Thursday, February 10, 2011
The SEC charged Tyson Foods Inc. with violating the Foreign Corrupt Practices Act (FCPA) by making illicit payments to two Mexican government veterinarians responsible for certifying its Mexican subsidiary’s chicken products for export sales. Tyson Foods agreed to pay more than $5 million to settle the SEC’s charges and resolve related criminal proceedings announced today by the Department of Justice.
According to the SEC, Tyson de Mexico initially concealed the improper payments by putting the veterinarians’ wives on its payroll while they performed no services for the company. The wives were later removed from the payroll and payments were then reflected in invoices submitted to Tyson de Mexico by one of the veterinarians for “services.” Tyson de Mexico paid the veterinarians a total of $100,311. It was not until two years after Tyson Foods officials first learned about the subsidiary’s illicit payments that its counsel instructed Tyson de Mexico to cease making the payments.
According to the SEC’s complaint filed in federal court in the District of Columbia, the scheme occurred during fiscal years 2004 to 2006. In order to export products, meat-processing facilities in Mexico must obtain certification through an inspection program administered by Mexico’s federal government and supervised by an office in the Mexican Department of Agriculture. Tyson de Mexico participated in the program in order to export goods to Japan and other countries. The two veterinarians involved were responsible for certifying Tyson de Mexico’s chicken products for export and served as official Mexican government veterinarians at Tyson de Mexico’s facilities.
The SEC alleges that in connection with these improper payments, Tyson Foods failed to keep accurate books and records and failed to implement a system of effective internal controls to prevent the salary payments to phantom employees and the payment of illicit invoices. The improper payments were improperly recorded as legitimate expenses in Tyson de Mexico’s books and records and included in Tyson de Mexico’s reported financial results for fiscal years 2004, 2005 and 2006. Tyson de Mexico’s financial results were, in turn, a component of Tyson Foods’ consolidated financial statements filed with the SEC for those years.
The Department of Justice charged Tyson Foods with conspiring to violate the FCPA and violating the FCPA. DOJ and Tyson Foods agreed to resolve the charges by entering into a deferred prosecution agreement. Tyson Foods has agreed to pay a $4 million criminal penalty.