Sacto 9-1-1
February 18, 2009
Scheme admitted to distribute 'unfit for food' tomato paste

From Denny Walsh:

A former employee of one of the nation's largest growers and processors of tomato products admitted Wednesday in Sacramento federal court she engaged in the years-long distribution and mislabeling of tomato paste that contained unlawful levels of mold and was "unfit for food."

Jennifer Lou Dahlman, who was dismissed this week as a reports and business analyst at California-based SK Foods, L.P., pleaded guilty to one count of the "introduction of adulterated and misbranded food into interstate commerce with the intent to defraud and mislead."

She admitted that for more than three years - from Nov. 23, 2004 to Jan. 21, 2008 - she caused the shipment of tomato paste with legally excessive mold content from SK Foods to customers in Wisconsin, Utah, Pennsylvania, New York, Kentucky, Maryland and Ohio.

She also admitted attaching false labels to the paste showing mold counts far below the actual levels and percentages of "natural tomato soluble solids" materially higher than the actual percentages.

Dahlman, 48, admitted these practices were carried out "at the direction of senior leaders and directors of SK Foods.

Her plea introduces a new element in the government's ongoing investigation of SK Foods. Before Wednesday, there were no public charges pertaining to adulterated food.

The plea belies a primary plank in the company's previous public statements: that the investigation has nothing to do with the quality of its products.

SK immediately issued a prepared statement through its attorney, Malcolm Segal.

"There was no problem with the commercial products Dahlman reviewed and no need for any recalls," the company insisted. "The ultimate products were all appropriately labeled and of excellent quality.

"The guilty plea ... is disappointing news. She was previously suspended and now has been terminated."

Segal, who was in the courtroom Wednesday observing the plea hearings, said, "Tomatoes come from Mother Nature, not from Barbie dolls. They are not all perfect. Commercial labeling is often the subject administrative disputes with the government, but it is important to appreciate that the government itself has said there were no health hazards with these products."

A prepared statement issued by Dahlman attorney Robert Wilkinson, says his client "apologizes to her family and the public for here involvement in the wrongs set forth in the plea and cooperation agreement."

"She is saddened that the leadership of SK Foods set a course for the company that was unlawful and that she was compliant in that course," Wilkinson's statement says.

SK Foods is headquartered in Monterey and has plants in Williams, 50 miles north of Sacramento, and Lemoore, south of Fresno. It is one target in an ongoing nationwide federal investigation of bribery and price-fixing that could be jacking up the cost of groceries.

In the matter just before Dahlman's on U. S. District Judge Lawrence K. Karlton's Wednesday calendar, a former Frito-Lay Inc. employee pleaded guilty and admitted taking bribes from a former SK Foods broker to rig bidding and hike prices in connection with SK Foods' sales to Frito-Lay.

James Richard Wahl Jr. admitted receiving $160,000 "on behalf of SK Foods" from former SK broker and director Randall Lee Rahal between 1998 and April of last year.

In return, Wahl admitted, he ensured that Frito-Lay purchased SK's products and he provided SK with information that allowed it to sell certain products to Frito-Lay at inflated prices.

Wahl, 58, is the second senior purchasing manager for a national company who has admitted receiving bribes to steer contracts to SK Foods and to buy its processed tomato and other food products at inflated prices.

Robert L. Watson, 59, of White Plains, N. Y., once a senior purchasing manger at Kraft Foods, pleaded guilty last month to receiving $158,000 in bribes from Rahal.

Kraft and Frito-Lay were unaware of the scheme.

Rahal, 59, of Ramsey, N. J., pleaded guilty in December to racketeering, price fixing, bid rigging and contract allocation conspiracies, all allegedly on behalf of SK.

Anthony Ray Manuel, 57, of Turlock also pleaded guilty last month to embezzling $975,000 from Morning Star Packing Co., where he was a sales representative and packaging manager before going to work for SK Foods in 2005. He was terminated at SK the day before his guilty plea.

Morning Star is a manufacturer and marketer of bulk tomato products with facilities in Williams and Los Banos, in western Merced County. The company is one of SK's competitors.

Rahal, Dahlman, Wahl, Watson and Manuel have all agreed to cooperate with prosecutors and agents in the ever-widening probe.

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