Man Admits Guilt in Food Kickback Scheme

The former owner of a meat distribution company pleaded guilty Monday to mail fraud for overcharging restaurant owners and using part of the money to pay kickbacks to their chefs and purchasing agents.

Michael Silver, 60, of Los Angeles paid cash kickbacks from January 1997 to 2000, often mailing the money to the purchasing agents’ homes, according to court documents. He covered the kickbacks by inflating invoice prices or delivering less food than ordered.

Authorities were able to document millions of dollars in kickbacks, which were based on the amount of food ordered. Silver’s M&M; Foods supplied beef, poultry and seafood to restaurants, country clubs, hospitals and assisted living facilities in California, Hawaii and Nevada. Most restaurant owners were unaware of the scheme, according to prosecutors.

“If there was a salesperson employed by Mr. Silver, the difference between the normal price and inflated price was split three ways between the salesperson, Mr. Silver and the purchasing agent,” said Assistant U.S. Atty. Stephanie Yonekura McCaffrey.

McCaffrey declined to identify the restaurants caught up in the scheme, citing an ongoing investigation. Silver, however, was named in a related suit filed in 2001 by the owner of the Reel Inn restaurants in Malibu and Santa Monica.

Silver pleaded guilty to three counts of mail fraud and two counts of tax evasion before U.S. District Judge Robert M. Takasugi. The tax evasion charges stem from Silver’s illegal deductions of more than $10 million in kickbacks as business expenses on his 1998 and 1999 federal income tax returns and failing to pay more than $5.5 million in taxes.

Silver faces up to 70 years in federal prison when he is sentenced Feb. 7.

“Mr. Silver pleaded guilty for the things he did wrong when he was running his business,” said Stanley Greenberg, Silver’s attorney. “He’s done so in a very responsible way that has saved the jobs of dozens of employees, and the government has been gracious in allowing him to do that.”

Greenberg said Silver had paid more than $1.5 million in restitution and had since sold M&M; Foods, which Greenberg described as the parent company of American Distributors, California Food Distributing, General Provisions, Quality Foods, United Seafoods and Universal Foods.