The Beech-Nut Apple Juice Scandal

Then, approximately four years later, a relic of the old company was spun off and run by a private group led by Frank C. Nicholas. This new company sold only baby food and found itself in a highly competitive market dominated by the Gerber Corporation. Beech-Nut sought to market its line as the natural baby food, but would ultimately cave to pressures to reduce costs. In an effort to save money the Beech-Nut Corporation switched to a new juice concentrate supplier, who provided a less expensive apple juice concentrate. The new supplier would eventually become known as Universal Juice. The disproportion between Beech-Nut’s 1977 manufacturing budget of over $50 million a year and the meager $250,000 saved per year due to the decision to switch suppliers may seem extreme, but the repercussions that followed this executive decision would serve as a major turning point in the world of white-collar crime.

In the same time period that Beech-Nut was making their cost effective decisions, a series of accusations would arise concerning adulteration processes taking place within the apple juice concentrate business. Consequently, in 1982 an investigation by the Processed Apples Institute revealed that a company called Food Complex had omitted apples from its product altogether. Food Complex served as Universal Juice’s manufacturing arm. It was also discovered that Food Complex was primarily supplying the Beech-Nut Corporation. The primary investigator, Andrew Rosenzweig, a former New York City narcotics detective and future chief investigator for the Manhattan District Attorney’s office, would eventually follow a truck of sugar water from the Food Complex facility to the Beech-Nut facility in Canajoharie, New York. Rosenzweig confronted executives at Beech-Nut about using suspect concentrate in their apple juice. Rosenzweig’s secret tape recordings of this confrontation ultimately proved to be key evidence against Beech-Nut executives. The recordings revealed John F. Lavery, Beech-Nut’s vice president of operations and manager of the plant in Canajoharie, and two other Beech-Nut executives making rationalizations as to why they were using the concentrate and ultimately stating that they had made their last purchase from Universal  . Even if Beech-Nut had received its last shipment from Universal, Niels Hoyvald, Beech-Nut’s president, made the decision to continue selling the tainted product. Moreover, Hoyvald intentionally chose to market the product aggressively. Then on July 29, 1982, the U.S. Food and Drug Administration (FDA) notified Beech-Nut that samples taken from supermarket shelves had been found to be adulterated. In August 1982 the New York State Department of Agriculture and Markets came to the same conclusions as the FDA. Fearing that their product was about to be seized by authorities, the executives at the Canajoharie plant moved the entire inventory (26,000 cases) of tainted juice to a warehouse in Secaucus, New Jersey, which fell outside the state of New York’s jurisdiction  . In September 1982 Hoyvald orchestrated the shipment to and eventual sale of 26,000 cases in the Caribbean  . Approximately 23,000 cases had been trucked from the company’s San Jose, California, plant to Galveston, Texas. In Galveston the cases were loaded on ships and shipped to the Dominican Republic and subsequently sold at a 50 percent discount  . The sale of the appleless apple juice product earned the Beech-Nut Corporation approximately $60 million over a ten-year period  .