Sunday, January 28, 2018
The 11th Circuit affirmed the convictions of three defendants coming from a 2009 investigation of a peanut production plant that was identified as the source of a nationwide salmonella outbreak. The court in United States v. Parnell stated in an unpublished opinion:
"The jury found Stewart and Michael guilty of several counts of fraudulently introducing misbranded food into interstate commerce, interstate shipment and wire fraud, and conspiring to commit these offenses. The jury also found Stewart guilty of fraudulently introducing adulterated food into interstate commerce. The jury found Stewart and Wilkerson guilty of obstruction of justice. The district court sentenced Stewart to 336 months [28 years] in prison, to be followed by three years of supervised release; sentenced Michael to 240 months [20 years] in prison, to be followed by three years of supervised release; and sentenced Wilkerson to 60 months [5 years] in prison, to be followed by two years of supervised release."
The convictions were based on conduct related to food safety and conduct during the investigation. The appellants were found to have "not [been] forthcoming with the FDA during its investigation."
"The court rejected arguments related to "juror exposure to extrinsic evidence." The court also rejected a discovery argument made by one of the defendants. This defendant objected to the government "producing a large hard drive of documents in late June 2014 when the trial was set to begin on July 14th." The defendant argued that this was "one of many untimely data dumps, where the Government produced hard drives containing hundreds of thousands of documents..." The court found that the district court had made a finding that the documents were searchable and that the government had provided a Bates index seven months prior to trial, and that "an IT consultant helped" the defendant and counsel "search and review the documents." The Court stated that "[g]iven that [the defendant] was able to search the documents, they were not suppressed for purposes of Brady."
See also opinion - here
R. Robin McDonald, 11th Circuit Upholds Convictions in One of Nation's Largest Criminal Food Safety Prosecutions, Daily Report, Jan. 26, 2018.
Monday, September 28, 2015
Just over a year ago, Stewart Parnell, the former CEO of Peanut Corporation of America (PCA), was convicted by a jury in the Middle District of Georgia of charges related to a deadly nationwide salmonella outbreak. The matter came to the government’s attention in late 2008 when people began falling ill across the country. The illnesses were eventually linked back to PCA’s peanut processing plant in Georgia. As investigators continued to examine the salmonella outbreak, they discovered that the case involved potential criminal misconduct by Parnell and others who allegedly knew about the contamination, attempted to cover it up, and continued to ship contaminated and potentially contaminated product. In one now infamous email from 2007, after being informed that batch test results were not back from the lab, Parnell wrote, “Just ship it.” The outbreak killed nine people and injured thousands more. Eventually, Parnell and others were charged in a 76-count indictment that alleged mail and wire fraud, introducing adulterated and misbranded food into interstate commerce, conspiracy, and obstruction of justice. A jury found Parnell guilty of 67 of the 68 charges against him on September 19, 2014.
On Monday of last week, U.S. District Court Judge W. Louis Sands sentenced Parnell to 28 years in federal prison. One interesting aspect of the sentencing is that because authorities charged this case as a “white collar” matter involving fraud, rather than a homicide case, the most significant factor driving the guideline sentencing range was not the deaths of nine people, but the loss of over $100 million by the various food companies that were forced to recall their products because of Parnell’s actions.
According to last week’s DOJ press release:
Judge Sands took into account the fraud loss of PCA’s corporate victims when imposing today’s sentence. The court found that Stewart Parnell and Mary Wilkerson should be held accountable for more than $100 million but less than $200 million in losses, and Michael Parnell should be held accountable for more than $20 million but less than $50 million in losses. The court also found the government established evidence that Stewart Parnell and Mary Wilkerson should be accountable for harming more than 250 victims, and Michael Parnell should be accountable under federal sentencing guidelines for harming more than 50 victims. The court additionally found that the Parnells should have known that their actions presented a reckless risk of death or serious bodily injury.
Looking at the applicable 2009 Federal Sentencing Guidelines (the Guidelines in place at the time of the offense conduct), one finds the following point allocations:
- Base Offense – 7 points
- Loss of more than $100 million – 26 points
- 250 or more victims – 6 points
- Risk of death – 2 points
- TOTAL: 41 points
While there were likely other applicable sentencing points, such as obstruction of justice and role in the offense, the above point allocations alone result in 41 total points. This translates into a guideline sentencing range of 324-405 months (27.00 – 33.75 years) for a defendant with no criminal history. Steward received 336 months (28 years).
To highlight the importance of the loss amount in the Guideline’s calculation, note that if this case had involved nine deaths, but no financial loss to food companies, the sentencing range under section 2B1.1 of the Federal Sentencing Guidelines would have dropped to 18-24 months in the above calculation. Obviously, this would have been a grossly unreasonable sentence given the devastating harm caused by Parnell.
I don’t know why this case was charged as a fraud and not a homicide. Perhaps it was to send a clearer message about national food safety by bringing federal charges, including charges directly related to the introduction of adulterated and misbranded food into interstate commerce. One additional item to note, however, as we think about the way this case proceeded, is that federal white collar sentences in high loss cases can often dwarf sentences for other crimes, including homicide. Consider that involuntary manslaughter in Georgia carries a maximum sentence of ten years in prison. Georgia also has automatic parole eligibility for most inmates. By comparison, Parnell received 28 years in prison using federal fraud statutes and their applicable sentencing guidelines. Further, there is no parole in the federal system.
Federal fraud offenses are often attractive to prosecutors because they are broad enough to apply in all manner of situations and carry potentially significant sentences. It should be no surprise, therefore, that we continue to see these statutes used in many cases that do not fit neatly into our traditional definitions of “white collar crime.” For a further discussion of the way “white collar offenses” are used in a vast array of cases, many of which do not involve traditional white collar criminal activity, see “White Collar Crime”: Still Hazy After All These Years, 50 Georgia Law Review Issue 3 (Lead Article) (forthcoming).
