In May 2020 the Department of Justice (DOJ) indicted Jason Penn, then CEO and marketing executive Roger Austin of Pilgrim's Pride and their counterparts Mikell Fries, CEO and Scott Brady of Claxton Foods on charges of price collusion The DOJ has now indicted additional broiler industry managers alleged to have been involved in collusion. The charges brought by the Department of Justice carry sentences of up to ten years in prison and a fine of $1 million.
Although news reports have implicated an additional three companies, they are in fact not involved other than having apparently innocently employed marketing personnel fired by Tyson Foods. In the process of defending a class action civil lawsuit, an internal investigation by Tyson Foods demonstrated irregularities. To their credit the company immediately approached the DOJ and negotiated a leniency arrangement, obviously with the assurance of cooperation. Ex-Tyson employees who migrated to other companies have been charged including Timothy Mulrenin, William Kantola and Brian Roberts. In deference to the situation, CHICK-NEWS is withholding the names of companies that employed ex-Tyson marketing personnel presumably without knowledge of their previous activities.
Bill Lovette, former CEO at Pilgrim's Pride who retired in March 2019 has been indicted on evidence that he either actively participated or condoned illegal activity during his tenure. His successor Jason Penn was first placed on administrative leave on June 15th, but then was terminated on September 25th, succeeded by Fabio Sandri the CFO of Pilgrim’s Pride.
It is however apparent that in addition to Pilgrim's Pride and Claxton Foods the principal subjects of the May indictments, other integrators may have been involved in allegations of price fixing and additional indictments may be forthcoming.
The DOJ inquiry suggests that illegal activity occurred as early as 2012 and extended until 2019 based on documentation of the alleged collusion. Since the May indictments the DOJ has probably "turned" lower-level individuals as is the practice with white-collar criminal investigations.
The intervention by the DOJ placed a hold on the class-action civil suit alleging collusion among major broiler integrators over an extended period. An aspect of this case relates to indirect collusion through subscribing to the Agristats® subscription benchmarking service documenting historical cost and sales data. The plaintiffs allege that data disseminated by Agristats® enabled integrators to manipulate supply through strategic placement of breeder replacement flocks thereby maintaining higher wholesale prices. It is noted that in an early stage of the civil lawsuit Fieldale Farms settled with the plaintiffs for a substantial figure subject to their cooperation with the law firms involved.
The attitude of the Department of Justice is exemplified in the statement of Makan Delrahim, the Assistant Attorney General for the Antitrust Division who stated, "executives who choose collusion over competition will be held to account for schemes that cheat consumers and corrupt our competitive markets". Delrahim prosecuted Christopher Lischewski CEO of Bumble Bee Seafoods who pleaded guilty to charges relating to collusion in participating in a scheme to rig the canned tuna market. He was sentenced to 40 months in Federal prison and fined $100,000. Starkist a co-colluder with Bumble Bee was subject to a civil penalty of $100 million.
It would be advantageous for the broiler industry if this case were to be disposed of as soon as possible to avert further degradation of image. The criminal indictments could be settled with guilty pleas avoiding further negative publicity. Then there is the question of the civil case. With guilty pleas or verdicts the plaintiffs only have to justify their damages since the outcome of a trial is predictable.
(see the Commentary on Pilgrim's Pride settlement with the DOJ below in this edition)