Plaintiff, the United States of America, by and through its undersigned attorneys, and
for its complaint alleges that:
- This matter involves defendant ROBERT MONDAVI CORPORATIONs ("MONDAVI")
gift of wine and entertainment to or for the benefit of former Secretary of Agriculture
Alphonso Michael Espy ("Espy") when there were matters of concern to defendant
MONDAVI pending before or in the jurisdiction of Secretary Espy. On October 29, 1993,
Secretary Espy visited defendant's winery in the California Napa Valley. In advance of and
during the visit to the winery, Richard Douglas ("Douglas"), then Senior Vice
President for Corporate Affairs for Sun-Diamond Growers of California and an advisor to
Secretary Espy, solicited wine from defendant MONDAVI in the name of and for the benefit
of Secretary Espy. During Secretary Espy's visit to the winery, representatives of
defendant MONDAVI discussed with Secretary Espy the following issues within the
jurisdiction of the United States Department of Agriculture ("USDA"): (1)
research funding to combat Phylloxera, a root stock pest that was devastating Mondavi and
other Napa Valley vineyards, (2) including the health benefits of moderate wine
consumption in the USDA-HHS Dietary Guidelines for Americans, (3) obtaining and using USDA
Market Promotion Program funds (4) trade issues related to the General Agreement on
Tariffs and Trade ("GATT") and the North American Free Trade Agreement
("NAFTA"), and (5) consolidation and/or elimination of the local USDA Soil
Conservation Service office. Prior to the conclusion of Secretary Espy's visit to the
winery, defendant MONDAVI, at the request and direction of Douglas, gave six bottles of
wine valued at $187 to or for the benefit of Secretary Espy.
- On March 8, 1994, Secretary Espy and his girlfriend attended a dinner hosted and paid
for by defendant MONDAVI at Kinkead's restaurant in Washington, D.C. During the dinner,
representatives of defendant MONDAVI discussed with Secretary Espy the following issues
within the jurisdiction of the USDA: (1) including the health benefits of moderate
wine consumption in the Dietary Guidelines for Americans, and (2) the creation of federal
marketing orders for wine grapes. The value of the dinner given to and for the benefit of
Secretary Espy, including the dinner for Secretary Espy's girlfriend, was $207.
- Defendant MONDAVI gave and Secretary Espy directly or indirectly received a total of
$394 in 1993 and 1994, or benefits therefrom. Defendant MONDAVI's participation in and
procuring of a violation of Secretary Espys fiduciary duty to the United States and
interference with his agency relationship with the USDA and the Executive Branch damaged
the United States.
JURISDICTION AND VENUE
- This Court has jurisdiction over this matter under 18 U.S.C. § 216 and 28 U.S.C. §§
1331 and 1345.
- Venue in the District of Columbia is appropriate under 28 U.S.C. §§ 1391 and
- The Plaintiff in this action is the United States of America.
- At all times material to this civil action:
- Defendant ROBERT MONDAVI CORPORATION ("MONDAVI") made and sold premium table
wines from its principal offices in Oakville, California, located in the Napa Valley.
Defendant MONDAVI also sold wine pursuant to importing and marketing agreements. Defendant
MONDAVI was a publicly held company with common stock traded on the National Association
of Securities Dealers National Market System.
- Defendant MONDAVI considered important maintaining a close relationship with senior
federal, state and local government officials. Herbert A. Schmidt ("Schmidt")
was the Vice President of Government Relations and Community Relations for defendant
MONDAVI and was responsible for the company's lobbying activities.
- Following his nomination by the President of the United States and his confirmation by
the United States Senate, Alphonso Michael Espy served as Secretary of Agriculture from
January 22, 1993, until the effective date of his resignation therefrom on December 31,
1994. Secretary Espy performed the duties of his office related to the allegations in this
Complaint in the District of Columbia, the Northern District of California and elsewhere.
- The USDA was an agency and department of the United States of America. The Secretary of
Agriculture was in charge of the USDA. Within the jurisdiction of the USDA were the
- Funding of viticulture research: The USDA provides funding to various universities in
California, including the University California at Davis, for research concerning wine.
