Former Bumble Bee CEO found guilty of tuna price-fixing scheme

UNITED STATES
Thursday, December 05, 2019, 00:00 (GMT + 9)

Former Bumble Bee Foods LLC Chief Executive Officer Chris Lischewski was convicted in a price-fixing conspiracy, capping a yearslong U.S. investigation that shook the packaged seafood industry and pushed Bumble Bee into bankruptcy last month.

Lischewski was found guilty Tuesday by a federal jury in San Francisco after just a few hours of deliberations in what experts say is likely the final piece of the Justice Department probe. Prosecutors alleged that he conspired with colleagues and executives at rival companies on a “peace proposal” in order to boost prices and meet earnings targets set by Bumble Bee’s 2010 sale to Lion Capital.

The former CEO faces up to 10 years in prison and a fine of USD 1 million, according to the indictment.

“We are very disappointed by today’s verdict,” Lischewski’s lawyer, Elliot Peters, said in an emailed statement. “We continue to believe strongly in Chris Lischewski’s innocence and intend to continue vigorously to pursue justice for Chris.”

The conviction underscores the Justice Department’s “willingness and ability to try high stakes price-fixing cases against senior corporate executives,” said Phil Giordano, a partner in the antitrust practice of Hughes Hubbard & Reed LLP and a former federal prosecutor who is not involved in the case.

San Diego-based Bumble Bee, owner of the largest North American brand of packaged seafood, pleaded guilty in 2017 to a felony charge of conspiring with competitors Starkist Co. and Chicken of the Sea Inc. to fix and raise prices of canned tuna in the U.S. from 2011 through at least late 2013.

The company’s guilty plea carried a criminal fine of USD 25 million, a reduced figure that the Justice Department agreed to after Bumble Bee argued a stiffer penalty would tip it into bankruptcy. Subsequent lawsuits filed against Bumble Bee by its customers, mostly major U.S. grocers, added to the financial pressure, forcing the tuna company to file for Chapter 11 protection from creditors on Nov. 21.

“Prosecutors don’t try to put companies out of business,” Giordano said. “But sometimes a fine by the book is in fact so substantial that it can bankrupt the company.”

Starkist pleaded guilty to the price-fixing charges in 2018 and also agreed to cooperate. Chicken of the Sea, owned by Thai Union Group PCL, received conditional leniency from the Justice Department for its cooperation with the investigation and didn’t have to pay fines.
In the case against Lischewski, prosecutors leaned on testimony from his former subordinates, Kenneth Worsham and Walter Cameron, who in 2016 pleaded guilty to price fixing and agreed to cooperate with prosecutors.

Peters devoted much of his closing arguments to attacking the credibility of Worsham and Cameron, arguing they fed prosecutors information they wanted to hear in order to reduce their own sentences and fines.

Lischewski’s conviction may make him a target in class-action lawsuits against Bumble Bee and related parties, said Eric Snyder, chairman of the bankruptcy practice at Wilk Auslander LLP, who is not involved in the case.

“Given the criminal fine here, he might end up filing for personal bankruptcy,” Snyder said.

The case is U.S. v. Lischewski, 18-cr-00203, U.S. District Court, Northern District of California (San Francisco).

Authors:  Joel Rosenblatt and Eliza Ronalds-Hannon /Bloomberg

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