Food & Beverage Industry Faces Close Scrutiny in 2015

Food & Beverage Industry Faces Close Scrutiny in 2015 2

McGuireWoods – For 2015, the food and beverage industry will experience governmental attention on a number of fronts. Given the Department of Justice’s recent success in prosecuting food manufacturing executives on criminal charges, the industry likely will see more of the same in the near future.

Expect further impact due to President Obama’s immigration reform initiative, data privacy problems and liability, EU competition and regulatory developments, a new Clean Water Act definition for “waters of the United States,” and an abundance of citizen suits.

Criminal Prosecution

R. Trent Taylor, Richmond

2014 was a watershed year for criminal prosecutions in the food industry. In 2013, the federal government brought high-profile criminal charges against food company executives in two important cases. In 2014, both of these cases concluded with victories for the federal government.

The most high-profile of these criminal prosecutions concluded on Sept. 19, 2014, and resulted in the convictions of three former executives of the Peanut Corporation of America (PCA): (1) Stewart Parnell, former owner; (2) Michael Parnell, former food broker; and (3) Mary Wilkerson, former quality control manager. This trial involved allegations that the Parnells knowingly shipped contaminated peanut butter and peanut paste to customers and faked lab tests intended to screen for salmonella, resulting in one of the largest food recalls in U.S. history. The 12-member jury found Stewart Parnell guilty of 67 federal felony counts, including conspiracy, wire fraud and obstruction of justice, while Michael Parnell was convicted of 30 counts related to falsification of lab results but was acquitted of actually shipping salmonella-tainted food. Mary Wilkerson was convicted on one count of obstruction of justice but acquitted on another; she faces a maximum of 10 years in prison and a $250,000 fine. The Parnells’ convictions are enough to send them to federal prison for the rest of their lives, as each count carries a maximum sentence of five or 10 years. However, to date, sentencing has not occurred due to a number of post-trial motions.

This prosecution is significant because it is one of the first times that food processors have been criminally tried in a federal food-poisoning case. Although both civil and criminal statutes and penalties against a company and individuals are available, the government has rarely used criminal provisions to charge individual food industry executives and employees. But that may be changing.

Also significant are the resources that the government devoted to this prosecution and how aggressively it prosecuted the case. The prosecution called 45 witnesses, and its case in chief lasted 26 days. The government indicted these individuals on 76 federal felony counts and went to trial on 71 of those counts. The charges carry prison sentences of up to 20 years apiece. Moreover, the government aggressively sought information from several law firms that formerly represented PCA by issuing subpoenas, and demanded that these attorneys be available for testimony at trial. The law firms sought to quash the subpoenas (claiming attorney-client privilege and work product), and the judge never decided the issue before the case went to the jury. In addition, two of PCA’s former top managers (plant manager Samuel Lightsey and operations manager Daniel Kilgore) reached pretrial plea bargains with the prosecution and testified at trial on behalf of the government. Their plea agreements appear to contemplate jail time.

After the victory, one of the prosecutors, U.S. Attorney Michael Moore for the Middle District of Georgia, said the verdicts in the PCA case have put the food industry on notice that it is now going to be held responsible for foodborne illnesses.

Another recent groundbreaking prosecution targeted Eric and Ryan Jensen, two corporate executives of a cantaloupe farm that was linked to a 2011 listeria outbreak that reportedly resulted in 33 deaths. They were charged with misdemeanors and faced up to six years in jail. The government issued warrants for their arrest, and the Jensens were brought to their arraignments in shackles – unusual for misdemeanor prosecutions. They pled guilty and were sentenced in January 2014 to six months in home detention and five years of probation, and ordered to pay $150,000 in restitution. What is significant about this prosecution is that there reportedly was no evidence that these executives knew about any adulteration of their cantaloupes prior to sale.

Aggressive criminal prosecution of the food industry likely will not only continue, but increase in 2015. One such case that is being followed closely is the prosecution in federal district court in Iowa of food industry executives related to allegedly falsified export documents and certificates involving the international sale of “Halal” beef. Indictments were handed down in October 2014, and the trial was scheduled to start in March 2015. A continuance has been granted, however, due to concerns expressed by both the prosecution and defense that the case is too complex to be tried so quickly. Another closely watched case is the prosecution of Jesse J. Amaral Jr., former Rancho Feeding Corp. co-owner. His trial in federal court in San Francisco, scheduled to begin in July, relates to charges he conspired to sell cattle known to have eye cancers and other problems, for consumption by humans.

Now that the most high-profile of these criminal prosecutions – the only one that actually went to trial – has ended successfully for prosecutors, the food industry is likely to see this weapon of criminal prosecution used more frequently. Success no doubt will beget more criminal prosecutions in 2015.
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