Donald C. Smaltz, Independent Counsel In re Espy, announced:
Richard Douglas, the former Senior Vice President for Corporate
Affairs for Sun-Diamond Growers of California, pleaded guilty today to a charge that he
had lied to the FBI when he earlier denied giving illegal gratuities to former Secretary
of Agriculture Espy.
Douglas admitted in his plea today that he had lied to the FBI about
a variety of matters, including giving Espy about $17,000 in illegal gratuities on behalf
of Sun-Diamond Growers which, at the time, had matters pending before the Department of
Agriculture. A San Francisco jury's verdict convicting Douglas in November 1997 on one
count of giving $7,600 in illegal gratuities to Secretary Espy was set aside in February
1998 because the trial court ruled that Douglas should not have been prosecuted in the
Northern District of California. Douglas' plea brings to a close this matter and two other
outstanding cases against him.
Pursuant to the Plea Agreement, Douglas will cooperate with the
Independent Counsel's investigation. Douglas will be sentenced on July 13, 1998 before the
Honorable Thelton E. Henderson in the Northern District of California.
Mr. Smaltz stated:
Richard Douglas' plea of guilty now brings to a close the Sun-Diamond/Richard Douglas
chapter of this investigation, and confirms the corporate arrogance of Sun-Diamond Growers
in willfully and repeatedly violating the criminal proscriptions against the regulated
giving gifts to the regulators. The corruptive effects on the workings of government, and
the undermining of public confidence in our regulatory institutions resulting from these
corrosive actions, require that this type of conduct be thoroughly investigated and, when
appropriate, vigorously prosecuted.
The Information charged Douglas with lying to the FBI in June 1994 in
the following particulars:
First, by representing that the only time Sun-Diamond paid any
expenses for Secretary Espy was when Sun-Diamond brought then-Congressman Espy to
California to speak at a convention when in fact Douglas gave the following illegal
gratuities to Espy: (1) Hartmann luggage valued at $2,427; (2) tickets, limousine
services, and meals valued at approximately $4,590 for the Secretary and the Secretary's
girlfriend to attend the U.S. Open Tennis Tournament in New York; (3) meals valued at
approximately $665; (4) $3,100 in cash for the Secretary's girlfriend so that she could
accompany Espy to the World Tree Nut Congress in Athens, Greece; and (5) a minimum of
$7,000 in contributions to be made to the Congressional campaign debt retirement of Henry
Espy, the Secretary's brother.
Second, by representing that Sun-Diamond had no issues pending
before the Department of Agriculture subsequent to Espy becoming Secretary of Agriculture
when in fact the following matters were pending before the USDA and Secretary Espy: (1)
funding for research for alternatives to the pesticide methyl bromide in the event the
Environmental Protection Agency would restrict or prohibit its use; (2) an Environmental
Protection Agency regulation to phase out and eliminate the use of methyl bromide; (3)
approval of the Market Promotion Program funding for the raisin industry, which would
benefit financially Sun-Maid Raisins, a Sun-Diamond member cooperative, (4) a study of the
Market Promotion Program, with a view to giving agricultural cooperatives preferences that
were designated for small entities; (5) various pesticide issues; (6) the federally funded
School Lunch Program; and (7) the Teamsters strike of Sun-Diamond member cooperative
Third, by claiming that he obtained tickets to a June 1993 Chicago
Bulls-Phoenix Suns championship basketball game in Chicago for himself and Secretary Espy
at no cost from a friend of his who was a professional basketball player, when in fact he
knew that Secretary Espy had obtained the tickets from the Chief Executive Officer of
Quaker Oats. Quaker Oats Co. was then regulated by USDA under a variety of statutes,
including the Meat Inspection Act which has an absolute prohibition against any officer or
employee of USDA soliciting or accepting anything of value from a company regulated under
Under the Plea Agreement, the Government agreed to dismiss the
remaining outstanding charges against Douglas. On March 5, 1998, the Office of Independent
Counsel had filed a notice of appeal from the trial judge's February 20, 1998 dismissal
for lack of venue of the jury's conviction of Douglas for illegal gratuities. In April
1997, the trial court severed nine wire fraud counts alleging Douglas committed fraud in
his mortgage application for a half-million-dollar house in Oakland, California, from the
gratuities and illegal campaign contribution counts in the indictment. The mortgage fraud
trial was scheduled to commence on March 31, 1998. In April 1997, the Court also had
dismissed two false statement counts, which the Independent Counsel had appealed.
On September 24, 1996, a District of Columbia jury convicted
Sun-Diamond Growers -- Douglas' employer -- of one count of providing illegal gratuities
worth approximately $6,000 to Secretary Espy, two counts of committing mail and wire fraud
resulting from a $5,000 illegal campaign contribution scheme, and five counts of making
illegal campaign contributions to Henry Espy for Congress worth $4,000. On May 13, 1997,
Sun-Diamond was sentenced to pay a fine of $1.5 million and was placed on five years
probation with special conditions.
Former Secretary of Agriculture Espy was charged in a 39-count
indictment filed on August 27, 1997. The trial is currently pending without date, awaiting
a ruling from the United States Court of Appeals for the District of Columbia on four
dismissed counts, including three counts where the trial court ruled that the Meat
Inspection Act's criminal proscription against accepting gratuities does not apply to the
Secretary of Agriculture. Oral argument is scheduled for March 25, 1998.
A copy of the Information and Plea Agreement may be obtained on
request from the Office of Independent Counsel.
The Independent Counsel's investigation is continuing.