Poultry Executives Indicted

Pilgrim's Pride and Claxton Poultry Leaders Indicted for Price Fixing, Bid Rigging

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The Department of Justice on Wednesday announced that a federal grand jury had indicted executives from two poultry companies for price fixing and bid rigging. (Company logos)

OMAHA (DTN) -- A federal grand jury has indicted the president and CEO of Pilgrim's Pride along with three other poultry executives with one-count indictments for conspiring to fix prices and rig bids for broiler chickens.

A grand jury for the U.S. District Court in Denver handed down the indictments against Jayson Penn, president and CEO of Pilgrim's Pride, along with Roger Austin, a former vice president of Fresh Foodservice at Pilgrim's Pride Inc. Also indicted were executives for Claxton Poultry Farms in Georgia, including Mikell Fries, president of Claxton Poultry Farms and grandson of the company's founder, along with Scott Brady, vice president of national accounts for Claxton Poultry Farms.

The Justice Department noted the four executives are the first to be charged in price fixing and bid rigging in the broiler-chicken industry in an ongoing criminal investigation. The Justice Department stated multiple federal agencies continue to collaborate on an investigation into the industry.

The indictment stated the four executives "together with their co-conspirators" operated in a network of suppliers "to suppress and eliminate competition though rigging bids and fixing prices and price-related terms for broiler chicken products sold in the U.S."

The one-count indictment charged four current and former senior executives from two major broiler-chicken producers with conspiring to fix prices and rig bids for broiler chickens. Broiler chickens are chickens raised for human consumption and sold to grocers and restaurants.

The indictment alleged the price fixing goes back to at least 2012 and points to repeated text communications between Austin, Brady and Fries over bids and prices for poultry contracts or overall market prices. The texts also repeatedly reference communications back to Penn as well. Those communications for bids on prices continued repeatedly until at least 2017.

The indictment also cited conversations over how to treat competitors who are short on product for delivery and competitors selling chicken products for lower margins. Penn noted in a series of emails regarding one unnamed competitor, "So in essence they are cheap and to add insult to injury are short product."

The indictment stated the business practices of the four executives "substantially affected interstate trade and commerce."

Colorado-based Pilgrim's Pride is one of the largest poultry companies in the country, citing on its website the company produces nearly one in five chickens in the U.S. Pilgrim's Pride has operations in 14 states and employs about 39,000 people in the U.S. In February, Pilgrim's Pride reported $11.4 billion in sales for fiscal year 2019 and operating income of $691 million. Pilgrim's Pride is listed on the NASDAQ exchange, but Brazilian-based JBS owns more than 78% of common stock in the company.

Claxton is a family-owned operation based in Georgia but is listed as one of the 100 largest poultry companies globally. A 2016 article naming Fries as the president cited Claxton employed more than 1,800 people at that time and processed more than 2.1 million birds every week.

DTN reached out to Pilgrim's Pride's parent company, JBSSA, and Claxton Poultry Farms for comment but did not receive a response Tuesday afternoon.

The Justice Department also filed the indictment with an antitrust class-action civil case in federal court in Illinois that was initially filed in 2016. Pilgrim's Pride as a company is one of several major broiler companies that are defendants in that civil case. That lawsuit alleges industry practices worked to drive up broiler prices going back to 2008.

USDA's Office of Inspector General also played a role in the case and credited the work of other agencies in bringing the evidence to a grand jury. That included the Department of Justice Antitrust Division, the FBI and the Department of Commerce Inspector General's Office.

"Ensuring the integrity of competition in agricultural markets in order for producers to receive competitive prices for their products, and to prevent consumers from being cheated, is of the utmost importance to USDA OIG, and we will continue to dedicate resources to the investigation of matters involving such potential of competitive harms," said Special Agent in Charge Bethanne M. Dinkins of USDA's Office of Inspector General.

Assistant Attorney General Makan Delrahim of the Department of Justice's Antitrust Division said his division remains committed to prosecuting crimes of people who raise the prices Americans pay for food. "Executives who cheat American consumers, restauranteurs, and grocers, and compromise the integrity of our food supply, will be held responsible for their actions," Delrahim said.

The guilty verdict on a charge of conspiracy to fix prices carries a maximum prison sentence of 10 years and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by victims if either amount is greater than $1 million, the Department of Justice noted.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton