Last week, federal prosecutors in Georgia filed papers supporting the local probation office’s U.S. Sentencing Guidelines calculation calling for a sentence of life in prison for Stewart Parnell, the one-time CEO of Peanut Corporation of America (PCA), for his role in a salmonella outbreak. The case is a cautionary reminder for the food and beverage industry about the frightening consequences of non-compliance and misconduct in their supply chains.
PCA was a supplier of peanut ingredients to international food and beverage companies, grossing approximately $30 million per year. The investigation began after a salmonella outbreak, ultimately traced to PCA processing facilities, led to nine deaths and over 700 customers falling ill.
The government’s case was based on PCA shipping products before required salmonella and fecal coliform testing was complete (or sometimes without testing at all), shipping products company officials knew tested positive for salmonella, falsifying lab reports, and lying to customers about whether salmonella had previously been detected at PCA’s roasting facilities. According to the testimony presented at trial, Parnell was personally informed by a customer that a PCA product shipment had tested positive for salmonella, but he feigned surprise and continued to order shipments released before testing was complete. Emails introduced into evidence showed that Parnell explicitly directed his subordinates to release untested products, and to lie to customers and the U.S. Food and Drug Administration. Not surprisingly, then, he was convicted of selling adulterated food products, fraud, and obstruction of justice after a lengthy trial.
In a pre-sentencing hearing, the U.S. Probation Office and the government urged the court to find that Parnell’s conduct resulted in over $100 million of loss to 31 corporate victims, mostly due to recall expenses. A U.S. Centers for Disease Control and Prevention expert witness testified that more than 20,000 people likely became ill from eating PCA’s products, in addition to the more than 700 confirmed salmonella cases traced to PCA. Indeed, Parnell faces a possible life sentence under the sentencing guidelines precisely because of the combination of costly recalls, the large number of victims, and his supervisory role in the company.
To be sure, Parnell’s conduct was extreme: he knowingly authorized the shipment of untested products, after numerous positive tests from the same facilities, all but admitting that he would cut corners on safety if he thought he could get away with it. But that provides little comfort to industry. The Parnells of the world get lengthy sentences, but ignorance is no guarantee that a defendant can escape a conviction and sentence: federal law imposes strict, vicarious criminal liability for introducing adulterated food into interstate commerce. In other words, food and beverage company executives can be criminally convicted if their company sells contaminated products, even if they didn’t know about the contamination, so long as they have authority over the offending facility.
Parnell’s case illustrates the need for end-product manufacturers in the food and beverage industry to be vigilant in their attention to supply chain management. It reminds ingredient suppliers to large food and beverage companies that the cost of their mistakes will be multiplied if end-product manufacturers must institute recalls. And most of all, it illustrates that a culture of compliance must begin at the top.