Monday, October 26, 2020

Former Bumble Bee CEO sentenced to 3 years in prison for price-fixing


Former Bumble Bee President and CEO Chris Lischewski was sentenced to 40 months in prison and given a USD 100,000 fine (EUR 88,000) as part of his role in a conspiracy to fix the prices of canned tuna sold in the United States from 2011 to 2013.

The sentence comes after a three-week-long trial in December ended with a jury finding Lischewski guilty of being involved in a scheme between Bumble Bee, StarKist, and Chicken of the Sea to fix the price of tuna. Lischewski was facing a maximum penalty of 10 years in prison and a fine of USD 1 million (EUR 887,500).

The sentence, according to U.S. District Court Judge Edward M. Chen, is in accordance to the severity of the conspiracy, which was “widespread, pervasive, and affecting the entire industry.”

“The conduct was deliberate, it was planned, it was sustained, over a three-year period,” Chen said. “This was not a rash act of having to commit a crime under distress, under episodic circumstances as we see sometimes, this was a contemplated and deliberate plan.”

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The sentencing came after an over two-hour hearing, in which part of the sentencing hinged on the qualitative affect that the price-fixing conspiracy had on the economy. California’s penal code includes stipulations on how sentencing should be calculated based on its financial impact.

Lischewski’s counsel had used an economic analysis indicating that, while the price of tuna had increased during the time of the conspiracy, it had actually increased less than economic models would predict based on the price of raw materials – i.e. tuna – at the time, which had recently jumped.

Prosecutors countered that data with the assertion that the economic analysis was based on flawed reasoning.

“The tuna industry does not allow for the type of price increases that you might expect,” Mikal Condon, an attorney representing the U.S. Department of Justice, said.

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The defense argued that the fact that the companies involved in the conspiracy showed relatively little benefit from it is evidence that the price-fixing had little impact on pricing.

“Let’s talk about what happened during the conspiracy,” Lischewski’s attorney, Elliot Peters, said. “StarKist’s profitability went completely into the tank … Bumble Bee’s profitability went down in 2010, 2011, and 2013.”

The lack of profitability, he said, demonstrates that price-fixing had low impact on the industry, and consumers.

“The idea that Bumble Bee was profiting from this so-called conspiracy is not consistent with the evidence,” he said. “There’s no evidence of actual unfair pricing or overcharges to consumers in this case.”

Peters also argued that Lischewski has been treated unfairly in contrast to his peers in the industry, who have either received lighter sentences or no sentence at all.

“How is it proportionate or fair that Mr. Lischewski get an extremely long sentence that bears no relationship to anyone else?” Peters said.

The prosecution, in contrast, argued that the case represents one of the most egregious examples of price-fixing seen in the country.

“This is really one of the largest and most pernicious price fixing conspiracies every prosecuted,” DOJ attorney Manish Kumar said. “What’s remarkable about this case is the offense conduct essentially infected an entire industry selling goods in the U.S.”

Key to the DOJ’s push for a heavier sentence was Lischewski’s role in the conspiracy, which the prosecutors framed as being led by Lischewski. They asserted that Lischewski committed the conspiracy because he stood to gain financially from Bumble Bee’s financial performance.

“Mr. Lischewski orchestrated this conspiracy for one reason only: his own personal gain,” Condon said.

Chen said that behind his sentencing decision was the nature of the goods in question.

“I do think it is clear that a couple things that I don’t think are disputed is that the product in question is a basic food staple. It is not expensive LCD screens, it is not some part of high price consumer goods,” he said. “This is food … for people who I think its fair to assume includes those who are at the lower end of the socioeconomic scale based on the pricing of this product.”

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Chen added that even with Lischewski’s past as an upstanding citizen, the optics of having two levels of the criminal justice system are apparent in the case.

“I think it is important to send a message that those who engage in high-level economic crimes need to face punishment as much as those who commit low-level economic crimes, street crimes,” he said.

In spite of that, while the sentence – based on guidelines – is set to be between 78 to 97 months, Chen set the sentence at 40 months, a downward variance Chen ascribed to the nature of the crimes and Lischewski’s past.

Chen said he also took the COVID-19 crisis into account when deciding on the sentencing, and determined that Lischewski should recieve no special considerations.

“This is something that confronts every judge in every courthouse across the nation at this point,” he said. “We simply can’t say we won’t impose a sentence that otherwise would be due.”

Lischewski, addressing the court for the first time since the case began over two years ago, said that he had told the truth, including during his testimony at trial.

“I was always honest and transparent in the statements I made to the court,” he said.

However, he also asserted that Bumble Bee’s profits were down during the years of the conspiracy, and that no harm was done.

“I do recognize that I’ve been found guilty of a crime, and I will serve the sentence passed down to me,” Lischewski said. “I do believe that the evidence we provided no financial impact on American consumers.”

Chen said Lischewski will likely serve time in a minimum-security prison. At the close of the hearing, Peters said Lischewski plans on filing an appeal to the case in the U.S. 9th Circuit Court.

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