The federal government is getting serious about food industry price-fixing. The recent sentencing of a tuna executive, the proper use of a leniency loophole, and cooperation in the poultry industry indictment are all part of a complex story.
Price-fixing is like food fraud, strictly speaking, it is not about food safety but still makes you queasy in your stomach when you hear a food company is involved. It might also mean the company’s food safety culture is at risk.
And during the past month, price-fixing scandals have washed over the tuna and poultry industries. Christopher Lischewskim, CEO of Bumble Bee Foods for almost two decades was sentenced to three years in jail and ordered to pay a $100,000 fine after a jury verdict found him guilty of price-fixing for tuna.
“The Bumble Bee executive’s sentencing is remarkable in that three years is a very long sentence for antitrust cases,” says Bilzin Sumberg Partner Scott Wagner.
“On average, most sentences range from 14 to 18 months. Sentences have been trending longer in the last 10 to 15 years. If you go back to the 1990s or early 2000s, the average sentences were much closer to a year.” he added. There are a number of reasons for this.”
“One of the major factors is the Antitrust Criminal Penalty Enhancement & Reform Act (ACPERA) statute that was passed 15 years ago. ACPERA built on the DOJ Corporate Leniency Policy. The DOJ Antitrust Division’s Corporate Leniency Policy provides the first corporation to go into DOJ and confess its involvement in a price-fixing conspiracy with complete immunity from prosecution, he continued. “The problem with this policy standing alone is that while a company would avoid criminal prosecution, it still faced enormous civil liability—under the civil antitrust laws, defendants are jointly and severally liable for treble damages for the entire effect of the conspiracy. Prior to ACPERA, companies who uncovered antitrust violations were faced with a difficult choice—seek leniency from the DOJ and face massive civil exposure or take a “wait and hope” approach—keeping quiet about the violation and hoping that a competitor would not disclose the illegal activity. ACPERA helped solve this problem by providing a drastic reduction in civil liability to amnesty applicants that also cooperate with civil plaintiffs.
Congress let ACPERA expire on June 22.
“The combination of the Corporate Leniency Policy and ACPERA has led to longer sentences and built stronger cases for two reasons,’ Wagner continues. “The first is that DOJ has someone from inside the conspiracy to point to where the bodies are buried within the mass of documents provided. Second, you have witnesses to get up on the stand during the trial to explain what happened during the course of the conspiracy. To have someone to tell the story and explain to the jury what actually happened is invaluable. In both the broiler chicken and tuna price-fixing matters, you have leniency applicants that will help build stronger cases for the government. I think the Department of Justice (DOJ) was hoping to send a message with the Bumble Bee executive’s sentencing that other executives need to think long and hard about whether they want to accept responsibility for their illegal conduct.”
Wagner leads the e-Discovery practice at the Miami-based Bilzin Sumberg and represents companies and individuals in antitrust and other complex litigation.
“Having an amnesty applicant in the broiler chicken case demonstrates how effective the programs are. It is possible that the DOJ would not have been in a position to bring criminal charges without having one of the participants in the conspiracy cooperating. I suspect there will be other criminal charges brought, and I would not be surprised if the DOJ has already reached agreements with other individuals and/or companies who were involved in the conspiracy.”
While Congress let ACPRA sunset, he’s confident it will eventually be extended retroactively because it’s ” an incredibly successful tool for the enforcement of the antitrust laws.”
The jury found the former Bubble Bee executive guilty of one count of conspiracy to fix tuna prices. He received a 40-month prison sentence, which is within federal sentencing guidelines. Prosecutors originally asked for a ten-year prison sentence and $1 million fine.
Bumble Bee filed for bankruptcy last November and saw its assets picked FCF Co. of Taiwan for $928 million.
Lischewski continues to maintain his innocence and plans to appeal his conviction and sentence. He’ll begin serving his sentence while the appeal goes forward.
A Justice Department official said Lischewski’s sentence was intended to “serve as a significant deterrent in the C-suite and the boardroom.”
After the indictment of Pilgrim’s Pride and Claxton Poultry Farm on price-fixing allegations, Tyson Foods Inc. went public with its cooperation under the kind of “grant to leniency” that Wagner explained.
Jayson Penn, CEO, and President of Pilgrim’s Pride is now on leave to work on his defense.
“Executives who cheat American consumers, restaurateurs, and grocers and compromise the integrity of our food supply, will be held responsible for their actions,” warned Makan Delrahim, the assistant attorney for DOJ’s Antitrust Division.
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