Defendant MONDAVI, along with other wineries and growers, sought the commitment of
additional research funds to combat the spread of phylloxera, a pest that was devastating
Mondavi and other vineyards in California.
- Market Promotion Program ("MPP"): Under the Market Promotion Program, commonly
referred to as MPP, the USDA provided government funds to certain trade organizations,
which in turn would provide funding to private companies. The money was available to
advertise American products in foreign countries. The Secretary of Agriculture would
approve the award of money to each trade organization, which he believed would
significantly contribute to United States export market development. Management of
defendant MONDAVI believed that MPP funds should be spent predominantly on generic
advertising and promotion to increase foreign sales of wine produced in the United States.
Management of defendant MONDAVI also advocated a general reduction in the amount of MPP
funds authorized for "brand marketing," advertising by specific wine brands.
Through the Wine Institute, which received MPP funds from the USDA in 1993 totaling
$11,680,000 and in 1994 totaling $4,950,000, defendant MONDAVI received MPP funds in the
- For calendar year 1993, $79,295, and
- For calendar year 1994, $70,295.
- Dietary Guidelines for Americans: Pursuant to statute, every five years the Department
of Agriculture and the Department of Health and Human Services ("HHS") jointly
promulgate the Dietary Guidelines for Americans. The 1990 version of the Dietary
Guidelines dissuaded any alcohol consumption. However, with the results of studies in the
early 1990s finding health benefits for moderate wine consumption, defendant MONDAVI and
others wanted this fact included in the Dietary Guidelines. Defendant MONDAVI did not
submit written comments to the joint USDA-HHS committee responsible for the Guidelines,
but made informal comments during meetings to members of Congress and the Administration,
including Secretary Espy.
- International Trade issues: In or about late 1993, the Clinton Administration worked to
pass NAFTA to create a free-trade bloc for North American countries. Defendant MONDAVI
believed that passage of NAFTA would be beneficial to the state of California, including
its wine industry.
- Soil Conservation Service: In the opinion of defendant MONDAVI, the Soil Conservation
Service ("SCS") conducted an effective program to deal with soil erosion. In or
about late 1993, the USDA was considering, and defendant MONDAVI opposed, cutting funding
of the program. In particular, USDA was considering closing the SCS office closest to
Mondavi. Mondavi sought Espys help in preventing the closure.
- Federal Marketing Orders: The USDA collects money from private sources and disburses it
through a trust fund to promote marketing of particular agricultural products to specific
geographic areas. Although the wine industry never before had federal marketing orders
because of a lack of industry unity to create the program, defendant MONDAVI sought
information and guidance from Secretary Espy concerning them. Although defendant MONDAVI
did not apply for them, defendant MONDAVI advocated that the wine industry should
understand and consider the use of federal marketing orders for wine grapes.
- As an official of the United States and employee of the Executive Branch, Secretary Espy
owed a duty of loyalty to the United States of America and its citizens, upon which the
Government and the people relied for an impartial decision-making process. The duty of
loyalty included the obligation to perform his job as Secretary free from, among other
things, the receipt of gratuities and conflicts of interest.
- In part, and among other things, Secretary Espy was required by law to adhere to the
Standards of Ethical Conduct for Employees of the Executive Branch, 5 C.F.R. § 2635,
which were promulgated, in part, under the statutory authority of the President of the
United States. In part, the Standards of Ethical Conduct provided that:
- "Public service is a public trust. Each employee has a responsibility to the United
States Government and its citizens to place loyalty to the institution, laws and
principles above private gain...." 5 C.F.R. §2635.101(a).
- "[A]n employee shall not, directly or indirectly, solicit or accept a gift (1) From
a prohibited source; or (2) Given because of the employees official
position...."5 C.F.R. § 2635.202.
- A "prohibited source," as defined in 5 C.F.R. § 2635.203, includes:
Any person who: (1) Is seeking official action by the employees agency; (2) Does
business or seeks to do business with the employees agency; (3) Conducts activities
regulated by the employees agency; (4) Has interests that may be substantially
affected by performance or nonperformance of the employees official duties.
- Under the Standards of Ethical Conduct, defendant MONDAVI and its officers and
employees, were prohibited sources.
