June 17, 1988, Friday, CITY EDITION; BUSINESS; Pg. 47
By Al Gordon
Saying they had perpetrated a
consumer fraud too “extraordinary” and too “extensive” to be punished
lightly, a federal judge yesterday sentenced two former Beech-Nut Nutrition
Corp. executives to a year and a day in prison for their role in the company’s
sale of bogus apple juice.
U.S. District Judge Thomas Platt
also ordered Neils Hoyvald, 54, Beech-Nut’s former president, and John Lavery,
56, former vice president for operations, to pay fines of $ 100,000 each and the
costs of the government’s prosecution.
The two had been convicted of
violating food and drug laws in connection with Beech-Nut’s sale of
purportedly “100 percent” apple juice for babies that actually was a
concoction of water, sugar, artificial flavor and other chemicals.
An occasional smile crossed
Hoyvald’s face as he sat through the proceedings in the federal courthouse in
Brooklyn. Lavery looked grim throughout.
Hoyvald, speaking with a slight
Scandinavian accent, said to Platt: “Please don’t send me to jail. Please
give me a small chance to make a life again.” His lawyer, Brendan V. Sullivan
Jr. of Washington, D.C., had asked that Hoyvald receive probation and an order
to perform community service.
Lavery, who was sentenced
separately after Hoyvald, made no plea to the judge, saying, “I cannot add
anything” to the arguments of his lawyer, Steven Kimelman of Manhattan, who
had proposed house detention and community service instead of prison.
But Platt said the defendants had
engaged in a fraud that was “pretty extraordinary.”
“The fraud was too extensive and
too involved to go completely unpunished,” the judge said. He said he had
spent two or three months thinking about a sentence and had concluded he had
“no alternative” other than imposing the year-and-a-day prison terms.
Hoyvald had been convicted of 359
counts of violating federal food and drug laws, and Lavery of 448 counts of
conspiracy, mail fraud, and food and drug law violations. Prosecutors charged
that not only had Beech-Nut knowingly sold a bogus product, but when federal and
New York State investigators learned of the deception, the executives engaged in
a cover-up while they sold off the remaining stockpiles.
Beech-Nut pleaded guilty in
November to food and drug violations and paid a $ 2.1-million fine.
The lawyers for Hoyvald and Lavery
said they would appeal the case. Platt allowed the two defendants to remain free
on bond - $ 1 million for Hoyvald, $ 500,000 for Lavery. U.S. Attorney Andrew J.
Maloney said that if the convictions and sentence are upheld, the two would have
to serve at least 4 months in prison before they would be eligible for parole.
Neither defendant had any comment
as they made their way through a gauntlet of reporters at the courthouse.
Kimelman also had no comment, while Sullivan, best known as the voluble defender
of Oliver North, said only, “There are some significant issues for appeal.”
He did not elaborate.
A Beech-Nut spokesman, Tim
Wallace, said the company will not pay the defendants’ fines. The two have
been on paid leave since they were indicted in 1986, and Beech-Nut has paid
their legal bills, which are in the millions of dollars by some estimates.
However, Wallace said, the company’s commitment was to pay for the defense
“until the process was completed,” and Beech-Nut is now considering whether
to continue the arrangement through any appeals.
Wallace would not disclose the
defendants’ salaries or legal bills. During the trial, it was disclosed that
Hoyvald was paid $ 120,000 annually during the early 1980s, when the bogus juice
sales were taking place.
Maloney said he was “pleased
with the results of the case,” including the length of the sentences. The
prosecution had asked Platt to impose “a substantial prison term.”
“We’re not talking about the
Mafia here or a bunch of bank robbers,” Maloney said. The former executives’
jail terms mean that “a message has been sent out to corporate America that
these cases will get the highest priority.”
Assistant U.S. Attorney Thomas
Roche, the lead prosecutor, said of Platt’s decision to impose the same
sentence on both defendants, “Both earned their respective sentences for
different reasons.”
Lavery had been convicted of the
more serious conspiracy and mail fraud counts, on which the jury deadlocked
regarding Hoyvald. But in his sentencing remarks, Platt noted that Lavery was
only “Number Two” in the company while Hoyvald was the boss.
Roche said the government’s
costs to be borne by the defendants would be in the “tens of thousands” of
dollars.
In his arguments to the judge,
Sullivan said Hoyvald was “a good and decent man” who was already suffering
“a life sentence” because of disgrace, publicity and loss of his job.
“Imprisonment would result in a crushing blow” to Hoyvald, Sullivan said.
Urging leniency for Lavery,
Kimelman maintained that stripped of government “hype,” the case amounted to
“selling apple juice that was really apple drink” and was not serious enough
to warrant prison.
But Roche argued that the two had
gone beyond the notion of “let the buyer beware” to create the “new
concept of ‘let the buyer be damned,’ “ and were guilty of “deliberate,
premeditated crimes.” Roche said executives who might contemplate taking a
shortcut around the law must “think about what might happen to them if they
are caught.”
Copyright 1988, Newsday Inc.