Wednesday, September 3, 2014
Last month Prof. Douglas Berman reported in his indispensable Sentencing Law and Policy blog about a ten-year prison sentence imposed by SDNY judge Richard Berman upon defendant Rudy Kurniawan, who had sold counterfeit wine to the very rich, including billionaire William Koch (one of the less political Koch brothers), and allegedly profited by over $28 million (see here by scrolling down to August 10, "Can wine fraudster reasonably whine that his sentence was not reduced given wealth of victims?" See also here). Some of the ersatz wine sold for as much as $30,000 per bottle.
Having a somewhat perverse sense of humor, I found it somewhat amusing that the 1% paid astronomical sums for and presumably sometimes drank the same wine that the other 99% of us drink. However, neither the judge nor the prosecutor (nor certainly the defendant and his lawyer) viewed the sentencing proceeding as a laughing matter.
To be sure, a $28 million fraud is a serious matter deserving serious punishment. Additionally, the judge seemed to view the crime in part as a public safety violation, declaring "The public at large needs to know our food and drinks are safe, -- and not some potentially unsafe homemade witch's brew," even though this was hardly a contaminated baby food case.
At the sentencing hearing, Kurniawan's attorney argued, reasonably I believe, that his client should be treated somewhat less severely since the victims were exceedingly wealthy. That argument provoked the prosecutor to the Captain Renault-like response that it was "quite shocking" for a lawyer to argue for a different standard for theft from the rich than from the poor.
That retort reminded me of Anatole France's immortal line (although not directly on point), "The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, beg in the streets or steal bread." In my view, a sentencing judge should certainly consider in sentencing the extent of damage to the victim(s). A fraudster who steals a million dollars from a billionaire, notwithstanding the Sentencing Guidelines' overemphasis on absolute figures, should (all things being equal) not deserve as harsh a sentence as one who steals the same amount if it were the entire life savings of a senior citizen.
Prosecutors, when fraud victims are pensioners and widows, argue, I believe reasonably, that the judge should consider the degree of suffering of the victims. Indeed, every seasoned white-collar trial lawyer knows that in a multi-victim fraud case the government is likely to call as "representative" witnesses those most sympathetic victims for whom the monetary loss was most damaging.
I assume that the prosecutor will get over his "shock" when he prosecutes a fraud case where a less than affluent victim's life savings are stolen. I further assume he will not argue that the judge should impose the same sentence she would if the victim were a billionaire for whom the loss figure might be pocket change.
Tuesday, March 5, 2013
One of the several troubling aspects of the continuing overcriminalization of federal law is the frequent elevation of a violation of civil regulation to a crime. In United States v. Izurieta, 11th Cir., 11-13585 (February 22, 2013), the Eleventh Circuit addressed this issue.
The defendants in Izurieta were convicted after trial by jury of violating the general smuggling statute, 18 U.S.C. 545, importing goods "contrary to law," by violating a customs regulation, 19 C.F.R. 142.113(c), in failing to redeliver to Customs for exportation or destruction goods purportedly contaminated with E. coli, Staphylococcus aureus and/or Salmonella which had been conditionally released.
The defendants appealed on various grounds -- significantly not including whether the indictment sufficiently charged a crime by relying on the Customs regulation. At oral argument, however, the Court raised this issue sua sponte and ordered supplemental briefing.
Section 545, as pertinent here, reads:
Whoever fraudulently or knowingly imports or brings into the United States, any merchandise contrary to law, or in any manner facilitates the transportation, concealment, or sale of such merchandise after importation, knowing the same to have been imported or brought into the United States contrary to law . . . shall be fined . . . or imprisoned . . . .
The regulation or "law" upon the charges here were based covered the "failure to deliver, export, and destroy with FDA supervision" certain foods found to be adulterated. 19 C.F.R. 141.113(c).
The Court in its opinion recognized a split among circuits on when a regulation constitutes the "law" upon which a Section 545 indictment may be based. The Ninth Circuit in United States v. Alghazouli, 517 F.3d 1179, 1187 (9th Cir. 2008) took what the opinion called "a relatively narrow interpretation" of Section 545 that regulations are included in "law" only when "there is a statute (a 'law') that specifies that violation of that regulation is a crime." The Fourth Circuit in United States v. Mitchell, 39 F.3d 465, 470 (4th Cir. 1994), to the contrary, took what the opinion called a "more expansive" view, deciding that Section 545 criminalizes violations of any regulation "having the force and effect of law" based on a three-prong test.
The Court, while claiming its binding authority, Bobb v. United States, 252 F.2d 702, 707 (5th Cir. 1958) was consistent with the Fourth Circuit's "expansive" approach in Mitchell, applied the rule of lenity and held that the regulation in question did not qualify as a "law" for purposes of Section 545 liability. It found that the regulation in question was primarily to reflect contractual requirements between Customs and the importer and thus was "civil only."
The rule of lenity was premised, it said, on two ideas: first, that "a fair warning should be given . . . of what the law intends to do if a certain line is passed" and, second, that "legislators and not courts should define criminal activity."
This apparent case-by-case approach, of course, does not establish a "bright line" as to when violations of an administrative regulation become a crime. Citizens and attorneys will often have to guess whether a violation of a regulation is a crime; that is, "what the law intends to do if a certain line is passed." The case may, however, curb the government's increasing efforts to convert violations of ostensible civil regulations into crimes.
This case should remind lawyers that the uncertainties in this area require that they pay attention at both the trial and appellate levels to the issue of whether a violation of an administrative regulation is a crime.
(A hat tip to Paul Kish and the Federal Criminal Lawyer Blog)