The U.S. Justice Department is hopeful that in the criminal case involving poultry executives whom it says conspired to keep prices high, the third time will be the charm.
Jury selection is scheduled to begin today in Colorado as part of a seldom-seen third trial of the executives from Pilgrim’s Pride and Claxton Poultry Farms. The case, which comes out of a 2020 indictment, has gone to trial twice before. Both times, deadlocked juries led to the cases being declared mistrials. After the last trial ended without a verdict in March, the Justice Department immediately said it wanted to try the case again.
The case is is part of a years-long investigation into price-fixing in the poultry sector. The investigation — which was revealed as the Justice Department intervened in a 2016 class action price fixing lawsuit — ended with criminal charges against 14 poultry executives.
Ten of those executives were involved in this trial. But following the second mistrial, the Justice Department dropped charges against five. The department said this move was made to “streamline” the case, court documents state.
Five executives remain and face charges related to what prosecutors say was a conspiracy to drive up prices of broiler chicken products from at least 2012 through early 2019. They include former Pilgrim’s Pride chief executives Jayson Penn and William Lovette and former vice president Roger Austin; and Claxton Poultry Farms President Mikell Fries and Vice President Scott Brady.
The executives engaged in a “conspiracy to suppress and eliminate competition by rigging bids and fixing prices,” the indictment states.
Following the announcement of the third trial, lawyers for the executives still facing charges called the Justice Department’s decision to move ahead with a third trial unlawful, filing a motion to dismiss the charges.
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“A third trial compounds this unfairness — the government will have yet another chance to revise and bolster its case. This puts the Defendants in an untenable position and violates fundamental fairness,” the motion said.
Although District Judge Philip Brimmer, who presided over the previous two executive trials, seemed skeptical about prosecutors’ chances of securing convictions in a third trial, he denied all of the executives’ motions for acquittal last week. The stage is set for another trial, and another chance for the Justice Department to flex its strategy of prosecuting executives for corporate misdeeds. From 2015 to the fall of 2020, 717 cases of executive prosecution in the United States had ended with fines and forfeitures, according to the Corporate Prosecution Registry of Duke University Law School and the Legal Data Lab at the University of Virginia’s Law Library.
This strategy has worked previously in the food and beverage space. Jonathan Kanter, head of the U.S. Justice Department’s antitrust division, told Brimmer at an April hearing that prosecutors “still have every bit of confidence that we did when we charged the case that it will result in convictions,” Bloomberg reported.
The accusations of price fixing in the poultry industry stretch much farther than this criminal case. Charges and investigations are underway for many corporate entities in the space. Tyson and Pilgrim’s Pride received protection from criminal prosecution by agreeing to cooperate with the Justice Department, while Koch Foods and Claxton Poultry face charges. Their trial is currently scheduled for April 2023. And civil lawsuits accusing chicken companies of price fixing have been filed by foodservice companies, CPG makers and retailers.
But the issue of potential price fixing — and federal government attention to executives — is not limited to chicken. There are also pending civil lawsuits about accusations of price fixing in the pork and beef sectors. Both of these have recently come under additional scrutiny as prices have increased and a few major players have dominated the markets.
Poultry companies and the Justice Department did not respond to Food Dive’s request to comment on this story.
Why go after executives?
Food company executives have historically found themselves in prosecutors’ crosshairs. In general, the two types of cases most commonly brought before courts involve food safety or price fixing issues.
In price-fixing cases like this one, prosecutors name the executives they say came up with the scheme and oversaw its operation. In food safety cases, which are often brought after large outbreaks, executives are accused of knowing about problems in their facilities but choosing to do nothing about them.
Robert McBride, a former federal prosecutor and the partner-in-charge of the Northern Kentucky office of Taft Law, said that prosecutors historically did not go after executives in corporate cases. But, he said, it’s hard to truly punish a corporation for wrongdoing. The only tools available are fines or monitoring.
“Individuals can be held accountable for the conduct of themselves and others in their company if they’re aware of it,” McBride said. “And, of course, individuals can have the most severe action taken against them, which in these kinds of cases, is removing their liberty.”
Former U.S. Deputy Attorney General Sally Yates reset the target for corporate prosecution. In a 2015 memorandum, Yates outlined a new Justice Department policy: Investigations into corporate misconduct should focus on individual wrongdoing from the beginning. Yates wrote there were several reasons for looking at individuals to seek accountability.
