September 29, 2015

CEO Conviction Aligns With Trend of Aggressive Foodborne Illness Prosecutions

The former CEO of Peanut Corporation of America (PCA), has been sentenced to an unprecedented 28 years for his role in the 2008-09 Salmonella outbreak linked to the deaths of nine people and more than 700 illnesses. While it is not news that food companies and corporate officials are increasingly facing criminal sanctions for shipping adulterated food products into commerce, Stewart Parnell’s lengthy term of imprisonment — and the government’s rationale for recommending a life sentence — is an unusually harsh example of the accelerating trend of aggressive prosecution following foodborne illness outbreaks.

Aggressive Prosecution and Sentencing – Why the PCA Case Is Different

Two things set Parnell’s case apart from other recent prosecutions following foodborne illness outbreaks:

  1. The government introduced overwhelming evidence of particularly egregious misconduct by Parnell and others (i.e., emails directing shipment of products which had failed microbiological testing or for which test results were not yet available, and falsification of certificates of analysis). In the view of the government, this evidence demonstrated a complete disregard for consumer health and safety and supported its decision to charge Parnell with multiple felonies. A Georgia federal jury agreed, finding Parnell guilty on 67 counts of mail and wire fraud, conspiracy, felony shipment of adulterated and misbranded food products, and obstruction of justice.

  2. PCA products so permeated the market that the financial losses were in the hundreds of millions. Although peanuts processed by PCA accounted for at most 2 percent of the U.S. peanut supply, the PCA scandal caused more than 200 food manufacturing companies to recall over 3,900 products. The financial impact on these corporate victims formed the basis for loss calculations ranging between $100 million-$200 million, which resulted in a 26-point jump in the offense level for Parnell under federal sentencing guidelines. Those 26 levels were the difference between a sentencing range of 37-46 months and life imprisonment.

By comparison, in the Quality Egg prosecution, there were 1,939 confirmed Salmonella Enteriditis illnesses and financial losses to more than 250 retail egg customers totaling between $400,000-$1,000,000. Yet Jack DeCoster, a CEO with a criminal history, opted to plead guilty to misdemeanor introduction of adulterated food into interstate commerce (which carries a one-year statutory maximum sentence) and was sentenced this April to three months’ incarceration.

Had the sentencing court chosen to impose on Parnell consecutive sentences for each of the 67 counts of conviction, his sentence could have been as high as 9,636 months, or 803 years. The court ultimately sentenced Parnell to 28 years, a term far less than the statutory maximum, but which is effectively a life sentence for the 61-year-old Parnell.

DOJ Intensifying Investigations into Foodborne Illness Outbreaks

Looking ahead, the federal government has made it clear that it will take an aggressive enforcement posture against responsible corporate officers for both misdemeanor and felony offenses whenever foodborne illness outbreaks result in significant illness or death. Parnell’s conviction and sentence is just the latest example of the Justice Department’s efforts to hold individual employees — including high-ranking executives — responsible for corporate misconduct, and those efforts will only intensify.

Indeed, less than three weeks ago, DOJ released new guidance addressing individual liability for corporate wrongdoing. That guidance provides that:

  • To be eligible for cooperation credit, corporations must disclose all relevant facts relating to the individuals responsible for misconduct.
  • Criminal and civil prosecutors should focus on individuals from the outset of investigations.
  • Criminal and civil prosecutors should maintain regulation communication with each other during corporate investigations.
  • Absent extraordinary circumstances, no corporate resolution will authorize immunity for potentially culpable individuals.
  • Corporate investigations should not be settled without a “clear plan” to resolve related individual cases.
  • Civil attorneys may no longer decline suits against individuals based solely on their inability to pay fines or penalties, but should instead consider factors such as deterrence and accountability when assessing civil action.

With sentences of incarceration now imposed even in misdemeanor convictions — and extraordinary penalties on the line in felony cases — food companies and CEOs are once again reminded of the critical importance of complying with food safety regulations and proactively managing all facets of the company’s response should an outbreak occur.

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