Bribery You Can Eat

Buyers from a couple of the world's biggest food companies have either pleaded guilty or soon will plead guilty to accepting bribes from suppliers as a result of a massive federal probe of the industry that prosecutors say is continuing.

Robert Watson, a senior purchasing manager for Kraft, took $158,000 from SK Foods, a major tomato processor. James Wahl, a buyer for Frito-Lay, a division of PepsiCo, took $160,000, prosecutors say. In return, the men helped SK Foods charge their companies inflated prices for products like tomato paste and diced tomatoes. Randall Lee of SK Foods pleaded guilty to several fraud charges in December.

The probe seems poised to reveal that such chicanery is widespread in the food industry. This ain't small potatoes: Prosecutors say Watson, for example, ensured that Kraft bought about 230 million pounds of processed-tomato products at inflated prices from SK Foods from 2004 through 2008.

"We have been victimized by one former employee," Kraft spokeswoman Renee Zahery told the Associated Press.

Sure. But Kraft also allowed itself to be victimized. This is precisely the kind of thing that accounting controls and both inside and outside audits are supposed to detect. Given that several other giant food companies are being probed, it would seem that the industry as a whole lacks proper procedures for routing out such fraud. Wahl, of Frito-Lay, allegedly took bribes for 10 years. Prosecutors said he will plead guilty "in the near future."

Other companies being investigated in the ongoing probe include ConAgra, Safeway, B&G Foods, and Agusa.

That list could grow much longer as the probe continues. In September, the feds announced that their investigation of SK Foods led them to evidence that such fraud was occurring throughout the food industry. Various probes are focused on tomato, egg, and dairy suppliers—industries in which suppliers often join cooperatives, which may be part of the problem. Prosecutors say buyers and sellers last year were using inflated commodity prices as cover for their actions, which themselves added to rising food prices.