Bribery Without Bribers

James B. Stewart brings up an undercovered story; Tyson Foods executives walked

James B. Stewart got off to a strong start this weekend with his new New York Times column, which fills the Saturday spot Joe Nocera vacated in his move to the op-ed pages.

I wrote the other day about “Fraud Without Fraudsters; Fraud Without ‘Fraud.’” That post was about the SEC’s $154 million settlement with JPMorgan Chase for defrauding its customers on a Magnetar CDO. The SEC accused the bank of negligence rather than knowing fraud, and it didn’t charge any actual individuals in the case, as if the corporate entity defrauded investors without human help.

Stewart writes that something similar happened with chicken-processing giant Tyson Foods, which bribed Mexican regulators at one of its plants with roughly half a million dollars (adjusting for inflation) from 1994 to 2007.

In 2004, Tyson execs learned that the wives of two government inspectors were on the payroll in Mexico. The inspectors were veterinarians who had to approve Tyson’s products for use and the wives didn’t do any work for Tyson. What did they do about it?

A few days later, senior Tyson executives convened a meeting at headquarters. Someone pointed out the obvious. The purpose of the payments was “to keep the veterinarians from making problems,” according to a subsequent memo — in short, bribes. Participants at this meeting — who included the president of Tyson International, the vice president for operations, and the vice president for internal audit — evidently agreed the payments to the wives had to stop. A company lawyer said he was seeking advice on “possible exposure” from the payments, evidently referring to potential liability for maintaining fraudulent records and bribing foreign officials, which are felonies under the Foreign Corrupt Practices Act.

And then, having identified the serious ethical and legal lapses, and the need to stop the bogus payments, this group of executives “were tasked with investigating how to shift the payroll payments to the veterinarians’ wives directly to the veterinarians,” according to a subsequent statement of facts negotiated by Tyson’s lawyers and the Department of Justice.


I like that Stewart is bringing up what some might dismiss as old news. The Justice Department and SEC announced the Tyson settlement back in February. But, with the notable exception of the Times itself, which put a thousand words on the front of Business Day then, the story barely got any coverage at the time. The Wall Street Journal stuffed 300 words on B5, about what Reuters and the AP gave it. Bloomberg barely touched it. The home state Arkansas Democrat-Gazette headlined its story as innocuously as possible, “Tyson incurs fines over vet payments,” and never once used the word “bribes.”

Tyson’s flacks and execs must have thought this one had blown over. They must be cursing Stewart’s name right now.

Which is why we’ll sing its praises, particularly because Stewart not only gets the story out there in a big way, but he connects it to the lack of corporate accountability we’ve seen in the wake of the financial crisis. He notes that Justice and the SEC didn’t charge anybody at Tyson with a crime, despite having what you’d think would be an open-and-shut case.

But the feds didn’t even name any of the executives at Tyson, much less throw them in prison or fine them:

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, as well as fines of up to $25 million for companies.

I assumed the names were withheld because the investigation was continuing and further charges might be forthcoming. I was wrong.

When I called this week, press officers for both the Justice Department and S.E.C. said the investigation was over and no one would be named or charged.

And this is where it gets really good. Stewart digs up the names of three of the executives and closes with them and where they are now. Those would be former president of Tyson International Greg Huett, former vice president for processed meat operations Paul Fox, and Chief Administrative Officer Greg Lee, who got a golden parachute when he retired from Tyson.

What Stewart doesn’t mention is that Tyson has a rich history of breaking the law, and that that shows how the well connected tend to get off the hook for serious crimes.

The company’s “gifts” took down Bill Clinton’s Agriculture Secretary Mike Espy in 1994. Espy himself was later acquitted, but Tyson executive Archie Schaffer III was convicted for trying to influence Espy, and his fellow Arkansan Clinton pardoned him (with the support of the WSJ edit page) before he could serve any time. Tyson the company pleaded guilty and paid $6 million in the scandal.

The company and/or its employees has violated SEC, environmental, and immigration (the company itself was acquitted on this last one) laws as well.

A 2002 Times story quoted company critics saying this was a cultural issue, “that Tyson’s growth and its transgressions rise from the same devil-may-care philosophy that the Tyson family, which tightly controls the company, has imbued it with from the start.”

That seems like as good an explanation as any for its jaw-dropping response to the bribery in Mexico.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,