Judge demands StarKist explore sale of TechPack to pay price-fixing fine
In a three-hour court hearing, prosecutors from the U.S. Department of Justice asserted StarKist’s investment in TechPack Solutions, an India-based can and bottle technology firm, was worth more than the potential USD 100 million (EUR 89.1 million) fine StarKist faces for playing a part in a criminal price-fixing conspiracy.
StarKist’s own expert witness placed the value of StarKist’s holding in TechPack at USD 155 million (EUR 138 million), and prosecutors said the holding gives StarKist “more than enough to pay for … the criminal fine and expected payouts in civil claims,” according to a summary of the 12 June hearing.
However, StarKist, which is pushing to have its criminal fine lowered to USD 50 million (EUR 44.3 million), claimed it cannot sell its holding in TechPack due to loan agreements requiring the consent of its lenders. StarKist also argued selling its stake would be difficult.
As a result of the dispute, U.S. District Court Judge Edward M. Chen postponed the sentencing hearing – in which he was to determine the amount of StarKist’s fine – until after a 7 August hearing on the TechPack issue.
Pittsburgh, Pennsylvania, U.S.A.-based StarKist has been sparring with Department of Justice lawyers over its ability to pay the full USD 100 million fine, which StarKist counsel Niall Lynch previously said could bankrupty the company.
"We're really not profitable at all," Lynch reiterated at the 12 July sentencing, according to Law360.
StarKist has already paid out USD 55 million (EUR 49 million) in civil settlements with many of the major U.S. grocery chains, including Walmart, Kroger, and CVS, and remains the target of a class-action lawsuit. Lynch said in a previous filing that the company cannot afford both the full criminal fine and the cost of all its civil settlements.
“StarKist simply cannot pay a USD 100 million dollar fine, make full restitution to civil plaintiffs, and remain viable in the packaged tuna industry,” he said. “StarKist is facing serious financial difficulty and is operating in a struggling industry … To order a USD 100 million fine here would defeat the purpose of the antitrust laws under which StarKist was prosecuted – rather than protecting the market, it would redistribute money away from victims toward the government and markedly reduce competition in the packaged tuna industry.”
However, Andrew Mast of the U.S. Department of Justice's Antitrust Division countered StarKist’s assertion.
"StarKist has the ability to pay a USD 100 million fine and plenty of room left over to settle claims," he said at the hearing, according to Law 360, calling the company’s discussion of bankruptcy as “an empty scare tactic."
Mast and other DOJ attorneys have criticized StarKist’s financial analysis as coming to “faulty conclusions,” including a financial outlook that shows the company’s sales of canned tuna declining, without including any information on its sales of pouched tuna, an increasingly popular and more high-margin product.
Furthermore, StarKist’s attempt to compare itself to its fellow conspirator, Bumble Bee, which received a reduction in its criminal fine to USD 25 million (EUR 22.8 million), is not accurate, prosecutors stated.
“If anything, the USD 50 million fine sought by StarKist would disproportionately undervalue the timing and nature Bumble Bee’s fine reflected an inability-to-pay reduction based on Bumble Bee’s financial exigencies,” the DOJ said. “In addition, Bumble Bee’s fine reflected a downward departure of over $50 million for substantial assistance [to prosecutors] – a reduction that Starkist did not earn or receive.”
Granting StarKist’s application to have its fine lowered would reward a bad actor, prosecutors alleged.
“A USD 50 million fine would not afford adequate deterrence to criminal conduct,” they argued. “Instead, it would demonstrate to other corporate defendants that they can escape just punishment for their crime by spending money on anything and everything ... other than the penalty for that crime.”
But Lynch said StarKist’s financial situation is dire, alleging the company only had about USD 6 million (EUR 5.4 million) in cash on-hand. After being pressed by Chen, however, Lynch acknowledge the company had not explored how it might sell off assets such as TechPack.
"Even at a fire sale there seems to be a lot of value there," the judge told StarKist, according to Law 360.
Both StarKist and prosecutors have expressed a willingness to consider counting the company’s payouts in its civil settlements against the total criminal fine, but the DOJ first wants Chen to rule as to whether StarKist has the ability to pay the full fine.
Photo courtesy of StarKist