Food Execs on High Alert After Sentencing in Peanut Case

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By Catherine Boudreau

Sept. 29 — The 28-year prison sentence handed down to the former owner of Peanut Corp. of America responsible for one of the nation's largest food-safety recalls highlights the Justice Department's heightened focus on investigating foodborne illness outbreaks and prosecuting individuals, attorneys said.

The case also signals to food companies—and their executives—that they can be held criminally liable for introducing contaminated products into the marketplace, a threat likely reverberating in corporate offices across the country.

“For a long time food cases didn't carry the penalties that have been handed out,” Michael Moore, U.S. attorney for the Middle District of Georgia that prosecuted the PCA case, told Bloomberg BNA. “There's no better way to get an executive's attention than the possibility of going to jail. They'll certainly go if they're trying to enrich themselves at risk of public safety.”

On Sept. 21, Stewart Parnell, who ran the now-defunct PCA as chief executive, received the toughest punishment in history for a food poisoning case. His brother Michael Parnell, who was a food broker for the company, was sentenced to 20 years behind bars and a former quality control manager was sentenced to five years in prison (U.S. v. Parnell, M.D. Ga., No. 1:13-cr-00012-WLS-TQL, sentencing 9/21/15).

PCA shipped salmonella-tainted peanuts that killed nine people in 2009 and sickened hundreds. Prosecutors during the trial said the Parnell brothers defrauded customers by covering up the presence of salmonella and fabricating documents accompanying peanut shipments that said the product was free of pathogens. When Food and Drug Administration officials visited a PCA plant in Georgia, the Parnells gave “untrue or misleading answers” to questions, according to the Justice Department.

PCA is the latest in a string of food producers being criminally prosecuted by the Justice Department. Unlike most of the cases, which have been prosecuted as misdemeanors, the PCA convictions were on felony charges because there was evidence of intent.

Attorneys cited several events leading to the Justice Department's aggressive pursuit of companies that fail to prevent contamination, including an array of multi-state foodborne illness outbreaks that were politicized by Congress; the Obama administration's commitment early on to overhaul the food safety system; and more sophisticated DNA analysis that makes its easier to trace an outbreak to its source.

Series of Illness Outbreaks

“There are certain things only a government can do,” President Barack Obama said in March 2009 when announcing the formation of a federal working group to modernize food safety laws. “And one of those things is ensuring that the foods we eat, and the medicines we take, are safe and do not cause us harm.”

High-profile foodborne illness outbreaks between 2006 and 2010 attracted national attention, including salmonella-tainted peanuts from PCA and peanut butter from ConAgra Foods Inc., fresh spinach contaminated by E. coli and eggs with salmonella produced by a company in Iowa.

The outbreaks led Congress to call food company executives and officials from the Agriculture Department and Food and Drug Administration to testify on Capitol Hill. Stewart Parnell was among those subpoenaed, but he invoked his Fifth Amendment rights and refused to testify.

The hearings largely shaped the Food Safety Modernization Act (FSMA), which the FDA has recently started implementing. The law (Pub. L. No. 111-353) was the largest overhaul of the food safety system in decades and expanded the FDA's authority—and the responsibility of food manufacturers—to prevent foodborne illnesses.

“[Obama] made it no secret that there would be a focus on food,” Moore said. “With that direction from the White House, these cases began to take on new priority.”

Each year, 48 million people get sick and 3,000 die of foodborne diseases, according to estimates by the Centers for Disease Control and Prevention (CDC).

Uptick in Justice Department Investigations

Recently the Justice Department has criminally prosecuted four companies and in most cases, individual executives.

A unit of ConAgra Foods Inc. on May 20 agreed to pay an $11.2 million fine—the most ever paid in a food safety case—to resolve misdemeanor charges over salmonella-tainted peanut butter that sickened at least 700 people in 2006 and 2007. No individuals were prosecuted.

In April, the owner and a top executive of what was one of the largest U.S. egg companies each were sentenced to three months in prison plus a year of probation and fined for their roles in the 2010 recall of more than half a billion eggs containing salmonella. The Iowa-based Quality Egg LLC also admitted to bribing a USDA inspector and unknowingly introducing adulterated food into interstate commerce.

In January 2014, two cantaloupe farmers in Colorado were sentenced to five years' probation each for a 2011 Listeria monocytogenes outbreak that killed 33 people.

Prosecutors in each case found unsanitary conditions that could cause contamination but weren't addressed even though the companies were aware there was some risk. For example, routine product testing in 2004 at a ConAgra plant in Georgia revealed salmonella in peanut butter that the company destroyed before shipment.

ConAgra said when the settlement was announced that after the 2007 recall, it invested in leading-edge food safety technology.

Three Previous Indictments

Before these convictions, the Justice Department had indicted only three companies over contaminated food that caused deaths or serious injuries. Most recently, the Sara Lee Corp. in June 2001 pleaded guilty to selling tainted meat that caused 15 deaths.

