WASHINGTON -- The government Friday accused Safeway Stores Inc. of 449 separate civil violations of American laws against taking part in an Arab boycott of companies that do business with Israel.
The complaint said that Safeway, one of the nation's largest food chains with 1,719 stores across the country and 114 in the Washington area, took part in the boycott by not buying products from blacklisted companies for three stores licensed to use its name in Saudi Arabia and Kuwait.
William V. Skidmore, director of Commerce's antiboycott office, said Safeway officials acted on orders from the Arab owners of the supermarkets.
The company faces fines that could go as high as $10,000 for each violation if a Commerce Department administrative law judge upholds the charges. If all the charges are proven, the fines could total almost $4.5 million, which is more than 10 times greater than the largest penalty ever imposed in the 10-year history of the Commerce Department's Office of Antiboycott Compliance, which enforces the law. Department officials said most cases end in a settlement.
Felicia del Campo, a Safeway spokesperson, called the complaint "preposterous," and added, "We will vigorously defend ourselves against these charges because we have done everything possible to comply with the U.S. anti-boycott law."
She said Safeway does not own or operate the two stores in Saudi Arabia and one in Kuwait listed in the complaint. "We have one employe in the Middle East" where Safeway has "technical agreements with a number of native firms" -- the owners of the Saudi and Kuwaiti stores plus two others in the United Arab Emirates were not mentioned in the complaint.
Skidmore said his office's investigation showed that "Safeway had an operation in which it provided management consulting services. It also licensed the use of its name and provided goods."
The Arab world has tried to enforce a boycott against companies that do business with Israel in an attempt to isolate the Jewish state and undermine its economy. The 10-year-old American law bans U.S. companies from joining in the boycott and from providing any information to representatives of the arab boycott committee about their business dealing in Israel.
Skidmore said a search of Safeway's records found the violations occured over the past five years and added that as far as the government knows they are still going on. "We have records of Safeway violating the anti-boycott laws in a variety of ways," Skidmore said.
Specifically, he said Safeway officials in this country and in the Middle East refused in 141 instances to buy products from suppliers that were put on the Arab boycott blacklist because they either did business with Israel or with other companies that did business with Israel. In another 173 instances, Safeway required other suppliers not to do business with firms on the blacklist. And in 137 other cases the supermarket chain told officials of the Arab Boycott Office in Kuwait about other businesses dealings with firms on the blacklist.
In a letter to Safeway detailing the complaint, the government said the supermarket chain "agreed to refuse to do business with potential suppliers of products by submitting the names of these suppliers to the Saudi stores for boycott clearance before entering into any contract" with the suppliers.
Safeway responded with a sharply worded statement issued late Friday from its Oakland, Calif., headquarters that denied as "completely false" that it has refused to do business with Israel, a charge that is not part of the government complaint, and added:
"All Safeway did was to provide to our customers in the Middle East, at their request, the names of manufacturers of products we were offering to sell to them .... Our Middle East customers made their own selection of the products they wished to purchase."
Commerce anti-boycott officials said supplying manufacturers' names consistituted a violation of U.S. law because it allowed the Arab owners to compare them with companies on the boycott list.
Safeway, though, asserted that, "To claim that the supplying of manufacturer information under these circumstances constituted an 'agreement' is absurd."
The company acknowledged that it answered a number of questions posed by the Kuwait government in 1983 when it "attempted to establish its presence in that country to provide technical assistance on the opening of a supermarket."
But it said it "recognized the sensitive nature of these questions" and hired a top U.S. law firm with offices in the Mideast "to assist the company in navigating the minefield of complex regulation that apply in such situations.
"Every step that Safeway took in responding to the Kuwait questionaire was under the guidance and direction of this outside law firm."
The company said Commerce officials blew up 29 answers to a total of 124 violations.