proved to be a never-ending ball of yarn.