Corporate Executives and Criminal Charges – Some Issues are Highlighted by an Ongoing Crimina
When should corporate officers face criminal charges? Judge Rakoff famously commented on DOJ not indicting bankers from the 2008 financial fiasco. There also are ongoing media stories regarding GM’s ignition switch recall failures, and some related calls for new criminal laws to foster criminal charges. (see this July 16, 2014 McClatchy News article by Greg Gordon).
With that in mind, it’s worth noting that there already are ways to seek criminal convictions for covering up evidence and corporate officials previously have faced criminal charges in the US. The point is emphasized by an ongoing criminal trial in Georgia that accuses corporate execs of covering up evidence of salmonella contamination, as reported in an August 8, 2014 article on Mercury News. The US Department of Justice indicted corporate officials in a 63 count indictment. The current trial evidence reportedly will not disclose to jurors that people died after consuming the contaminated products. According to the news article:
“Witnesses say Stewart Parnell and others at Peanut Corporation of America knowingly shipped salmonella-tainted products, and that they sent customers lab results from other clean batches rather than wait for tests to confirm their products were free of deadly bacteria. Defense lawyers correctly noted for the jurors that salmonella tests aren’t even required by federal law.
Their plant in rural Blakely, Georgia, was shut down and the company went bankrupt. Long after consumers ate contaminated peanut butter, ice cream, energy bars and other products, the outbreak prompted one of the largest food recalls in U.S. history. But Stewart Parnell, his brother and food broker, Michael Parnell, and quality assurance manager Mary Wilkerson aren’t charged with killing anybody. In fact, prosecutors agreed not to mention the death toll to the jurors. The 76-count indictment instead accuses the Parnell brothers of defrauding customers that used Peanut Corporation’s contaminated products as ingredients. Stewart Parnell and Wilkerson are charged with concealing information from federal investigators.
Public outcry over the peanut case and several other outbreaks of food borne illness led Congress to pass the Food Safety Modernization Act of 2011, which was supposed to give the FDA more resources and enforcement power.
Salmonella causes an estimated 1.2 million illnesses every year in the United States, with about 23,000 hospitalizations and 450 deaths, according to the U.S. Centers for Disease Control and Prevention. The bacteria can cause severe diarrhea and vomiting, with infections that spread throughout the body, killing people who aren’t quickly treated with antibiotics. The elderly, infants and people with compromised immune systems are particularly vulnerable.
The CDC says it has tracked salmonella outbreaks since 1962. It even has an interactive map with county-by-county information on the impact. And while many sources are never discovered, dozens of food producers have been identified through the years. Some egregious incidents have resulted in fines, and victims have found private attorneys to file civil lawsuits that often get settled out of court. But illnesses, and deaths, continue.
“Could all these people have been charged criminally with something? The answer is, hell yes,” said Bill Marler, an attorney who claims to have won $500 million for victims of food-borne illnesses over the past two decades.
Three other cases — a salmonella outbreak traced to eggs in Iowa, a listeria outbreak blamed on dirty cantaloupes in Colorado and an E. coli outbreak linked to Odwalla juices in California — resulted in federal plea deals without prison time. This is the first to go to trial, Marler said.
The DOJ’s press release and the February 2013 indictment are online at DOJ. The press release states the following:
Former Officials and Broker of Peanut Corporation of America Indicted Related to Salmonella-Tainted Peanut Products
Allegations Include Mail and Wire Fraud, Introduction of Adulterated and Misbranded Food into Interstate Commerce with Intent to Defraud or Mislead, and Conspiracy
A 76-count indictment was unsealed yesterday charging four former officials of the Peanut Corporation of America (PCA) and a related company with numerous charges relating to salmonella-tainted peanuts and peanut products, the Justice Department announced today. Stewart Parnell, 58, of Lynchburg, Va.; Michael Parnell, 54, of Midlothian, Va.; and Samuel Lightsey, 48, of Blakely, Ga., have been charged with mail and wire fraud, the introduction of adulterated and misbranded food into interstate commerce with the intent to defraud or mislead, and conspiracy. Stewart Parnell, Lightsey and Mary Wilkerson, 39, of Edison, Ga., were also charged with obstruction of justice.
Also yesterday, an information filed against Daniel Kilgore, 44, of Blakely was unsealed. On the same day that charges against Kilgore were filed, he pleaded guilty to that information, which charged him with mail and wire fraud, the introduction of adulterated and misbranded food into interstate commerce with the intent to defraud or mislead, and conspiracy.
The investigation into the activity at PCA began in 2009, after the Food and Drug Administration and the U.S. Centers for Disease Control and Prevention traced a national outbreak of salmonella to a PCA plant in Blakely as the likely source. As alleged in the indictment, the Blakely plant was a peanut roasting facility where PCA roasted raw peanuts and produced granulated peanuts, peanut butter, and peanut paste; PCA sold these peanut products to its customers around the country.
