U.S. District Court Judge Edward M. Chen once again postponed the sentencing hearing for StarKist, which pleaded guilty to fixing the price of canned tuna sold in the United States between 2011 and 2013.
After an hour-long hearing on 7 August in which Chen sought to determine whether StarKist has the ability to pay a USD 100 million (EUR 89 million) fine, the judge delayed sentencing until 11 Setpember, with both the U.S. Department of Justice and StarKist required to submit a status report by 4 September.
At issue is a request by StarKist to reduce the fine to USD 50 million (EUR 44.5 million) and its claim that the full USD 100 million fine would drive it into insolvency. At the conclusion of the August hearing, Chen ordered StarKist and the DOJ to attempt to craft a conditional agreement whereby the USD 100 million fine can be reduced in the future if StarKist runs into further financial difficulty.
A central point of disagreement that has emerged between the DOJ and StarKist in the past two months has been the DOJ’s insistence that the company sell its holding in Techpack Solutions, an India-based can and bottle technology firm with major sales in South Korea. StarKist paid USD 154 million (EUR 137 million) for a 44 percent holding in Techpack, but StarKists insists it cannot sell the asset, and that it should not be required to.
For its part, DOJ lawyers contend that StarKist has not made a meaningful effort to find a buyer for its Techpack holding, nor has it attempted to refinance its loans.
“StarKist’s arguments regarding why a USD 154 million asset cannot be used for this purpose are implausible, contradictory, and unsupported. StarKist’s ownership of Techpack can and should be accounted for when determining its ability to pay a USD 100 million criminal fine,” they wrote in a 2 August filing. “Techpack is not essential to StarKist’s ongoing operations … It simply would prefer to hold on to Techpack so it can reap the benefits of, rather than sell or leverage it to pay StarKist’s fine. The Guidelines do not provide for a fine reduction simply to preserve potential future profits and justice requires that a corporate criminal defendant be treated like all other criminal defendants: it should divest itself of a non-essential asset to pay for its criminal actions. Just as other criminal defendants may have to sell luxury cars, second homes, or other assets to satisfy criminal judgments, StarKist should sell Techpack if needed to pay its fine.”
While StarKist has sought to compare itself to Bumble Bee, which received a significant reduction in its criminal fine from Chen after its own guilty plea in the price-fixing case, the DOJ lawyers said such a comparison is unfair. Bumble Bee was “highly leveraged and carried approximately USD 500 million [EUR 446.2 million] in third-party debt, which was reaching maturity in less than a year,” they argued, while StarKist was able to obtain new financing even after its own guilty plea.
“When StarKist obtained its loan in 2018, it had already signed its plea agreement and disclosed to its lenders that it was facing a USD 100 million fine. Still, its lenders provided StarKist with a USD 150 million loan and StarKist secured a loan guarantee from its ultimate parent. StarKist’s lenders would not have approved, and its parent [Dongwon Industries] would not have guaranteed StarKist’s loan unless they were confident StarKist could weather a USD 100 million fine. StarKist is not on the verge of bankruptcy,” they argued.
Additionally, the DOJ is fighting StarKist’s request for a revised payment schedule in the event it is levied the full fine. StarKist is requesting it pay an initial USD 250,000 (EUR 223,000) within 30 days after the final judgment, with four annual payments of USD 5 million (EUR 4.5 million) per year, with a final payment due five years after the final judgment. The DOJ, in contrast, is requesting USD 10 million (EUR 8.9 million) upfront and USD 18 million (EUR 16.1 million) per year for the next five years.
Photo courtesy of Chinese Historical Society of America
