Food Broker Pleads Guilty To Price-Fixing

A New Jersey food broker has agreed to plead guilty in a federal investigation into the industry that processes tomato products, a conspiracy that prosecutors say drove up food prices across the nation.

Randall Rahal, 61, of Ramsey, N.J., will plead guilty next week to racketeering, money laundering and antitrust charges filed Wednesday in Sacramento federal court, his attorney and prosecutors said. Rahal, the first person charged in the probe, also agreed to cooperate with investigators and forfeit more than $600,000.

Rahal is the owner and president of New Jersey-based Intramark USA Inc. It is a wholesaler of food ingredients, including processed tomatoes that are widely grown in California.

Prosecutors say Rahal acted illegally while working as a broker for SK Foods of Lemoore, Calif. The company grows and processes products like tomato paste and diced tomatoes, 95 percent of which are processed in California.

Rahal negotiated contracts between SK Foods and food-product manufacturers, distributors and retail stores throughout the United States. The charges allege that Rahal, in cooperation with other company officials and employees, routinely bribed its customers' purchasing agents.

The bribes were to make sure the customers bought only from SK Foods, paid inflated prices and shared confidential information from SK Foods' competitors, according to the criminal complaint. That let the company fix prices and rig bids in violation of antitrust laws, prosecutors said.

"This conduct deprived the purchasers of processed-tomato products of the benefits of a competitive marketplace, ultimately causing American consumers to pay higher prices for these everyday staples," said Acting Assistant Attorney General Deborah A. Garza said in a statement.

The government says the company also sold some products that did not meet quality and content requirements between January 2004 and April 2008. Rahal and company employees then covered up the "inferior product" by faking internal and customer documents including labels and invoices.

The charges do not allege any health danger from the poor products, and prosecutors do not believe there is a health concern, said spokeswoman Lauren Horwood.

SK Foods is not charged, though the court documents allege it was engaged in "racketeering activity" with Rahal.

An attorney representing SK Foods, Brian Maschler, said the company dropped its business with Rahal as soon as it learned of the allegations in a search warrant served on SK Foods in April.

"The type of conduct that he's been charged with is fundamentally contrary to SK Foods' policies and practices and the way it does business," Maschler said. He said the company is cooperating with investigators.

Rahal's attorney, Christopher Adams, said his client "has agreed to accept responsibility by pleading guilty to all charges and fully cooperating with the government in its continuing investigation."

The racketeering charge carries a maximum 20 years in prison, while the other charges could each bring up to 10 years in prison. The sentence agreed to under Rahal's plea agreement was not disclosed.

The complaint also says Rahal and others at the company sent bogus financial information to some of its customers. It alleges that "various corporations and individuals ... participated as co-conspirators," but it did not name them.

In previously filed court documents, FBI agents said they tapped Rahal's telephones late last year, and raided SK Foods in April. They say they found buyers accepting payments at six food companies including Agusa Inc., Kraft Foods Inc., Safeway Inc., B&G Foods Inc., ConAgra Foods Inc., and Frito-Lay, which is a division of Pepsico Inc.

Prosecutors say their investigation is ongoing.