Sara Lee Disputes Boycott Charges That Could Lead to $2 Million in Fines

The Chicago based Sara Lee Corporation is calling “misleading and grossly exaggerated” Commerce Department charges that it violated anti-boycott provisions of the Export Administration Act.

The 10-year-old act prohibits American firms from cooperating with foreign boycotts that are directed at countries friendly to the United States. Most Arab countries boycott Israeli goods and services and maintain a blacklist of countries and persons doing business with Israel.

Sara Lee has not been charged with boycotting Israel or Israeli firms. However, the Commerce Department “believes that in providing information about its business ties, Sara Lee was furthering the Arab boycott of Israel in a manner prohibited by Congress,” according to Donald Creed, a Commerce Department spokesman.

According to a charging letter issued Nov. 19, the commerce Department’s Office of Anti-boycott Compliance (OAC) alleges that Sara Lee provided 235 items of boycott-related information in connection with a 1982 application to register the corporation’s L’eggs trademark in Kuwait and other Arab countries.

The department also alleges that the company provided information about its subsidiaries’ relationships with Israel, or with companies blacklisted because of their relationship with Israel.

FINES COULD TOTAL $2.35 MILLION

Sanctions of up to $10,000 per violation — a potential penalty of up to $2.35 million — could be assessed against Sara Lee and its export privileges could be denied if the company is found to have breached the law.

The largest penalty in the history of the Export Administration Act was $381,000, imposed in August against NCR Corporation for 266 alleged violations.

But fines totaling $4 million are pending against the Oakland-based Safeway supermarket chain, which was charged in July with 449 violations of the anti-boycott law, in connection with its operation of supermarket chains in Saudi Arabia and Kuwait. That case is currently before a Commerce Department administrative law judge.

According to Gordon Newman, Sara Lee senior vice president and general counsel, Sara Lee is charged with violating “complex and highly technical” anti-boycott regulations when it transmitted four documents to the Kuwaiti and other Arab officials.

Of the 235 alleged violations, said Newman, 229 are based on only two documents in which Sara Lee listed the names and nationalities of 39 corporate officers or board members and the names of its 190 subsidiaries.

The information, said Newman, is a matter of public record and is supplied routinely in the company’s annual reports and other filings.

OAC CALCULATION ‘OUTRAGEOUS’

“The OAC’s method of calculating the number of violations is outrageous,” said Newman.

Sara Lee, which manufactures and markets food and consumer products internationally, was founded in 1939 by the late Nathan Cummings, who was Jewish and after whom a planned addition to the Israel Museum in Jerusalem will be named, according to information provided by Sara Lee.

The corporation has a longstanding agreement with an Israeli firm to manufacture knitwear products for sale in the United States. As a result, Sara Lee has been banned by the Arab League from any business dealings in the Arab countries, according to Newman.

In May, Sara Lee was notified by telephone that the OAC had uncovered violations from 1982, said Newman. According to Creed, a charging letter was issued when attempts to reach a settlement “came to a standstill.”

The company has until Dec. 20 to respond to the charges, when the case will be referred to a Commerce Department administrative law judge.

Newman called “not realistic” any attempt on Sara Lee’s part to have the charges completely dismissed. Instead, said Newman, the company will ask for a substantial reduction of the charges and the size of the penalty.

Between 1980 and 1986, the OAC investigated 1,839 cases of alleged anti-boycott violations, 265 of which resulted in settlements. Charging letters were issued against 25 companies.

According to Will Maslow, general counsel of the American Jewish Congress and editor of its Boycott Report, charges against Sara Lee and other companies in recent months indicate that the OAC is “going after serious violations.”

“These are not technicalities,” said Mallow, who had not yet seen a copy of the charging letter against Sara Lee. “They show the office is serious about the law and enforcing it to the hilt.”