March 12, 2013
When food safety violations occur, not only are companies at risk for civil liability and criminal prosecution, but corporate executives at such companies also can face criminal prosecution as well. Federal prosecutors have recently demonstrated an increased emphasis on criminal prosecution of corporate executives, as exemplified by charges brought by the federal government against food company executives last month.
On Feb. 20, 2013, the United States Department of Justice announced criminal charges against five former officials and employees of Peanut Corporation of America (PCA), a peanut processor and manufacturer. The government charged four individuals, including PCA’s president and owner, in a 76-count indictment, and another employee plead guilty to similar charges. The charges stem from a 2009 salmonella outbreak that the Food and Drug Administration (FDA) traced to a PCA roasting plant in Georgia. An FDA investigation found that PCA did not clean its plant adequately or take proper precautions to prevent food contamination and that the plant had a leaky roof, poor ventilation and inadequate pest control. The FDA alleges that at least nine people died due to consumption of the tainted peanut products, which were recalled. In 2010 more than 100 people who had been sickened by the tainted peanuts settled with an insurance carrier for $12 million. The recall cost PCA and the companies that bought its products more than $1.5 billion. PCA entered bankruptcy and is no longer in business.
The indictment is broad in scope, setting forth a detailed and lengthy six-year conspiracy to deliver adulterated and misbranded food. The crux of the alleged criminal conduct centers on the indicted individuals’ failure to alert customers after laboratory tests revealed the presence of salmonella and on the individuals’ fabrication of certificates of analysis (COAs) — documents that summarize lab results, including whether the food tested is contaminated with microorganisms. Employees allegedly created false COAs stating the peanut products were not contaminated when in fact one of the following had actually occurred: the products had not been tested, despite customer requests; the lab results had not been received; or the products had tested positive for salmonella. The charges also include nine instances of attempts to obstruct the government investigation of the PCA facility.
Criminal charges against individuals historically have been an unusual step for the government in cases involving food safety violations. 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. This remains true even though the U.S. Supreme Court specifically held in the seminal 1975 case of United States v. Park, 421 U.S. 658 (1975) – now known as the Park Doctrine, that corporate executives could be prosecuted criminally even for unintentional violations of food and drug laws by their companies.
Several factors likely contributed to the government’s aggressive move in this case. First, the alleged conduct depicts company officials operating with impunity in executing a deceptive scheme that focused on profit over safety. For example, in one email detailed in the indictment, PCA’s president ordered that products for which the salmonella testing results were not yet available be shipped to the customer, writing “s**t, just ship it. I cannot afford to loose (sic) another customer.” Second, the conduct took place over a significant period of time, beginning as early as 2003 and continuing until 2009, demonstrating a lengthy pattern of alleged repeated intentional wrongdoing. Third, on top of the underlying conduct, the charged individuals also engaged in alleged obstruction. As set forth in the indictment, company officials, who had reportedly plotted to give false information to the FDA if ever questioned, took steps to cover up their discovered misconduct and as part of their efforts made untrue and misleading statements to FDA investigators who visited the plant, including responding falsely to investigators’ questions about whether there had been any positive results from salmonella testing and concealing a key record regarding COAs.
Recent significant enforcement activity in the food industry is not limited to the PCA case. The government is continuing to investigate two other large scale outbreaks: a 2010 salmonella outbreak in eggs and a 2011 listeria outbreak in cantaloupe that was linked to more than 30 deaths. Food safety issues have led to increased authority for the FDA in the Food Safety Modernization Act passed in 2011, including the ability to issue mandatory recalls and revoke the registration of food facilities. The FDA used its increased powers, for example, in November 2012 to shut down a peanut butter plant in New Mexico associated with another salmonella outbreak.
There is also evidence that federal prosecutors have revived the aforementioned Park Doctrine. For instance, in 2010, FDA Commissioner Dr. Margaret Hamburg told Congress that an internal committee had recommended “increas[ing] the appropriate use of misdemeanor prosecutions, a valuable enforcement tool, to hold responsible corporate officials accountable.” Soon thereafter, in January 2011, that recommendation was followed as the FDA changed its internal regulatory procedures to authorize Park Doctrine prosecutions against corporate executives under some circumstances. This renewed emphasis on the Park Doctrine was reaffirmed recently in the prosecution of Gary Osborn, the owner of the compounding pharmacy ApothéCure, Inc., who was charged with and pled guilty to two misdemeanor criminal violations of the Food, Drug, and Cosmetic Act, despite having no direct or personal involvement in the misbranding or labeling of the adulterated drug. The acting assistant attorney general of the Civil Division of the Department of Justice, Stuart Delery, said about this prosecution: “This plea shows that the Department of Justice will enforce the Food, Drug, and Cosmetic Act against responsible corporate officers of companies that fail to control the quality of their products.”
As the government continues to increase its efforts to ensure food safety, the PCA case highlights the importance of vigilant compliance efforts and swift action when a problem is detected. Criminal charges against individuals in the food industry are possible and should be a particular concern when there is evidence of intentional adulteration and the company has not been proactive in acknowledging that there is a problem. However, the Food, Drug, and Cosmetic Act also criminalizes the distribution or sale of adulterated food even without knowledge of that adulteration, and the apparent revival of the Park Doctrine is a huge concern for those in the food industry. Food companies need to have effective compliance programs at all levels, both to prevent health-endangering contamination before it happens and also to properly investigate after contamination occurs, to rectify the issues immediately and make prompt disclosures to the government. Uncovering a food safety issue, fixing it and disclosing to the government can prevent additional illness as well as potentially protect the company and its employees from criminal and civil liability.
McGuireWoods’ food and beverage lawyers have extensive experience advising companies and their executives on these matters. We can assist those who may find themselves threatened with prosecutions under the Food, Drug, & Cosmetic Act, and we can counsel companies about measures they can take to make such investigations and charges less likely.
1. Letter from Margaret A. Hamburg, commissioner of Food and Drugs, to Sen. Charles E. Grassley (March 4, 2010) at 2.
2. See U.S. Food and Drug Administration, Regulatory Procedures Manual at Section 6-5-3.
3. U.S. Department of Justice Press Release, April 24, 2012.