- The gratuity provision of federal criminal law, Title 18, United States Code §
201(c)(1)(A) prohibited a person or entity from directly or indirectly giving anything of
value to a public official for or because of any official act performed or to be
performed. Title 18, United States Code § 201 (c)(1)(B) prohibited a public official from
directly or indirectly receiving or accepting anything of value personally for or because
of any official act performed or to be performed.
- Title 18, United States Code, § 209(a) prohibited a corporation from supplementing the
salary of an employee of the United States under circumstances which would make its
receipt by the employee compensation for his services as an officer or employee of the
- Title 5, United States Code, § 7353(a) prohibited an employee of the executive branch
solicit[ing] or accept[ing] anything of value from a person--
(1) seeking official action from, doing business with, or (in the case of executive
branch officers and employees) conducting activities regulated by, the individuals
employing entity; or
(2) whose interests may be substantially affected by the performance or nonperformance
of the individuals official duties.
- On or before October 5, 1993, Richard Douglas ("Douglas"), then Senior Vice
President for Corporate Affairs for Sun-Diamond Growers of California and a personal
friend of and advisor to Secretary Espy, telephoned Schmidt at defendant MONDAVI and asked
if it would be possible for Secretary Espy to visit the defendant MONDAVIs winery in
the Napa Valley in California on or about October 29, 1993. Douglas told Schmidt, in
substance, that Secretary Espy would be traveling to San Francisco, California to deliver
a speech and that Douglas wanted Secretary Espy to come to Napa for broader industry
- On a date uncertain after October 5, 1993 and before October 29, 1993, Schmidt
telephoned Douglas and told Douglas that senior officials of defendant MONDAVI and other
interested Napa Valley vintners would be available to meet with Secretary Espy on October
- On a date uncertain after October 5, 1993 and before October 29, 1993, during another
telephone call, Douglas told Schmidt that Secretary Espy and his girlfriend as well as
Douglas would be in the San Francisco Bay Area for the weekend to celebrate a
private event. During the telephone call, Douglas asked Schmidt, in substance, whether he
could pick up "some wine" from defendant MONDAVI for Espys group. Schmidt
agreed, knowing that Secretary Espy would be one of the recipients of the wine and that it
was unlawful for Mondavi to give things of value to Executive Branch officials.
- On or about October 29, 1993, Secretary Espy visited defendant MONDAVIs winery in
Oakville, California. Representatives of defendant MONDAVI met with Secretary Espy and
discussed the following matters of concern to defendant MONDAVI which were pending before
Secretary Espy and regarding which the company hoped Secretary Espy would act favorably --
(1) Phylloxera, specifically describing the effect of the pest and requesting an
increase in research funding from the USDA; (2) MPP; (3) Trade, specifically NAFTA; (4)
Health and moderate wine consumption; and (5) the Soil Conservation Service,
specifically concerns about cuts in funding.
- Following the meeting at defendant MONDAVIs winery, a representative of the
company gave a tour to Secretary Espy and Douglas to show them the damage to the vineyards
caused by phylloxera. Between the meeting and the tour of the vineyards, Douglas asked
Schmidt, in substance, "do you have the wine for the Secretary?" Schmidt told
Douglas, in substance, that the wine would not be a problem.
- On or about October 29, 1993, in comments to the press at Mondavi, Espy expressed the
With respect to research funds to combat Phylloxera:
"We will move federal agricultural research funds to the front burner to
help the wine industry deal with the problem."
"Weve got money for research. We can do more than we have been doing
and I commit to you we will."
With respect to NAFTA:
"[NAFTA is] a win, win, win situation for U.S. agriculture and particularly
for California, which is the nations leading agricultural state."
The Press Democrat reported that Espy said he believed NAFTA would get through
Congress, which would result in more wine being sold in the growing Mexican market.
With respect to the Dietary Guidelines, the St. Helena Star reported that Espy
"vowed to get the department moving on the wine-health issue."
