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Michael Hiltzik: This government price-fixing case makes the tuna industry sound like the mafia

Michael Hiltzik, Los Angeles Times on

Published in Business News

Speaking as a lifelong aficionado of the tuna fish sandwich on rye, I was relieved to learn that Bumble Bee's Nov. 21 bankruptcy filing wouldn't mean the eradication of the brand from store shelves -- it would merely come under new ownership.

Yet there's much more to it than that. The bankruptcy filing is an outgrowth of a price-fixing case that makes tuna processing seem a lot wilder and more colorful on dry land than it is at sea.

In fact, judging from the federal allegations, the guilty pleas filed by all three major tuna processing companies and several of their executives, and other documents, a lot went on in this industry that wouldn't be out of place in a Martin Scorsese movie.

There are secret meetings to plot criminal strategies, participants turning state's evidence to cut a better plea deal than their co-conspirators, even the allegation of a sotto voce threat delivered with a brotherly hand on the shoulder of a would-be witness.

The three brands involved are household names: Bumble Bee, StarKist and Chicken of the Sea. The first two have pleaded guilty to criminal price-fixing, agreeing to fines of $25 million and $100 million, respectively. Chicken of the Sea has been awarded amnesty for blowing the whistle on the two others. (Bumble Bee and Chicken of the Sea are based in San Diego, StarKist in Pittsburgh.)

Bumble Bee was assessed the lower fine because it successfully pleaded to prosecutors that any higher figure would put it out of business.

 

As I've reported previously, the government's price-fixing case began with routine antitrust scrutiny of a proposed $1.5-billion merger between Bumble Bee and Chicken of the Sea. The merger, announced in 2014, would have created a canned tuna giant commanding nearly half of the U.S. market, swamping StarKist, which at the time was the No.1 brand with 34.6%.

The Department of Justice turned thumbs down on the merger in 2015, but its announcement had an ominous tone. "The market is not functioning competitively today," the agency said, "and further consolidation would only make things worse." Reading between the lines, the department had found evidence of a price-fixing conspiracy.

Chicken of the Sea's parent company, Thai Union Group, abandoned the merger and sang like a canary, knowing that under Justice Department protocols the first member of a conspiracy to turn on the others gets the sweet deal. Bumble Bee executives Walter Scott Cameron and Kenneth Worsham, and StarKist executive Stephen L. Hodge all subsequently pleaded guilty to federal price-fixing charges and agreed to cooperate with federal prosecutors.

That leads us to what may be the last federal loose end: the criminal prosecution of former Bumble Bee Chief Executive Christopher Lischewski. Testimony in Lischewski's trial wrapped up on Tuesday in federal court in San Francisco. Closing statements are scheduled for Monday, after which the case will go to the jury. Lischewski was a major prosecution target because he was one of the most respected and influential executives in the tuna canning industry, and also because, by the government's reckoning, he was a mastermind of the scheme.

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