“[I]t deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system,” the memo states.
The impetus for using the Yates memo as a prosecutorial guidepost may have waned somewhat during Donald Trump’s presidency. But in October, U.S. Deputy Attorney General Lisa Monaco said at an American Bar Association conference that individual prosecution is once again central to Justice Department efforts to promote corporate responsibility.
“Individuals can be held accountable for the conduct of themselves and others in their company if they’re aware of it. And, of course, individuals can have the most severe action taken against them, which in these kinds of cases, is removing their liberty.”
Robert McBride
Northern Kentucky partner-in-charge, Taft Law
Executive prosecution has been a commonly used tool to make changes in the food industry. The most notorious case involved the leaders at Peanut Corporation of America, a former peanut processing business that was the source of a major salmonella outbreak in late 2008 and early 2009. The outbreak sickened 714 people nationwide and resulted in nine deaths. The FDA found company officials knew their products were contaminated with salmonella when they were shipped out, and former employees said long-standing sanitation problems at facilities were ignored.
After being convicted by a jury, Stewart Parnell, PCA’s former owner and president, was sentenced to 28 years in prison in 2015. His brother Michael Parnell, a food broker who worked on behalf of PCA, received a 20-year prison sentence.
The PCA case helped spur the Food Safety Modernization Act, which was signed into law in 2011 and requires extensive preventive measures to ensure food safety. It also encouraged manufacturers nationwide to do more to organize themselves around food safety. And, it served as the template for the current prosecution of former Blue Bell President Paul Kruse, who investigators say conspired to cover up a 2015 listeria outbreak that sickened 10, killed three and resulted in all of the company’s products being recalled. Kruse is currently set to go on trial in August.
In addition to the current example involving the chicken industry, price fixing cases have also drawn executive-level prosecution and conviction. Former Bumble Bee Foods CEO Chris Lischewski was convicted of charges related to price fixing in 2019, part of a scheme that spanned from November 2010 to December 2013. He was sentenced in 2020 to 40 months in prison.
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“The sentence imposed today will serve as a significant deterrent in the C-suite and the boardroom,” then-Assistant Attorney General Makan Delrahim said in a June 2020 press release. “Executives who cheat American consumers out of the benefits of competition will be brought to justice, particularly when their antitrust crimes affect the most basic necessity, food.”
Brandon Garrett is a Duke University Law School professor who wrote the book “Too Big to Jail” about what happens when federal prosecutors bring charges against companies, and he maintains the Corporate Prosecution Registry. He said in a price-fixing scenario, there are definitely individuals for prosecutors to target. After all, he said, different people need to plan out the scheme. And it takes more people to cooperate in order to make it work.
But it takes a lot of work to bring a price fixing case against individuals to trial, he said. The cases tend to involve violations of highly technical financial rules and regulations. They also deal with misapplications of industry standards, which usually are not well known to those outside of the industry.
Even without these complex regulations, it’s a challenge to ensure that a clear case is built for jurors, Garrett said.
“Jurors are sometimes confused with technical issues in these cases, and are also understandably trying to figure out where to assign blame, where you have both the company and people working at different levels of the company,” he said. “…The corporate conduct for lots of things that the company was doing were illegal, or even admirable. …Many of the people in the company were trying to do their jobs well. And to be held responsible, blame is really complicated.”
This complexity may underscore why it is taking a third trial to get to a verdict in the chicken price-fixing case. Bloomberg reported on the jury votes from the first trial: Eight jurors wanted to convict Penn, Fries, Brady and Austin, while four wanted to acquit them. Five thought Lovette was guilty, while seven said he was not. Four of the defendants who were dropped from the case got only three votes to convict. Jury votes from the second trial were not disclosed, the newswire said.
After two trials without verdicts, prosecutors don’t generally return for a third go-round — and it seems that Judge Brimmer is skeptical about this retrial.
The push to hold individuals responsible may be what’s behind the third trial for these executives, who prosecutors say helped plan and execute a price fixing cartel in the chicken industry. McBride said that by pushing ahead, the Justice Department is essentially saying that cases to hold individuals accountable for supposed wrongdoing at the corporate level are not going away, and it plans on following through as much as needed to ensure that the right people are held responsible.
“I think that in and of itself has a deterrent effect,” he said.