- Following the tour of the vineyards, Secretary Espy attended a reception at the Vichon
Winery ("Vichon"), another Napa Valley winery owned by defendant MONDAVI. During
a conversation between Douglas, Schmidt and another employee of defendant MONDAVI, Douglas
again brought up the wine. As a result of this conversation, the employee of defendant
MONDAVI went to obtain wine from the winery store. Schmidt told the employee of defendant
MONDAVI, in substance, that the wine was for Secretary Espy.
- On or about October 29, 1993 at approximately 5:43 p.m., the employee of defendant
MONDAVI drew six bottles of premium wine from the companys retail gift shop in
Oakville, California. The employee wrote on the receipt that the purpose of the wine was a
"GIFT FOR FED. AG. SEC." The total retail value of the six bottles of wine was
- On or about October 29, 1993 at approximately 5:50 to 5:55 p.m., the employee of
defendant MONDAVI returned to the Vichon Winery with the six bottles of wine that he had
drawn for Secretary Espy. Upon seeing the employee arrive at the Vichon Winery with the
wine, Schmidt and Douglas escorted the employee to the parking lot. The wine was then
placed, either by Douglas or at the direction of Douglas, into one of the two cars that
were part of Secretary Espys traveling party for and for the benefit of, among
others, Secretary Espy. Douglas advised the Mondavi personnel that Espy could not receive
the wine directly but it would be "OK if it was put in Douglas car" for
- Neither Secretary Espy nor Douglas nor Kearney offered to or did pay for the six bottles
of wine. Defendant MONDAVI did not ask or expect Secretary Espy, Douglas or Kearney to pay
for the wine. When defendant MONDAVI gave the wine to Douglas for delivery to Secretary
Espy, Schmidt knew that giving things of value directly or indirectly to Executive Branch
officials was a violation of federal law.
- On or about October 29, 1993 and at the time that defendant MONDAVI gave the wine to or
for the benefit of Secretary Espy, defendant MONDAVI wanted Secretary Espy to act
favorably with respect to certain concerns or issues pending before Secretary Espy and
within his jurisdiction, including: (1) Additional funds for phylloxera research;
(2) a bill pending before Congress concerning the tax treatment of damaged crops;
(3) not reducing funding to the Soil Conservation Service; (4) support for NAFTA and
GATT; and (5) the MPP program.
- On or about November 1, 1993, Schmidt issued a memorandum to senior officials of
defendant MONDAVI that provided, in part:
"[W]e have embarked on a program of inviting cabinet secretaries to visit Napa
during the next 9 months. . . .The first visit took place this past Friday,
October 29. United States Secretary of Agriculture, Mike Espy, visited . . .(the first
visit of a secretary since 1983). During his briefings at [Robert Mondavi Winery,
Secretary Espy] expressed the following feelings:
Health - Clinton administration believes wine in
moderation is good for you! Important since his department is in charge of the nutrition
of the nation.
Market Promotion Programs - Believes they need support but reform
(perhaps should be removed from Wine Institute).
NAFTA - Thanked . . . for our unconditional support and noted it will not
Research Funding - Will make available greater USDA funding for research
into grapevine pests and diseases.
[O]ne thing is clear, we have an unprecedented opportunity to make a difference on
national policy regarding moderate consumption of wine. We must seize the opportunity! It
will not happen again anytime soon. It is an ideal situation for political progress in
terms of wine industry problems."
- On or about January 19, 1994, Schmidt issued a memorandum addressed to senior officials
of defendant MONDAVI that provided, in part:
"This year on the federal level health care reform, welfare reform and regulatory
questions have the potential of affecting us not only as producers of wine but as a small
business. . . .
The key tools in facilitating our strategy are:
. . .
Continue and expand our relationship with key legislators in
both Sacramento and Washington.
Continue to have cabinet level officials to visit [Robert Mondavi Winery] to see our
operation and discuss our concerns]."
On or about March 8, 1994, defendant MONDAVI hosted a dinner in a private room at
Kinkeads Restaurant in Washington, DC to celebrate the second American Wine
Appreciation Week. Among the twelve guests of defendant MONDAVI attending the dinner were
Secretary Espy and his girlfriend. The total cost of the dinner was $1660. The total value
of the dinner to Secretary Espy for himself and his girlfriend was $207. Neither Secretary
Espy nor his girlfriend offered to or did pay for their dinners.
