Recent media and print news articles continue to bring to light the ongoing incidents of procurement bribery and tainted shipments involving processed tomatoes. The most recent article featured in the New York Times last week, and also noted by U.S. television media, outlines the disturbing incidents involving the U.S. food and grocery industry, and as noted, “has raised some serious questions about how well food manufacturers safeguard the quality of their ingredients.”

The article specifically outlines incidents of bribery among procurement managers, as well as the shipment of sub-standard product under falsified documentation.  Procurement managers for Kraft Foods, Frito-Lay, Safeway and B&G Foods have pled guilty to taking bribes in connection with the acquisition of tomato products. According to the article, one manager, Robert Watson, a senior purchasing manager for Kraft Foods from 2004 to 2008, “needed $20,000 to pay his taxes.”  Watson pled quilty In January 2009 and was sentenced to two years in jail and ordered to pay restitution to Kraft.

SK Foods, a now defunct tomato grower and processor of vegetable products based in Monterray CA, allegedly orchestrated these bribery schemes, and for years shipped customers millions of pounds of bulk tomato paste and puree that fell short of basic quality standards including the falsification of documentation to mask sub-standard product.  It was reported that in 2007, faced with a product shortage, 3.4 million pounds of moldy tomato paste was shipped to Kraft.

Sub-standard shipments were reported to involve more than 55 companies.  In some cases, companies had detected problems, but many reportedly did not. Tainted and potentially moldy product wound up in food sold to consumers.  The United States Attorney in Sacramento, California is also looking into allegations of collusion and price fixing.  A BNET blog commentary in September of 2009 laid out the scope and extent of potential bribery. The federal probe has been far reaching and senior executives at SK Foods began to be indicted as early as August, including the senior vice-president of sales operations. In early February, the actual owner of the company was taken off a plane at Kennedy Airport and later indicted on racketeering, fraud and obstruction of justice charges.

Supply Chain Matters joins others in the supply chain community blogosphere to condemn the practice of procurement fraud. The practice harms consumers / customers, companies, and all those in the procurement profession itself.   These past months of severe global recession have been personally challenging for all professionals, but that does not excuse any such behavior. Neither should we excuse the behavior of the most senior of management blaming other managers, when a culture of bribery has been supported.

Since the very origins of Supply Chain Matters in 2008, we have often commented on the increasing problem of counterfeit or substandard parts and commodities. The problem has reached alarming proportions, and now more public incidents of bribery and collusion do not add to the confidence of consumers.  Where consumers may have believed that these occurrences mainly came from products produced in China and other developing countries, we now have evidence that the U.S. is not immune to such practices.  While the practices of SK Foods could be described as a “desperate act by a company suffering from tough economic times”, it does excuse such practices, irregardless of country or geography.

The best and most advanced technology cannot overcome unscrupulous practices.  The essence and accountability of a process in the end, always comes down to the people associated with that process.  Perhaps ISM and other procurement certification programs should now include more distinct testing on the issue of ethics and the law.

It is also somewhat of a shame that so many advancements in supplier collaboration, trust and self-inspection may now suffer a setback as companies react to this news.

 Those who are convicted of bribery will certainly pay a price in their jobs and their careers, but, what about consumers who now have yet another concern regarding the quality of the food and products that are consumed.

What about your firm or procurement organization?  Do you feel that the motivation for unscrupulous practices has increased as a result of the current challenging economic environment?

 Bob Ferrari