A U.S. judge holds the fate of canned tuna company StarKist in his hands, according to a company representative speaking in federal court.
Niall Lynch, an attorney representing StarKist in a hearing with U.S. District Court Judge Edward M. Chen, called the decision in the upcoming sentencing of the company following its guilty plea “unprecedented.”
“This is a USD 50 million [EUR 44.3 million] hearing. The low end [of the fine] is USD 50 million, the high is USD 100 million [EUR 88.5 million],” he said. “This is really about the life or death of our company, and its ability to continue as an ongoing concern.”
Pittsburgh, Pennsylvania-based StarKist announced it would plead guilty on Thursday, 18 October, 2018, to fixing the prices of the canned tuna it sold in the United States between 2011 and 2013. In that time, StarKist acknowledges selling around USD 600 million (EUR 531 million) worth of canned tuna, setting its minimum criminal fine at USD 50 million and the ceiling on the fine at USD 100 million.
Attorneys representing the Antitrust Division of the U.S. Department of Justice have argued the company can afford to pay the maximum fine, but at the 14 November, 2018, hearing in which StarKist entered its guilty plea, Lynch said that amount, combined with the restitution it is paying to retailers and foodservice companies as a result of lawsuits connected to the price-fixing, will put the company’s future in jeopardy.
“We're not walking away from our responsibility here,” Lynch said. “We're agreeing to pay, at a minimum, USD 50 million. It's just simply USD 100 million will either bankrupt the company, or absolutely impair its ability to pay restitution to victims."
Under U.S. law, restitution has primacy over the size of the fine, according to Lynch, meaning that if the fine impaired StarKist’s ability to pay restitution, the court is required to reduce the fine to a point at which the company can pay restitution.
To aid Chen in making his determination, Lynch said StarKist is planning to ask for an evidentiary hearing in front of the judge, including live testimony from expert witnesses describing the financial situation of the company, estimates for the total cost of payments from the numerous civil lawsuits StarKist has settled and which it continues to face, and presenting evidence estimating the available money it has on hand to pay a criminal fine.
“We think that all of the evidence should be presented to the Court in its fullest form, so that the court is fully informed,” Lynch said.
Speaking on behalf of the Department of Justice, Assistant U.S. Attorney Leslie Wulff said the government would present evidence that would prove StarKist has the ability to pay the full USD 100 million fine, even taking into account the numerous lawsuits it faces.
“The government does not believe it's necessary for the civil cases to be resolved in order for this court to make a finding as to whether or not StarKist has an ability to pay,” Wulff told Judge Chen. “And I believe that once the issue has been more fully put to Your Honor by the parties and probation, that that will become clear to Your Honor as well.”
There is precedent for StarKist to request its fine be reduced. The U.S. Department of Justice agreed to lower the fine levied against Bumble Bee Foods for its role in the price-fixing scandal in part because a larger fine could have led to the company’s insolvency. However, part of the agreement entailed Bumble Bee working with the government to further unravel the particulars of how the conspiracy worked; as the last defendant facing charges in the case, that option is likely not available to StarKist.
In exchange for cooperating in the Department of Justice’s investigation, Bumble Bee received a reduction in its fine to USD 25 million (EUR 22.8 million), down from a maximum potential fine of much as USD 272.4 million (EUR 234 million). In addition, due to Bumble Bee’s financial position, the DOJ allowed payment of its fine over a five-year timeline, and waived interest over that period.
“The USD 25 million fine represents a reduction below the guidelines fine range due to Bumble Bee’s inability to pay a full criminal fine without substantially jeopardizing the continued viability of the organization,” the DOJ’s sentencing memorandum said.
However, Assistant U.S. Attorney Wulff’s statements to the court at November hearing indicate the government appears less willing to strike a compromise with StarKist.
StarKist’s sentencing hearing has been tentatively scheduled for 12 June, 2019, though that date may be pushed back again – it was originally scheduled for May – as direct and indirect purchasers of the canned tuna affected by the price-fixing make a legal push to provide testimony at the hearing.