During the dinner of March 8, 1994, a senior official of defendant MONDAVI spoke to
those in attendance, including Secretary Espy, about, among other things, the healthful
effects of wine consumption and the creation of federal market orders for wine grapes.
Both issues were matters pending before or within the jurisdiction of Secretary Espy.
On or about March 18, 1994, Schmidt issued a memorandum to senior officials of defendant
MONDAVI that provided, in part:
On or about March 18, 1994, a senior official of defendant MONDAVI wrote a letter to
Secretary Espy that included the following:
"Our meeting with some of the top officials of our government was very effective.
. . .They were more than pleased to hear our point of view and want to be helpful."
On or about November 14, 1994, Schmidt sent a handwritten note to Secretary Espy that
provided, in part: "I wanted to thank you for my appointment to APAC [(the
Agricultural Policy Advisory Committee on Trade)]. It will be an honor to serve you and
our country." APAC is an international trade committee dealing with agricultural
issues appointed by Secretary Espy and the United States Trade Representative.
"It was an honor to have you join us for dinner last week at Kinkeads. . .
.It was a pleasure to meet [Espys girlfriend]. What a lovely woman.
Please know that you have a standing invitation to visit us in Napa. . . .We do have a
guest house which could be made available to you."
COUNT I (Tort)
- Plaintiff realleges and incorporates by reference paragraphs 1 through 33 as though
fully set forth herein.
- On or about October 29, 1993, defendant MONDAVI, acting through Schmidt, its Vice
President of Government Affairs and Community Affairs, who was acting in response to a
solicitation by Douglas made on behalf of and in the name of Secretary of Agriculture
Espy, did knowingly participate in Secretary of Agriculture Espys breach of his
fiduciary duty owed to the United States and interfered with his agency relationship with
the USDA and the Executive Branch by giving six bottles of wine to him or for his benefit
valued at a total of $187.
- On or about March 8, 1994, defendant MONDAVI, acting through a senior official of the
company and Schmidt, did knowingly participate in Secretary of Agriculture Espys
breach of his fiduciary duty owed to the United States and interfered with his agency
relationship with the USDA and the Executive Branch by giving him, and his girlfriend,
dinner valued at a total $207.
COUNT II (18 U.S.C. §§ 209
- Plaintiff realleges and incorporates by reference paragraphs 1 through 33 as though
fully set forth herein.
- Between October 5, 1993 and October 29, 1993, and again on October 29, 1993, Richard
Douglas solicited wine from defendant MONDAVI for the direct and indirect benefit of
- On or about October 29, 1993, defendant MONDAVI delivered into the custody of Douglas
for the direct and indirect benefit of Secretary Espy six bottles of wine valued at $187.
- On or about March 8, 1994, defendant MONDAVI gave dinner to Secretary Espy and his
girlfriend dinner at a restaurant valued at a total of $207.
- In consequence of the acts set forth in this Count, defendant MONDAVI did supplement the
salary of an officer and employee of the executive branch of the United States Government
as compensation for his services, by providing to Alphonso Michael Espy, the Secretary of
the United States Department of Agriculture, wine valued at $187 and dinner valued at $207
as compensation for his services in giving favorable consideration to matters pending
before the Department of Agriculture concerning (1) funding for research to combat
phylloxera, (2) including the health benefits of moderate wine consumption in the
Dietary Guidelines for Americans, (3) using Market Promotion Program funds, (4) trade
issues related to the GATT and NAFTA, (5) funding of the Soil Conservation Service,
and (6) federal market orders for wine, all in violation of 18 U.S.C. § 209.
PRAYER FOR RELIEF
WHEREFORE, plaintiff, the United States of America, prays that judgment be entered in
its favor against defendant MONDAVI and $50,000 damages be awarded to the plaintiff for
Count I and the maximum civil penalty in the amount of $50,000 be awarded to the plaintiff
for Count II.
DONALD C. SMALTZ
THEODORE S. GREENBERG
Deputy Independent Counsel
JACOB S. FRENKEL
Associate Independent Counsel
Office of Independent Counsel
103 Oronoco Street, Suite 200
Alexandria, VA 22314
Date: July 21, 1998