Food Fraud incidents being treated as criminal cases? In the MSU Food Fraud Overview MOOC earlier this month I briefly discussed this, and I want to follow up with examples and details here. It takes quite a bit for a US agency to pursue criminal charges when there are civil law options. The burden of proof for a criminal case is much higher than for civil charges — and in many situations even State civil cases can shut down a business and seize all assets, even when the business is not aware of the dangerous public health threat. For example, see the State of Alabama’s Deceptive Trade Practices Act. This act is focused on protecting public health and welfare but also on protecting the legitimate innovative businesses that are trying to provide healthy lifestyle products.
Packaging industry legal guru Eric Greenberg discussed in a Packaging World article the criminal charges levied against Peanut Corporation of America (PCA). The criminal charges are outlined in an indictment that is based on intent to defraud. One of those charged already pleaded guilty… so the prosecution will probably have a willing witness. One broader law, the Park Doctrine, states that charges can be brought against corporate leaders even if they didn’t know of the dangerous acts. In the PCA case there is evidence that the leaders did know of the salmonella contamination, so other, more direct charges could be levied.
The PCA case highlights a concerning issue for food manufactures and retailers where the fraudster is actively seek to avoid detection. Even in facilities that are audited by competent auditors – even in unannounced inspections – the bad guys can find ways to hide their fraudulent operations , which is what happened when PCA intentionally transferred product from a non-certified plant to a certified one after inspections.
Various types of criminal charges can apply. During the MOOC I mentioned what the US Customs has called “honey laundering.” This is where honey is transshipped from a country with a high tariff through a country with a lower tariff and labeled as coming from that low tariff country. The “origin laundering” or “neutralization” is the fraudulent and deceptive change of the country of origin on the label. The fraud opportunity for tax avoidance smuggling can be substantial. One honey case led to $180 million in profit from avoided taxes through this sleight of hand. (See honey laundering stories here and here.)
There is a public health vulnerability in smuggling for two reasons. First, in a recall, it is not possible to trace the fraudulent honey… or worse, if the traceability codes are incorrect, we might recall the wrong product while the dangerous product remains in the marketplace. Second, we lose transparency on the product, itself. With the lack of transparency there is an increased fraud opportunity to use unapproved or dangerous ingredients. At minimum, the bad guys often get greedy and start adulterating the product to further increase their profits.
As was stated in the indictments, several of the food fraudsters did start adulterating the honey with sugar. In this instance the perpetrators all knew they were committing a crime so criminal charges were not a surprise – though criminals don’t think they’ll get caught.
Regarding Food Fraud Prevention, the take-away is that we need to reduce the fraud opportunity regardless of whether we trust our suppliers or don’t think there is any logical reason to commit fraud. Regarding protecting your corporate leaders from being led out of your facility in handcuffs… be diligent in developing and supporting a Food Fraud prevention strategy. Address “reasonably foreseeable hazards” and your actions will reduce the potential charge of “willful blindness.” JWS.