The charging documents charge that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in a scheme to manufacture and ship salmonella-contaminated peanuts and peanut products, and in so doing misled PCA customers. As alleged in the indictment, those customers ranged in size from small, family-owned businesses to global, multibillion-dollar food companies.
“When those responsible for producing or supplying our food lie and cut corners, as alleged in the indictment, they put all of us at risk,” said Stuart F. Delery, who heads the Justice Department’s Civil Division. “The Department of Justice will not hesitate to pursue any person whose criminal conduct risks the safety of Americans who have done nothing more than eat a peanut butter and jelly sandwich.”
Although PCA is now no longer in business, the allegations against each of the defendants arise from his or her conduct while at PCA and a related company. The following allegations are set forth in the indictment: Stewart Parnell was an owner and president of PCA; Michael Parnell, who worked at P.P. Sales, was a food broker who worked on behalf of PCA; Lightsey was the operations manager at the Blakely plant from on or about July 2008 through February 2009; and Wilkerson held various positions at the Blakely plant – receptionist, office manager and quality assurance manager – from on or about April 2002 through February 2009. As charged in the information, Kilgore served as operations manager of the PCA plant in Blakely from on or about June 2002 through May 2008.
“We all place a great deal of trust in the companies and individuals who prepare and package our food, often times taking it for granted that the public’s health and safety interests will outweigh individual and corporate greed,” said Michael Moore, U.S. Attorney for the Middle District of Georgia. “Unfortunately and as alleged in the indictment, these defendants cared less about the quality of the food they were providing to the American people and more about the quantity of money they were gathering while disregarding food safety. This investigation was complex and extensive, and I credit the cooperation of our federal agencies with not only making sure that the cause of this outbreak was uncovered and the people responsible called to account, but also with working hard every day to make sure that parents across the country can feel confident that the food they are feeding their children is safe.”
The charging documents allege that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in several schemes by which they defrauded PCA customers about the quality and purity of their peanut products and specifically misled PCA customers about the existence of foodborne pathogens, most notably salmonella, in the peanut products PCA sold to them. As the charging documents allege, the members of the conspiracy did so in several ways – for example, even when laboratory testing revealed the presence of salmonella in peanut products from the Blakely plant, Stewart Parnell, Michael Parnell, Lightsey and Kilgore failed to notify customers of the presence of salmonella in the products shipped to them.
In addition, the charging documents allege that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in a scheme to fabricate certificates of analysis (COAs) accompanying various shipments of peanut products. COAs are documents that summarize laboratory results, including results concerning the presence or absence of pathogens. As alleged in the charging documents, on several occasions these four defendants participated in a scheme to fabricate COAs stating that shipments of peanut products were free of pathogens when, in fact, there had been no tests on the products at all or when the laboratory results showed that a sample tested positive for salmonella.
After the salmonella outbreak that gave rise to this investigation, FDA inspectors visited the plant several times in January 2009. According to the indictment, the inspectors asked specific questions about the plant, its operations, and its history, and, in several instances, Stewart Parnell, Lightsey and Wilkerson gave untrue or misleading answers to these questions.
“The charges announced today show that if an individual violates food safety rules or conceals relevant information, we will seek to hold them accountable,” said FDA Commissioner Margaret A. Hamburg, M.D. “The health of our families and the safety of our food system is too important to be thwarted by the criminal acts of any individual or company.”
Stewart Parnell, Michael Parnell, and Samuel Lightsey are each charged with two counts of conspiracy; multiple counts of introducing adulterated food into interstate commerce with the intent to defraud; multiple counts of introducing misbranded food into interstate commerce with the intent to defraud; multiple counts of interstate shipment fraud; and multiple counts of wire fraud. Stewart Parnell, Lightsey and Wilkerson are also charged with multiple counts of obstruction of justice.
Kilgore pleaded guilty to one count of conspiracy to commit fraud, one count of conspiracy to introduce adulterated and misbranded food into interstate commerce, eight counts of introducing adulterated food into interstate commerce with the intent to defraud, six counts of introducing misbranded food into interstate commerce with the intent to defraud, eight counts of interstate shipment fraud, and five counts of wire fraud.
Mark F. Giuliano, Special Agent in Charge, FBI Atlanta Field Office, stated, “The FBI was brought in to this matter to provide additional resources and expertise to a complex and very serious investigation. We fully understand the victim impact as a result of this salmonella outbreak and will be asking to hear from other possible victims in this matter.”
Individuals who feel that they may have been affected by or have become ill from tainted PCA products, and businesses that purchased products that were recalled as a result of the outbreak, should visit the following website for further details: https://forms.fbi.gov/pca-salmonella-tainted-product-case/
The case is being prosecuted by Trial Attorneys Patrick Hearn and Mary M. Englehart of the Consumer Protection Branch of the Civil Division of the Department of Justice and Assistant U.S. Attorney Alan Dasher of the Middle District of Georgia. Marietta Geckos, formerly a Trial Attorney with the Consumer Protection Branch, also worked on the prosecution. The case was investigated by the Food and Drug Administration’s Office of Criminal Investigations and the FBI.
An indictment is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.
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