In a historic agreement, Blue Bell Creameries agreed to plead guilty to charges that it shipped contaminated products linked to a 2015 listeriosis outbreak and will pay $19.35 million in fines, according to the Justice Department.
This is the second-largest agreement ever to resolve a food safety case, behind only last month’s landmark Chipotle Mexican Grill agreement to pay a $25 million fine over food safety violations.
Under terms of the plea, Blue Bell agreed to plead guilty to two misdemeanor counts of distributing adulterated ice cream products and pay a criminal fine and forfeiture amount totaling $17.25 million. The remaining $2.1 million in fines was earmarked to resolve civil False Claims Act allegations regarding ice cream products manufactured under insanitary conditions and sold to federal facilities.
“American consumers rely on food manufacturers to take necessary steps to provide products that are safe to eat,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “The Department of Justice will take appropriate action where food manufacturers ignore poor factory conditions or fail to abide by required recall procedures when problems are discovered.”
James F. Neale, a partner in McGuireWoods LLP, currently serves as co-chair of the firm’s foodborne illness litigation practice group and notes this agreement was important for several reasons. “First, it represents another criminal prosecution for Food Drug & Cosmetic Act violations,” he says. “Those violations have been illegal for more than a century, but it’s really only in the last decade or 15 years that the federal authorities have exhibited much appetite for criminally prosecuting companies responsible for large-scale foodborne illness outbreaks.”
Second, he continues, the agreement illustrates the difference between food manufacturing and other industries. “We normally don’t prosecute companies when planes fall out of the sky, or air bags fail to deploy,” Neale adds. “The Blue Bell prosecution emphasizes the very high stakes involved in manufacturing and distributing food under the Food Drug and Cosmetic Act. Selling adulterated food is illegal and the federal government appears determined to continue to criminally prosecute these violations.”
Third, says Neale, the Blue Bell prosecution makes it clear that the government will pursue larger companies, whether public (like Chipotle) or private (like Blue Bell), for 21 USC 331 violations.
The Texas-based ice cream manufacturer’s former president, Paul Kruse, was also charged by the Department of Justice with seven felony counts in connection to an alleged scheme to cover up the listeria violations.
In 2015 Deputy Attorney General Sally Yates authored a memo entitled “Individual Accountability for Corporate Wrongdoing.” It announced a DOJ policy focused on individuals within corporations who may have done wrong, and made very clear that “to be eligible for any cooperation credit, corporations must provide the department all relevant facts about individuals involved in corporate misconduct.”
“That appears to be playing out here,” Neale says. “I am unfamiliar with the evidence against Mr. Kruse, but the charges against him individually appear to represent an example of the Yates Memo policy being implemented. A deal for the company likely involved cooperation by the company in the DOJ prosecution of Mr. Kruse.”
Donald A. Shindler, co-leader of the food, beverage and hospitality group at Clark Hill in Chicago, says that Blue Bell made a mistake with its actions, and took the wrong public relations approach. “I think the Department of Justice is hammering these companies hard when they don’t do a little more self-reporting and a little more ‘let’s get to the bottom of this quickly,’” he says. “What the DOJ really raked Blue Bell over the coals with was they had some rumblings as early as 2013 from the investors saying they had to do better sanitation, and when this happened in 2015, they quietly pulled the two products off the shelf and didn’t tell wholesalers or retailers. Two weeks later, a third product was found contaminated with listeria pathogens and then the regulators got involved.”