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SEC Charges Tyson Foods with FCPA Violations


Washington, D.C., Feb. 10, 2011 — The Securities and Exchange Commission today 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.

The SEC alleges that 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.

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.

“Tyson and its subsidiary committed core FCPA violations by bribing government officials through no-show jobs and phony invoices, and by having a lax system of internal controls that failed to detect or prevent the misconduct,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

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’s complaint alleges that a Tyson de Mexico plant manager discovered the wives on the payroll in June 2004 and informed a Tyson Foods accountant of the situation. After subsequent meetings involving Tyson Foods and Tyson International officials, the payroll payments to the veterinarians’ wives were replaced with invoice payments to one of the veterinarians. An executive of Tyson International approved this approach.

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.

Without admitting or denying the SEC’s allegations, Tyson Foods consented to the entry of a final judgment ordering disgorgement plus pre-judgment interest of more than $1.2 million and permanently enjoining it from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, codified as Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934. The proposed settlement is subject to court approval.

In a related criminal information filed today, 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.

The SEC’s case was investigated by Allen Flood and Conway Dodge of the SEC’s Division of Enforcement. The SEC acknowledges the cooperation of Tyson Foods in the investigation. The SEC acknowledges and appreciates the assistance of the U.S. Department of Justice’s Fraud Section and the Federal Bureau of Investigation.

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For more information about this enforcement action, contact:

Cheryl J. Scarboro,
Chief, Foreign Corrupt Practices Act Unit, SEC Division of Enforcement

Conway T. Dodge
Assistant Director, SEC Division of Enforcement



Modified: 02/10/2011