On September 19, 2014, Stewart Parnell, the former owner and president and CEO of Peanut Corporation of America was found by a twelve member jury guilty of 67 federal felony counts associated with a massive Salmonella outbreak in 2008. His brother, Michael Parnell, who served as vice president of the company, was found guilty on 30 charges. Many of the counts were violations of the Federal Food, Drug and Cosmetic Act (FD&C Act). In accordance with the U.S. Supreme Court ruling in U.S. v. Park (aka the Park Doctrine), CEOs and other corporate officers can be held criminally liable for misdemeanor violations committed within their companies even if such violations were committed without their participation or knowledge.

The conviction of the Parnell brothers comes on the heels of another high-profile criminal case involving violations of the FD&C Act—Jensen Farms. In September 2013, the two brothers that ran the Colorado melon farming operation, Eric and Ryan Jensen, were arrested for violations of the FD&C Act following a deadly Listeria outbreak linked to their produce. The brothers plead guilty and each received six months of home detention, five years of probation, and 100 hours of community service. They were ordered to collectively pay $300,000 in fines.

Although both the PCA and Jensen Farms outbreaks were particularly tragic, the ensuing criminal prosecutions are a reminder of FDA’s broad authority under the FD&C Act which imposes criminal liabilities for a wide range of violations, including those that are much less severe than what occurred at Jensen Farms or PCA. Criminal penalties under the FD&C Act include significant fines and imprisonment. Convictions are punishable by up to one year of imprisonment and up to a $100,000 fine for an individual (unless the crime results in death, in which case the maximum fine is $250,000). Fines are doubled for organizations. Repeat violations or violations with intent to defraud or mislead are punishable by up to three years of imprisonment and fines.

Signed by President Obama in January, 2011, the Food Safety Modernization Act (FSMA) creates large new criminal liabilities for food industry firms up and down the supply chain. FSMA created new criminal violations under the Federal Food, Drug and Cosmetic Act (FD&C Act). These violations are:

1. Operating a facility not in compliance with the FSMA Preventive Controls Rules (for both Human and Animal Food)
2. Failure to comply with the FSMA Produce Safety Rule
3. Failure to comply with FSMA food defense regulations
4. Refusal or failure to comply with an FDA recall order
5. Knowing and willful failure to comply with consumer recall notification requirements
6. The importing or offering for importation of a food if the importer does not have a foreign supplier verification program in compliance with the FSMA Foreign Supplier Verification Program Rule
7. Failure to comply with recordkeeping requirements for high-risk foods

It is also important to be aware that violations of the Sanitary Food Transportation Act are punishable with criminal penalties. Although the law predates FSMA, it was never implemented by FDA. FSMA however required the Agency to promulgate rules to implement it.

It is essential that corporate officers be aware of the increased liability exposure they face under FSMA and take steps to manage it. These steps include being proactive when it comes to food safety, following-up to ensure resolution of food safety problems and shifting liability where possible among other things. For more information please contact Erik Lieberman at erl1@liebermanpllc.com or 202.830.0300.