Greenvale and Sainsbury's in corruption probe

Sainsbury’s, the supermarket group, was this weekend embroiled in a £3m bribes investigation after one of its most senior buyers was arrested on suspicion of accepting backhanders from a potato supplier.

John Maylam, who has worked for the supermarket for more than a decade, was arrested last week over receiving irregular payments from Greenvale, which supplies nearly half of the chain’s potatoes.

City of London police said two people had been arrested on suspicion of corruption and money laundering. Residential and business premises have been searched in Shropshire and Cambridgeshire.

A Sainsbury’s source said: “We are the victims of an alleged crime and take it very seriously.

None of the payments went through our system and we believe this was limited to the one supplier.”

Maylam has for years been one of the supermarket’s most respected buyers. He is regularly used as an expert commentator by the company and has been quoted in the media talking about Jamie Oliver’s positive impact on vegetable sales.

Britain’s £1 billion potato market is described as “cutthroat” and there is said to be overcapacity in the processing and packing plants that supply the supermarkets.

“There are only about 10 main players but they are chasing too little business,” said one industry source. “They can’t afford to lose supermarket business.”

The allegations once again put the spotlight on the supermarkets’ dealings with suppliers. The supermarkets have been repeatedly accused of putting farmers out of business by driving down prices and making unfair demands. If the allegations of bribes are proven, it will raise questions over whether there have been any other illegal payments made or offered by supermarket suppliers.

James Lowman, chief executive of the Association of Convenience Stores, said: “We don’t know if this is a one-off or the tip of the iceberg but supermarkets’ relationships with their suppliers should now be opened up. There are kickbacks all through the process which are considered lawful.” Sainsbury’s said it was not aware of any previous allegations about possible illegal payments.

Greenvale, which also supplies Tesco, has potato packing operations in Shropshire, Cambridgeshire and the Scottish borders. Its turnover was £139.7m in 2005-6, but it lost £4.2m. The company, which has received the Queen’s award for innovation, is understood to supply about 45% of Sainsbury’s potatoes. The irregular payments – believed to be up to £3m – are understood to have been discovered by Produce Investments, Greenvale’s parent company.

Sainsbury’s was alerted and Maylam and David Baxter, Greenvale’s operations director, were arrested on Thursday and then released on bail.

Sainsbury’s said it had rigorous rules for its buyers and had referred the matter to police. Produce Investments said it had brought the matter to the attention of Sainsbury’s.

Source: Sunday Times