Utah food company linked to St. Louis political scandal — special guest star: Montel Williams

(David Carson/St. Louis Post-Dispatch via AP) Businessman John Rallo, left, and his lawyer John Rogers leave federal court in St. Louis, Friday, May 10, 2019. Rallo, accused in a pay-to-play scheme with St. Louis County's former top elected official, pleaded not guilty Friday to three federal bribery charges.

St. Louis • One night in 2014, the owner of a Utah food company went to dinner with former talk show host Montel Williams.

Williams brought someone with him — a St. Louis businessman by the name of John Rallo.

The food company owner, Frank Davis, said in a recent interview that Williams thought Rallo might want to strike a deal to manufacture coconut water powder. Davis found Rallo to be personable and professional.

“I felt he was an honorable, good person,” Davis said.

Rallo eventually would become the CEO of Davis’ company, Food For Health International, which had its headquarters in an industrial neighborhood near Interstate 215 and California Avenue in west Salt Lake City.

Rallo, 53, and his Utah connections were discussed earlier this month in separate legal documents. First, a federal grand jury in St. Louis indicted Rallo for bribery in a scandal that has already evoked a guilty plea from one of the city’s top Democrats.

(Robert Cohen | St. Louis Post-Dispatch via AP file photo) St. Louis County Executive Steve Stenger, center, and his lawyer Scott Rosenblum, leave federal court Monday, April 29, 2019, in St. Louis, after entering a not-guilty plea on corruption charges following his indictment.

Then the Missouri secretary of state sent Rallo a cease-and-desist order. The order accused Rallo of selling unregistered securities meant to finance the coconut water powder enterprise. A Utah investor is listed as one of the complainants.

Then there’s Davis, a longtime Utah entrepreneur in the food and supplement industry. Five years after that dinner with Williams and Rallo, Davis says he’s owed about $9 million.

The Missouri Division of Securities lists Rallo as having an address in Utah — a home in Cottonwood Heights that the Salt Lake County assessor says has a market value of almost $1.2 million. There’s no record that Rallo has ever owned that home, however. The listed owners did not return messages seeking comment.

Utah also came up in Rallo’s indictment, where he’s charged with three counts of bribery and accused of using campaign donations to influence then-St. Louis County Executive Steven Stenger. The executive job is similar to that of county mayor. Rallo is suspected of having Stenger steer the sale of a publicly owned industrial park to Rallo’s bid.

The indictment says Rallo agreed to become a member of Stenger’s “Trustee” program and give Stenger $2,500 each quarter.

“Sorry, bad reception I’m skiing in Utah,” Rallo texted Stenger on Jan. 12, 2017, the indictment says. “… Absolutely count me in as a trustee, glad to support!”

Rallo has pleaded not guilty. His lawyer declined to comment last week and Rallo did not return a message seeking comment.

(Evan Agostini | Invision via AP file photo) Montel Williams attends the "Now You See Me" premiere at AMC Lincoln Square in New York on May 21, 2013.

The Utah ties to St. Louis’ political scandal run through that 2014 dinner described by Davis. It happened, he said, at a hotel restaurant near Temple Square in downtown Salt Lake City.

Davis, who resides in Orem, calls Williams a friend who has supported the food and supplement industry. Williams, who is known to snowboard in Utah and used to have a home in the state, endorsed products made by Food For Health International, including dehydrated fruits and powders.

One of those powders was for a coconut water Food For Health International promoted as a way to boost electrolytes without consumption of sugary drinks. Davis said Williams knew Rallo, thought he might be interested in entering the coconut water business and brought him to the dinner.

Williams “was trying to do the best thing for helping the business grow,” Davis said.

Davis said he and Rallo discussed a large venture in which a company owned by Rallo would buy coconut water concentrate. Food For Health International would convert that concentrate to powder. The powder would be packaged and sold in Costco and Sam’s Club stores. Davis’ and Rallo’s companies would split the profits.

That plan never fully materialized, Davis said. The deals with Costco and Sam’s Club didn’t get made. Davis doesn’t recall why.

