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OIC Smaltz- Press Releases

August 26,1998

 

FOR IMMEDIATE RELEASE

Donald C. Smaltz, Independent Counsel In re Espy, today announced that, in a matter referred by the Office of Independent Counsel to the Department of Justice, Sun-Land Products of California ("Sun-Land"), a wholly-owned subsidiary of Sun-Diamond Growers of California ("Sun-Diamond"), pleaded guilty in the Northern District of California to a two count Criminal Information charging that Sun-Land, in 1992 and 1993, illegally made conduit contributions -- contributions in the name of certain individuals, to two federal political campaigns in violation of the Federal Election Campaign Act ("FECA"). Sun-Land made these conduit contributions using stipends paid to non-management directors. As part of the Plea Agreement entered today, Sun-Land paid a total of $480,250 and entered into a conciliation agreement with the Federal Election Commission ("FEC"). The payment is comprised of a $400,000 criminal fine, $250 in special assessments, and an $80,000 civil penalty to the FEC. The matter was handled at the Department of Justice by Craig C. Donsanto, Director, Election Crimes Branch, and Faye Ehrenstamm, Senior Trial Attorney, Public Integrity Section. Before the referral, our investigation was headed by Theodore S. Greenberg, Deputy Independent Counsel, and Jacob S. Frenkel, Associate Independent Counsel.

The Office of Independent Counsel uncovered and substantially investigated Sun-Land’s unlawful stipend scheme during its investigation of illegal gratuities by Sun-Diamond and its member cooperatives to former Secretary of Agriculture Mike Espy. Once the Independent Counsel determined that Sun-Land did not use the stipends as a means of giving things of value to Secretary Espy or to contribute to Espy’s brothers Congressional campaign, he turned over the completed investigation to the Department of Justice's Public Integrity Section for prosecution. The Department of Justice represented the United States in today's proceedings.

In pleading guilty, Sun-Land admitted that, in 1992 and 1993, its Board of Directors approved a $2,500 stipend to be paid to non-management directors with the suggestion that they be used for political contributions to political organizations or candidates to whom Sun-Land wanted contributions to be made. The Information charged that the illegal contributions to federal candidates for the two years totaled $37,000 -- $16,000 in 1992 and $21,000 in 1993.

Sun-Land gave a $2,500 stipend to each of 16 non-management directors in 1992 and 1993. In 1992, after issuing the stipends, Sun-Land "suggested" that the Bush-Quayle ‘92 Primary Committee Inc. ("Bush-Quayle") receive contributions. The total contributions to Bush-Quayle from non-management directors who received the stipend, and in some cases certain family members, was $16,000. In 1993, after issuing the stipends, Sun-Land "suggested" that Campaign America, Senator Robert Dole’s political action committee, receive contributions from the stipend scheme. The total contributions to Campaign America from non-management directors who received the stipend, and in some cases certain family members, was $21,000. All $37,000 in illegal contributions were made at the "suggestion" of Sun-Land management and were funded by the stipends provided by Sun-Land.

The stipends were corporate funds intended for political contributions which Sun-Land disguised to appear as individual contributions to the designated political campaigns and presented as a group to each of the specified campaigns. A majority, but not all, of the 16 non-management directors who participated served as conduits for illegally contributing corporate funds to political campaigns.

When the Sun-Land Board of Directors considered and decided to issue stipends to cover political contributions, Sun-Land admitted that at least one of its senior officials knew that FECA prohibited (1) corporate contributions to federal election campaigns, (2) individuals and corporations from contributing or causing contributions to be made in the name of another individual, and (3) any person from contributing more than $1000 to a primary campaign and general campaign for federal office, or to the candidate’s authorized political committee.

The fine of $400,000 represented the maximum possible fine of $200,000 per count under 18 U.S.C. 3553 and 3571.

Sun-Land is a California corporation that processes and makes dried fruits and nuts. Sun-Diamond, Sun-Land’s parent corporation, is an agricultural cooperative headquartered in Pleasanton, California. On September 24, 1996, a jury in the District of Columbia convicted Sun-Diamond of one count of providing illegal gratuities worth approximately $6,000 to Secretary Espy, two counts of committing mail 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. The jury acquitted Sun-Diamond on one illegal gratuity count. Judge Ricardo Urbina sentenced Sun-Diamond to pay a $1.5 million fine and five years probation with special conditions. On March 20, 1998, the United States Court of Appeals for the District of Columbia Circuit affirmed the convictions on the mail fraud and illegal campaign contribution counts but reversed the gratuities conviction because of an improper jury instruction. The DC Circuit remanded the case for new trial on the gratuities count and resentencing. On June 16, 1998, the DC Circuit denied the OIC’s Petition for Rehearing En Banc. On July 21, 1998, the OIC filed a Petition for Certiorari with the United States Supreme Court to review the Circuit Court’s decision on the gratuities count.

In an additional related matter, on November 24, 1997, a federal court jury in San Francisco convicted Richard Douglas, Sun-Diamond’s Senior Vice President for Government Relations, of giving illegal gratuities valued at approximately $6,000 to Secretary Espy and others. The Douglas jury could not reach a verdict on a second gratuity count that charged $3,100 worth of illegal gratuities to Espy and his girlfriend, and acquitted him of one mail fraud count and five counts of FECA violations related to illegal contributions to Espy’s brother’s unsuccessful political campaign to replace his brother in Congress when he became Secretary of Agriculture. On February 20, 1998, the trial court set aside the verdict against Douglas finding that venue in the Northern District of California was improper. On March 16, 1998, Douglas pleaded guilty to one count of making false statements to government agents by falsely denying that he gave gratuities to Secretary Espy, when in fact he gave a total of approximately $17,000 in illegal gratuities, and claiming that he supplied Secretary Espy with tickets to a National Basketball Association playoff game, when in fact he knew that Espy obtained the tickets from a Chicago corporation regulated by USDA. The plea to one false statement count included $7,000 in illegal campaign contributions that were not part of Sun-Land’s guilty plea today. On July 27, 1998, the trial court sentenced Douglas to 18 months probation, a $3000 fine, a $100 special assessment and 100 hours of community service.

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