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Tyson settles lawsuit over Nebraska insurance policy
KEVIN O'HANLON
Associated Press
Jul. 13, 2005
LINCOLN, Neb. - Tyson Fresh Meats Inc. has settled a lawsuit that demanded that an insurance policy bought in Nebraska help cover millions of dollars lost due to alleged fraud committed by former executives at a subsidiary.
The 2003 lawsuit filed in U.S. District Court stemmed from the 2001 purchase by Tyson Foods of IBP Inc., based in Dakota Dunes, S.D.
IBP is now called Tyson Fresh Meats and is a subsidiary of Tyson Foods, the world's largest meat producer.
The lawsuit said Federal Insurance Co. sold IBP a $5 million insurance policy to cover losses caused by employee theft but refused to pay for money lost because of the fraud.
The alleged fraud occurred at IBP subsidiary DFG Foods, a Chicago-based maker of frozen hors d'oeuvres and appetizers, and was discovered just before Tyson bought IBP.
The lawsuit alleged that Andrew J. Zahn, the former owner of the companies that came to be operated by IBP as Andrew J. Zahn Foods, and two other DFG employees, Philip Sexauer and Cindy Berryman, manipulated the company's books.
That, in turn, caused Tyson "to make payments to Zahn, Sexauer, Berryman and others" of at least $7.8 million to which they were not entitled.
John Winsbro, the lead attorney for Tyson, declined to comment on the settlement.
Brian Nolan and Gretchen Harvey, who represented the insurance company, were not in their office Wednesday and could not be reached to comment.
Tyson called off its planned purchase of IBP on March 29, 2001, 10 days after IBP reported the potential fraud at DFG.
IBP sued to force Tyson to complete its $4.7 billion purchase of the company, which included taking on $1.5 billion in IBP debt.
Then-Tyson CFO Steven Hankins testified in that case that he and Chairman John H. Tyson knew that there were "red flags" about DFG before offering to buy IBP.
A court later ruled that Tyson had to go through with the deal.
A Securities and Exchange Commission review required to get approval for a merger between IBP and Tyson also found financial trouble.
In August 2001, IBP filed a lawsuit in Chicago accusing Zahn and other former DFG executives of cheating IBP out of more than $50 million by manipulating financial records and embezzling money.
It also alleges Zahn and others lied about the financial statements to cover up the fraud.
That lawsuit is pending.
The SEC also initiated an action against Zahn, Sexauer and Berryman, which also is pending.
IBP bought DFG in 1998.
Zahn served as chief executive officer of DFG under IBP's ownership and was an officer of IBP's Foodbrands America, Inc. subsidiary.
Saveur Food Group LLC of New York has since purchased DFG from Tyson.
KEVIN O'HANLON
Associated Press
Jul. 13, 2005
LINCOLN, Neb. - Tyson Fresh Meats Inc. has settled a lawsuit that demanded that an insurance policy bought in Nebraska help cover millions of dollars lost due to alleged fraud committed by former executives at a subsidiary.
The 2003 lawsuit filed in U.S. District Court stemmed from the 2001 purchase by Tyson Foods of IBP Inc., based in Dakota Dunes, S.D.
IBP is now called Tyson Fresh Meats and is a subsidiary of Tyson Foods, the world's largest meat producer.
The lawsuit said Federal Insurance Co. sold IBP a $5 million insurance policy to cover losses caused by employee theft but refused to pay for money lost because of the fraud.
The alleged fraud occurred at IBP subsidiary DFG Foods, a Chicago-based maker of frozen hors d'oeuvres and appetizers, and was discovered just before Tyson bought IBP.
The lawsuit alleged that Andrew J. Zahn, the former owner of the companies that came to be operated by IBP as Andrew J. Zahn Foods, and two other DFG employees, Philip Sexauer and Cindy Berryman, manipulated the company's books.
That, in turn, caused Tyson "to make payments to Zahn, Sexauer, Berryman and others" of at least $7.8 million to which they were not entitled.
John Winsbro, the lead attorney for Tyson, declined to comment on the settlement.
Brian Nolan and Gretchen Harvey, who represented the insurance company, were not in their office Wednesday and could not be reached to comment.
Tyson called off its planned purchase of IBP on March 29, 2001, 10 days after IBP reported the potential fraud at DFG.
IBP sued to force Tyson to complete its $4.7 billion purchase of the company, which included taking on $1.5 billion in IBP debt.
Then-Tyson CFO Steven Hankins testified in that case that he and Chairman John H. Tyson knew that there were "red flags" about DFG before offering to buy IBP.
A court later ruled that Tyson had to go through with the deal.
A Securities and Exchange Commission review required to get approval for a merger between IBP and Tyson also found financial trouble.
In August 2001, IBP filed a lawsuit in Chicago accusing Zahn and other former DFG executives of cheating IBP out of more than $50 million by manipulating financial records and embezzling money.
It also alleges Zahn and others lied about the financial statements to cover up the fraud.
That lawsuit is pending.
The SEC also initiated an action against Zahn, Sexauer and Berryman, which also is pending.
IBP bought DFG in 1998.
Zahn served as chief executive officer of DFG under IBP's ownership and was an officer of IBP's Foodbrands America, Inc. subsidiary.
Saveur Food Group LLC of New York has since purchased DFG from Tyson.