While some of the concentrate was converted to powder and sold elsewhere, a lot of Rallo’s concentrate sat at storage facilities, Davis said.

(David Carson | St. Louis Post-Dispatch via AP) Businessman John Rallo leaves federal court in St. Louis, Friday, May 10, 2019. Rallo, accused in a pay-to-play scheme with St. Louis County's former top elected official, pleaded not guilty Friday to three federal bribery charges.

The cease-and-desist order from the Missouri Securities Division alleges Rallo was pitching the venture to investors. In June 2015, Rallo created a Missouri corporation called FFH Holdings LLC.

The next month, the cease-and-desist order says, Rallo solicited a 58-year-old St. Louis resident to invest in FFH Holdings.

“Rallo told [the investor] about FFH and its potential investment in [Food For Health International] regarding buying and selling coconut powder to Costco and Sam’s Club,” the Securities Division wrote. “Rallo supplied [the investor] with a payout schedule that showed what the investor could expect to receive based on the amount of sales in coconut powder.”

In September 2015, the investor wired $125,000 to FFH Holdings.

Rallo made a similar pitch in 2015 to someone identified in the cease-and-desist order only as a “Utah resident.” In luring that investor, Rallo asserted to have invested $700,000 of his own money in FFH Holdings. The Utah resident went on to invest $400,000.

In all, the order lists six investors who gave Rallo $1.3 million. It says Rallo wired Food For Health International $1.15 million.

Rallo has paid investors $37,514, the order says.

By March 2016, according to documents, Davis was in the process of selling Food For Health International. He said he was nearing retirement age. He sold the company to two businessmen for $7 million. Davis said the deal closed in October 2016.

Davis said he was never paid. The new owners had financial problems, Davis said, and persuaded him to invest $2 million of his own money to create new a marketing firm and help Food For Health International’s lagging sales.

It didn’t work. In May 2018, Food For Health International filed for protection in U.S. Bankruptcy Court in Salt Lake City. Davis is listed as a creditor. So is Rallo’s company, FFH Holdings. Bankruptcy filings say it’s owed $1.17 million.

The bankruptcy documents list Rallo as the CEO. Davis said he introduced the new owners to Rallo since they would inherit a financial obligation to Rallo for the coconut water deal. But Davis said he doesn’t know how Rallo came to be CEO — that happened after the sale. Those new owners did not return messages seeking comment.

When the Missouri Securities Division inquired about Rallo’s investors, he told investigators the new owners of Food For Health International had “financial problems” and had stopped paying a promissory note held by Rallo’s company.

The Missouri secretary of state considers Rallo’s fundraising to be the selling of unregistered securities. It’s asking Rallo to pay almost $1.3 million in restitution — accruing 8% interest per year — what could be $300,000 in penalties and to reimburse the state for the cost of its investigation. The cease-and-desist order was dated May 10. Rallo has until 30 days from receipt to request an administrative hearing.

Stenger, the St. Louis County executive, was indicted in late April. He resigned and then pleaded guilty to three counts in federal court. Sentencing is scheduled for August.

The former head of the St. Louis Economic Development Partnership has pleaded guilty in federal court to a single count related to covering up the pay-to-play scheme. Her sentencing is also scheduled for August.

Williams is not accused of any wrongdoing, though his name has come up in the St. Louis scandal, too. Stenger is accused of steering a $130,000 public relations contract to a firm owned by Rallo, according to court documents. The P.R. campaign was pitched as a way to improve the St. Louis area’s image after the 2014 shooting of Michael Brown in Ferguson and the civil unrest that followed.

In a radio interview on Feb. 6, 2018, Stenger said Williams was working with Rallo’s firm and that Williams’ fees accounted for a large portion of the $130,000, according to the St. Louis Post-Dispatch. Last week, Williams’ representative sent The Salt Lake Tribune a statement it had earlier sent to St. Louis journalists. It said Williams was paid less than $10,000 for his work.

Davis said he’s not necessarily going to lose everything he’s owed. He said the final $2 million he loaned Food For Health International gives him equity in a new venture being started by the owners who declared bankruptcy.