Escalating Legal Risk for Senior Management

Detail shot of a meeting room

If you are a senior executive in the grocery or foodservice business, your brand, financial and regulatory risk has been increasing over the past few years driven by the government’s focus on ensuring a safer food supply.  It’s now more important than ever to understand who your suppliers are and to verify their good, safe manufacturing practices whether they provide you with food or non-food products.

Surprisingly, we see that many supply chain partners don’t have even the most basic documentation, such as proof of insurance coverage or a valid third party audit.  To protect your company and your brand, you’ll first want to make sure you have this basic documentation from your list of suppliers should an unfortunate incident causing harm to a consumer occur.

Your company’s risk is likely higher than you might think.  Our studies show among suppliers new to ReposiTrak…

65% of Certificate of Liability Insurance is Missing or Expired
65%
Nearly 11% of insurance minimum requirements were not met
11%
36% of Hold Harmless Agreements are Missing or Expired
36%
75% of Required Third Party Audits are Missing or Expired
75%
29% of suppliers’ letters of continuing guarantee are missing or expired
29%

Increasing Legal Risk for Selling Adulterated Food

Since 2013, the Justice Department has won convictions or guilty pleas in four criminal cases against food companies or the executives that ran them. All of the cases fell under the 1938 Federal Food, Drug and Cosmetic Act.   The law makes it illegal to manufacture, introduce into commerce, deliver or receive any adulterated food item.  A food is considered adulterated not only if it contains a substance that is harmful to health, but also if it has been prepared, packed, or held under unsanitary conditions that could allow it to become contaminated.  By contrast, that is roughly the same number of convictions or guilty pleas as the agency landed under the same act in the 24-year-period from 1988 through 2012.

Two Very Well Known Groundbreaking Prosecutions in the Industrygavel on stack of documents on white background

One is the 76-count indictment against executives with Peanut Corporation of America (PCA), which was at the center of a 2009 Salmonella recall.  Stewart Parnell–the former Peanut Corporation of America owner was convicted for knowingly shipping Salmonella-contaminated peanut butter from his Georgia plant.  Age 61 at the time of conviction, he received a 28-year (virtually a life) sentence in prison for his crime.

The second was the prosecution of two executives from Jensen Farms responsible for a 2011 Listeria outbreak linked to cantaloupes.  The outbreak killed 33 people and sickened 147 in 28 states.  In this case and others, federal prosecutors use a little-known rule known as the Park Doctrine, which allows for criminal prosecution even if the official had no actual knowledge of or participation in the specific offense.  The Jensen Farms case is also noteworthy in that it also set precedence for retailer liability, given Walmart’s out of court settlement with the victims in the case.

It’s Now More Important Than Ever to Ensure Your Supply Chain is Safe  

Brand with lockTake the time to meet with your food safety personnel to review policies and procedures, and look for gaps.  Underscore the need for documentation, as it will be key to proving actions that were taken should you wind up in court.  The bottom line for minimizing food safety risk in your food supply chain is to not trust, but verify.

Stephen NguyenEscalating Legal Risk for Senior Management