Blue Bell’s CEO took a long road to criminal charges

Opinion

Blue Bell Creameries pleaded guilty on Monday to charges that they distributed adulterated ice cream products and will pay a criminal fine and forfeiture amount totaling $17.25 million. According to the Department of Justice (DOJ) Press Release, Blue Bell also agreed to pay an additional $2.1 million to resolve civil False Claims Act allegations regarding ice cream products manufactured under insanitary conditions and sold to federal facilities. The total $19.35 million in fine, forfeiture, and civil settlement payments constitutes the second largest-ever amount paid in resolution of a food-safety matter.

Today I want to consider the criminal charges against former President and Chief Executive Officer (CEO) of the company, Paul Kruse, as laid out in the Information filed against him.

Blue Bell prided itself and indeed sold itself to the outside world as a family owned, family operated business that was a part of every community in which it had offices, a plant, facility or customer. Reading the Information, you see just how far the company strayed from that propaganda, why they ended up shutting down all production, laid off nearly 50% of the work force and essentially sold themselves at very steep discount to the only bidder.

As a food service company, the highest risk is that your food causes your customers to get sick and die. That is not simply the basis for US food safety regulation but the basis for the relationship between food producer and customer. You rarely, if ever, see a corporate CEO violate that relationship. However, if the allegations against Kruse are even close to correct, he did so in one of the worst cases in US food safety history.

As far back as 2010, Blue Bell executives and specifically Kruse “knew that appropriate practices to ensure sanitary conditions were not being followed or achieved at the Blue Bell manufacturing facilities.” These were recurring problems but Kruse refused to have them remedied. In early 2011, a Blue Bell quality control representative created a program to test for listeria, which found the presence of the deadly pathogen. In April of that year, Kruse personally met with the employee and ordered him to stop his testing program. He then ordered another employee to destroy hard copy and electronic records of the positive tests yet continued to ship the product which had been tested positive for listeria.

But it really hit the fan for Kruse in February 2015 when three times over the month, Kruse was personally notified by Texas state health officials that the company products had tested positive for listeria in three separate facilities. In March 2015, the US Food and Drug Administration (FDA) also notified Kruse of the positive tests for listeria in Blue Bell facilities and then twice more in April.

What was Kruse response? He lied, lied and then lied some more. First, he attested to the FDA that Blue Bell was recalling the tainted products “as quickly as possible”. The reality was Kruse did not order a product recall but only instructed Blue Bell employees to remove the tainted products from customer shelves without telling them about the listeria outbreaks. He further instructed company employees not to tell the general ice cream consuming public about the deadly contamination. Blue Bell products were removed from hospitals, obviously with consumers at high risk as well as elementary schools with the same risks.

Apparently, there were Blue Bell employees who wanted to be frank about the situation and meet their legal obligations. However, he rejected “open and honest” communications with customers to continue to lie and hide the truth about the listeria outbreak in Blue Bell facilities. One customer even noted the unethical conduct of Blue Bell (not knowing at the time just how bad it was). The Information cited to the following example, “Specifically, on or about February 20, 2015, a school district official sent an email to PAUL KRUSE and other Blue Bell executives that stated, “the decision made not to inform the school district] of this potential health risk and to try and quietly just pick-up the products gives the impression of deception and lack of integrity. These actions are contrary to our past experiences with Blue Bell Creameries. With open and honest communication, we would have eliminated all potential risks with our guests (our children) and secured the product.””

Yet Kruse could not even pull off his campaign of lying, cheating and stealing. Although he ordered Blue Bell employees to surreptitiously remove the tainted products, “multiple customers reported to Blue Bell that some products purported to have been removed remained in their stores or freezers on or after the date of Blue Bell’s statement.” Yet in another example, “Blue Bell employees determined that approximately 1,050 pints of the affected lot were already in customers’ stores in Texas. After receiving direction from PAUL KRUSE and other Blue Bell executives, Blue Bell sales employees were instructed “do not pick anything up in the stores unless we notify you to do so.””

The height of Kruse’s fraud on the public was after the announcement of the listeria related deaths by three patients in Kansas, Blue Bell announced it was closing the facility where the ice cream was produced but blatantly lied when “a Blue Bell sales executive wrote that “to date, we have not been made aware by the FDA of any other items that have tested positive for listeria at any of our plants.””

You really have to wonder what kind of executive would knowingly and intentionally put the food consuming public at risk. Unfortunately for the public it was Blue Bell.

About the author: Thomas Fox has practiced law in Houston for 30 years. He is now an independent consultant, assisting companies with anti-corruption and anti-bribery compliance. He was most recently the general counsel at Drilling Controls Inc., a worldwide oilfield manufacturing and service company. He was previously division counsel with Halliburton Energy Services Inc. where he supported Halliburton’s software division and its downhole division. Fox is the author of the award-winning FCPA Compliance and Ethics Blog and the international best-selling book “Lessons Learned on Compliance and Ethics.” His second book, “Best Practices Under the FCPA and Bribery Act,” was released in April, 2013. His latest work is an eBook entitled, “GSK in China: A Game Changer for Compliance.” He writes and lectures across the globe on anti-corruption and anti-bribery compliance programs.

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