Let's Really Get Tough on Crime

What does it take to send a crook to jail?

If we're talking about the burglar stealing your family silverware or the shoplifter grabbing twelve cashmere scarves, it may not take much. But if someone steals thousands, if not millions, of dollars from your shareholders... well, that's a different story, isn't it?

James B. Stewart, Pulitzer-Prize-winning journalist at the Wall Street Journal and now a financial columnist for the New York Times, has a depressing example of this in today's paper. Headlined "Bribery, but Nobody was Charged," the piece details years of payments by Tyson Foods to keep veterinarians at a Mexican processing plant happy. The veterinarians were there, Stewart reports, "as part of Mexico's efforts to meet high sanitary and processing standards... [and] certified products as suitable for export."

The payments ($2700 per month, each, made over many years) were originally given to the wives of the veterinarians. When this became known at company headquarters, in 2004, action was swiftly taken.

But it's not the action that you or I would expect.

Participants agreed that the payments to the wives had to stop. But the executives (including, Stewart notes, the president of Tyson International, the vice president for operations, and the vice president for internal audit) then "were tasked with investigating how to shift the payroll payments ... directly to the veterinarians."

Hello?

As Stewart puts it, "What were these Tyson officials thinking?"

Two years later, the company finally did what it should have done at the outset. Sort of. With the help of outside counsel, "under a government program intended to encourage voluntary disclosure of white-collar crime, [Tyson] turned the results over to the Justice Department and the Securities and Exchange Commission."

In the end, Tyson agreed to a "deferred prosecution agreement", admitted the government's statement of facts, acknowledged its violation of the Foreign Corrupt Practices Act (a.k.a. Paying Bribes), and paid a total of $5.2 million in penalties and SEC charges.

So which Tyson employee went to jail for this appalling scheme?

None of them.

As Stewart writes,

It would seem self-evident that if Tyson engaged in a conspiracy and violated the Foreign Corrupt Practices Act, then someone at Tyson did so as well. The statute specifically provides for fines of up to $5 million and a prison term of up to 20 years for individuals...

Perhaps it is only that the investigation is still continuing?

You wish.

...[Press] officers for both the Justice Department and SEC said the investigation was over and no one would be named or charged. This seems to reflect the belief that the deferred prosecution agreement, penalty and SEC settlement largely achieved the government's objectives, which were to stop the illegal conduct at Tyson and deter future instances.... But surely bribery, not to mention other forms of corporate wrongdoing, would be more effectively deterred if someone was actually held accountable for it.

In this case, none of the senior executives involved have suffered any negative backlash. While none is still employed at Tyson, the former president of Tyson International is now a director of Yuhe International ("China's largest producer of day-old broiler chicks"), and the chief administrative officer, who received the 2004 email first reporting the illegal payments, has taken early retirement, receiving $1 million at retirement and "a 10-year consulting contract providing an additional $3.6 million in compensation", plus such fringe niceties as the use of a car, reimbursement for country-club dues, and some personal use of company aircraft.

It takes a lot, sadly, to shock me these days. But this story recounted so much bad behavior it was hard to know where to start.

And what's particularly frustrating is the feeling that there's nothing we can do about it, that Tyson probably differs from others in its industry in that it 'fessed up and paid the fine (more exactly, the shareholders paid the fine), and that Tyson itself may be back to the same old way of "doing business".

Why didn't the president of Tyson International get charged personally with violation of the Foreign Corrupt Practices Act? It may be, as Stewart suggests, a reflection of "budgetary constraints at both agencies ... and, for the Justice Department, the burden in a criminal case of proving guilt beyond a reasonable doubt."

Call me cynical, but I think it also has to something to do with the well-worn hallways between DOJ and the nation's top law firms, the very firms to which a company like Tyson might turn.

What can we as consumers do? About the only thing we can do is hit 'em where it hurts: boycott the product.

But know that the other guy is likely doing something just as bad.

I'd say it was time to turn vegetarian if it weren't for Germany's recent E. coli-laden sprouts....