UPDATE: June 16, 2020: Former Bumble Bee Foods CEO Chris Lischewski was sentenced to 40 months in prison and will need to pay a $100,000 fine after being convicted of price-fixing, the Department of Justice announced. The ruling was handed down by Edward Chen, a federal judge in California, Undercurrent News reported.
Dive Brief:
- Former Bumble Bee Foods CEO Chris Lischewski was found guilty of conspiring to fix prices of canned tuna sold in the U.S. from about November 2010 to December 2013. Lischewski was convicted by a federal jury Tuesday in San Francisco after just a few hours of deliberations.
- The verdict comes after a four-week trial in the U.S. District Court for the Northern District of California and a yearslong investigation into the price-fixing conspiracy. The ex-CEO faces up to 10 years in prison and a $1 million fine.
- "The jury’s verdict is a reminder that no one, including members of the C-Suite, is above the law," Assistant Attorney General Makan Delrahim of the Department of Justice's Antitrust Division said in a release. This verdict reaffirms the department's commitment to "rooting out collusion that robs American consumers of the benefits of competition when they purchase household staples like canned tuna," he said.
Dive Insight:
This conviction could set a precedent for future executives facing charges for their companies' actions and caps off the long antitrust investigation that has roiled the canned tuna industry and forced Bumble Bee to file for bankruptcy last month.
Since the three largest tuna giants were accused of the price-fixing conspiracy that affected hundreds of millions of dollars in sales, the companies have faced major fines, lawsuits, bankruptcy and executive charges. Lischewski's guilty verdict is the latest hit to an industry struggling to make a comeback.
Tuna giants StarKist and Bumble Bee both pleaded guilty to federal charges of price fixing in the last three years. Bumble Bee's guilty plea came with a $25 million fine, while StarKist was sentenced to pay $100 million. Chicken of the Sea served as the whistleblower in the investigation and wasn't fined.
The tuna industry has struggled to recover from these accusations as consumer demand has shifted and sales have dropped. According to market research firm IRI, tuna sales fell 4% by volume between 2013 and October 2018.
Last year, Lischewski, who had served as CEO of Bumble Bee since 1999, was indicted by a grand jury on charges related to his involvement in the scheme. At the time, Lischewski temporarily stepped down from his role as CEO. At his trial, prosecutors argued Lischewski conspired with rival companies to raise prices and hit earnings targets set by Bumble Bee's 2010 sale to Lion Capital.
According to evidence presented at trial, the Justice Department said Lischewski and others worked to hide their actions by meeting at offsite locations, using outside email addresses and getting rid of documents about the scheme. Three other executives who already pleaded guilty to price-fixing charges — one from Starkist and two from Bumble Bee — testified at Lischewski's trial. Prosecutors also used the testimony of former Bumble Bee employees who pleaded guilty in 2016 and agreed to help the prosecution to avoid jail time.
This latest verdict is a reminder that C-suite executives can be found personally responsible for their business's actions.
But it isn't the first time top level executives have been held accountable for their company in court. After more than 500 million eggs from two Iowa farms owned by Austin "Jack" DeCoster were recalled in 2010 and sickened 56,000 people, he and his son Peter DeCoster plead guilty for selling contaminated eggs and bribing a USDA inspector to try and sell eggs that failed to meet industry standards. The men were jailed for 3 months and fined $6.8 million.
Although the DeCosters only served time for a couple months, other executives have faced longer prison time. Former Peanut Corporation of America CEO Stewart Parnell was convicted of knowingly distributing salmonella-tainted peanut butter, which killed nine people and sickened 714 in 2008. Parnell is now serving a 28-year prison sentence.
Since the company pleaded guilty to federal charges, Bumble Bee has also been sued by its customers, including grocers and suppliers like U.S. Foods and Walmart. Lischewski's guilty verdict may also make him a target in future class-action lawsuits.
This latest case could spook other companies and executives currently facing price-fixing accusations. This year, the U.S. Justice Department intervened in a major price-fixing lawsuit against chicken producers, including Tyson Foods, Sanderson Farms and Pilgrim's Pride, which experts said could mean the government is close to bringing federal charges. Similar lawsuits also have been filed involving dairy, pork and beef.
If any price-fixing accusations follow the same path as these in the tuna industry, executives may want to recall this verdict and carefully consider their options.