“I didn't see any uptick in these cases until 2008-2009,” Jim Neale, a partner at McGuireWoods LLP who has represented ConAgra in civil food safety cases, told Bloomberg BNA. “Now, any time there’s a recall there seems to be the threat of an investigation. It's as if the Department of Justice has taken the law off the shelf and dusted it off.”

Neale said the law outlawing the sale of adulterated food, today known as the Food, Drug and Cosmetic Act (FDCA), has been on the books since Upton Sinclair wrote “The Jungle” in 1906 that exposed repulsive conditions at Chicago meat plants.

Impact on Food Companies

The tougher Justice Department enforcement of FDCA also highlights that the law makes it a crime to sell contaminated food, even unknowingly.

“People are saying, ‘Can this really happen to us?' The answer is yes, it could,” Neale said. “It seems incredible if you're a company trying to do the right thing every day, which 99 percent are. If there were debates before among executives over investing in the most advanced food safety system, there will be no longer.”

Alan Maxwell, a partner at Weinberg, Wheeler, Hudgins, Gunn & Dial LLC, agreed that most food sold in the U.S. is safe and companies prioritize safety.

“PCA is truly an outlier in terms of facts and circumstances,” Maxwell said, adding that food companies will remain aware of the potential consequences of any oversights. Maxwell was PCA's civil defense counsel when the company filed for bankruptcy and also testified during its trial.

PCA also illustrated how a small player can impact food safety on a national level, Maxwell said. Peanuts from PCA, a business with fewer than 100 employees, made their way into thousands of products across the country.

Food safety already is a top priority of food companies, and executives are taking a more proactive role, said Hilary Thesmar, vice president of food safety programs at the Food Marketing Institute. Companies want customer loyalty, so it is good business to sell safe, high quality food.

“Four years ago, executives may have been really involved in food safety plans only out of personal interest,” Thesmar told Bloomberg BNA.

Future of Outbreak Cases

The bigger issue is whether the Justice Department will decide to prosecute in recent and future foodborne illness outbreaks, said Bill Marler, a Seattle-based food safety lawyer that represented victims of the PCA outbreak.

“If they don't, why not? And just because they can, should they? That is a dialogue the public, businesses and the attorney's office need to have,” Marler told Bloomberg BNA.

Blue Bell Creameries Inc. this spring recalled 8 million gallons of ice cream distributed in 23 states to contain the spread of listeria after three people died. Marler said he read all of the company's inspection reports from its Oklahoma plant, and they are as bad as any he's seen in the more than 20 years of representing victims of foodborne diseases.

Marler said he thinks prosecutors will exercise discretion about whom to bring charges against in these cases, noting that there aren't clear criteria for the Justice Department to launch an investigation.

Moore, the U.S. attorney for the Middle District of Georgia, said the Justice Department will continue to look at food safety cases “under a magnifying glass instead of a telescope.”

Individual Accountability

Justin Lugar, an attorney at Gentry Locke who was part of the team defending Stewart Parnell, said there is criticism of the Justice Department's focus on individual accountability.

“It seems that if you’re a big company with lots of money, you will just get a slap on wrist,” Lugar told Bloomberg BNA, citing the case against ConAgra that resulted in a settlement. “If you’re a small producer or family business who is at mercy of larger food companies with certain demands, you could face serious consequences.”

Moore denied that the Justice Department is targeting “little guys.”

“I don't care if it's a big or small company,” Moore said. “It's a prosecutor's job to look at the facts and the evidence and decide what can be proved.”

The corporate fraud, and evidence that PCA executives used their positions to make money at the peril of consumers, warranted individual convictions, Moore said. In the ConAgra case, individual culpability couldn't be satisfied.

Lugar said the defense team will appeal the verdict and the sentence in Stewart Parnell's case on grounds of juror misconduct.

FSMA

In the meantime, the FDA is working on implementing parts of FSMA.

Two recently finalized regulations require food manufacturers to identify where contamination is likely to occur, outline actions to prevent it, routinely evaluate the plan's effectiveness and submit documents to the FDA. The agency also is increasing inspections to ensure compliance.

The FDA has yet to finalize five other major regulations impacting produce farmers, food importers and operations that transport food. All must be completed by May 2016, according to court-ordered deadlines.

“Now you have a regulatory scheme designed to have proactive food companies rather than a reactive government that identifies the source of the outbreak after people are already sick and works backwards,” Maxwell said.

But the comprehensive safety law won't be effective if the FDA doesn't receive substantially more funding in fiscal year 2016, according to Michael Taylor, FDA deputy commissioner for foods and veterinary medicine.

“There will have to be hard choices,” Taylor told reporters after a hearing by the Senate Agriculture Appropriations Subcommittee.

The panel in July approved an appropriations bill that would allocate a $45 million increase over fiscal 2015 levels, while a House measure would provide $41.5 million more. Those totals are less than half of what Obama requested in his budget.

To contact the reporter on this story: Catherine Boudreau in Washington at cboudreau@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com