The New Normal for the Food Industry - Compliance Programs and Employees Who (Seriously) Enforce them.

The Company: Peanut Corporation of America (PCA). The Crime: not complying with good manufacturing practices resulting in a potentially deadly outbreak of food borne illness. The Punishment: PCA is out of business, and on February 20, 2013 the Department of Justice unsealed a 76 count criminal indictment of former executives and employees. See Indictment, available here.

The indictment relates to a national outbreak of salmonella in 2008 and 2009 that was traced to PCA "as a likely source for that outbreak."

As charged in the indictment, PCA produced peanuts ... under insanitary conditions, which included PCA's failure to follow appropriate practices to ensure its plants were sanitary, its failure to prevent cross-contamination between raw and cooked product, and its failure to take adequate steps to keep rodents and insects out of the plant.

See the Department of Justice Press release, Feb. 21, 2013, available here.

The Indictment charges that the employees committed fraud and conspiracy by falsifying data concerning the "quality and purity of the peanut products and specifically misled PCA customers about the existence of foodborne pathogens..." The indictment charges that test results were ignored and the company falsified documents that attested to quality "stating that shipments of peanut products were free of pathogens when, in fact, there had been no tests on the products at all or when the laboratory results showed that a sample tested positive for salmonella."

Compounding the criminal problems, once the investigation began "[defendants] gave untrue or misleading answers to questions" concerning "the plant, its operations, and its history." The charges range from conspiracy to introduce adulterated food into interstate commerce and misbranding with the intent to defraud, to wire fraud and obstruction of justice. One of the defendants has already pled guilty

Announcing the indictment, the Deputy Assistant Attorney stated that:

Under the FDCA, it is illegal to introduce into our markets a food or drug that is adulterated – which, for foods, generally can mean either that the product is tainted or that it was produced or handled in insanitary conditions. As a result, the FDCA is a powerful tool for protecting the health and safety of all Americans. Using the FDCA, the Department has worked to prevent adulterated products from reaching consumers by securing injunctions that ban companies from distributing food or drugs until they have cleaned up their facilities. And, when adulterated products do reach the market and pose a significant danger to the public, we will not hesitate to bring criminal cases that seek to hold wrongdoers accountable and deter other would-be violators.

See Statement of Principal Deputy Assistant Attorney General Stuart F. Delery, February 21, 2013, available here.

Beginning in 1906, when faced with information concerning widespread unsanitary food handling, Congress established the Food and Drug Administration and set its mission to promote the public health and to ensure that "foods are safe, wholesome, sanitary and properly labeled." 21 U.S.C. § 393. Since that time, outbreaks of foodborne illness have resulted in Congress increasing the grant of federal oversight of the food industry providing the FDA more and greater powers to regulate and punish food manufacturers for violations of the Food Drug and Cosmetic Act (FDCA) and FDA's Regulations. Most recently and perhaps most profoundly, the Food Safety Modernization Act of 2010 (FSMA) signed into law on January 4, 2011 gave the FDA significant new muscle and, since its enactment, FDA has flexed its substantial new regulatory might through fines, product detention, suspension of registration and criminal prosecution of executives and employees.

Section 402 FSMA granted the FDA "expanded authority" to detain and seize any regulated food determined to be unsafe, adulterated or misbranded, "or otherwise failing to meet the requirements of the food safety law." In addition to FDA's new seizure and detention powers, FSMA added significant civil penalties (i.e. "not more than $1,000,000 for each offense and every day is considered a separate offense) and expands on the criminal sanctions under the FDCA.

Under prior law, the penalty was up to 1 year in prison. Now, if the offense results in serious illness, "the person committing the violation shall be imprisoned for not more than 5 years" and 10 years if it results in death. Couple these sanctions with the government's use of the Park Doctrine in prosecuting "C" suite officers, even when they had no actual knowledge of an offense, and there should be no question that ensuring compliance can no longer wait until an inspector knocks at the door. In the past, adverse health outcomes were strong drivers for enforcement and criminal prosecutions, but the new powers granted under FSMA has resulted in a demonstrable willingness to use the new authority granted under FSMA without waiting for an adverse health outcome:

When food or drug manufacturers lie and cut corners, they put all of us at risk. The Department of Justice will not hesitate to pursue any person whose criminal conduct risks the safety of Americans who have done nothing more than eat a peanut butter and jelly sandwich.

As FDA continues its march to implement FSMA, including its proposed Rule concerning Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Human Food there are three things manufacturers and distributors must do: Comply, Comply, Comply. Having a written Comprehensive Plan that includes responding to FDA inspections is an essential first step. A robust response with a comprehensive corrective action plan demonstrating the ability to immediately implement corrective measures might be the one thing that prevents fines, product detentions, suspension of registrations and criminal prosecution of executives and employees.

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