Sara Lee Settles Boycott Case by Agreeing to Pay $725,000

The Chicagobased Sara Lee corporation has agreed to pay a $725,000 penalty in order to settle charges that it violated U.S. anti-boycott laws.

If approved by a federal administrative law judge, the settlement would be the second largest in the 10-year history of the Export Administration Act. The act prohibits American firms from cooperating with, among other boycotts, the Arab boycott of Israeli goods and services.

The corporation faced a potential penalty of $2.35 million.

The highest penalty, $995,000, was paid earlier this year by the Oakland-based Safeway supermarket chain, in connection with its supply of products to supermarket chains in Saudi Arabia and Kuwait.

Sara Lee was not charged with boycotting Israel or Israeli firms, but with “furthering the boycott” with information it supplied during company efforts in 1982 to register the corporation’s L’Eggs trademark in Kuwait and other Arab countries.

“The penalty was appropriate to the magnitude of the alleged violations and an important symbol of how seriously the department takes its responsibilities under the anti-boycott provisions” of the Export Administration Act, Paul Freedenburg, undersecretary of commerce for export administration said in a statement.

Despite the settlement, Sara Lee maintains that it did not participate in any boycott action against Israel.

“This settlement does not constitute either a determination of guilt or an admission by the company of any violation of the law,” Gordon Newman, senior vice president and general counsel of Sara Lee, said in a statement.

NOT ‘AN ACTION AGAINST ISRAEL’

“If we furnished certain information in an effort to protect our company’s trademark overseas, it certainly was not done as an action against Israel, where we have active and ongoing business relationships,” he said.

According to Newman, Sara Lee and its subsidiaries strongly oppose the Arab boycott, and have been blacklisted by the Arab states for several years.

But according to Will Maslow, general counsel of the American Jewish Congress and editor of its “Boycott Report” newsletter, Sara Lee’s offer of a settlement is the “equivalent of a plea of ‘nolo contendere’ — they’re not willing to contest the charges.

“Companies don’t settle unless there is some indication that they will be punished if they go to a hearing,” he said.

According to Maslow, no company has defeated the Office of Anti-Boycott Compliance, which enforces the Export Administration Act, after it issued charges of anti-boycott violation. He credited the caution with which the office prepares its charges.

According to a charging letter issued Nov. 19, the compliance office alleged that Sara Lee provided 235 items of boycott-related information to Kuwait and other countries. Of the 235 allegations, each subject to a $10,000 fine, 229 were based on two documents, on which Sara Lee listed the names and nationalities of 39 corporate officers or board members and the names of its 190 subsidiaries.

According to Newman, the corporation provided only “already-public information.”

Sara Lee, which manufactures and markets food and consumer products internationally, was founded in 1939 by the late Nathan Cummings, who was Jewish. Also Jewish was Charles Lubin, who founded the corporation’s “Kitchens of Sara Lee” division. Lubin died last month.