Foley & Lardner’s Lisa Noller on Securing Deferred Prosecution Agreements

Last month, Groeb Farms Inc. of Onsted, Michigan, the nation’s largest industrial honey supplier, was charged with buying Chinese-origin honey, knowing that it was illegally imported into the United States to avoid more than $78.8 million in anti-dumping duties. (See “Why Were Honey Companies Given Deferred Prosecution Agreements?” 27 Corporate Crime Reporter 9, March 4, 2013.)

The company admitted that two former executives purchased Chinese-origin honey for processing at its facilities and sold that honey to its domestic retail, food service, and industrial customers as mislabeled non-Chinese honey, and at other times, as Chinese honey, all while knowing that it had been illegally imported to avoid anti-dumping duties and, at times, honey assessment fees.

The honey was variously described falsely as sugars and syrups instead of Chinese-origin honey, and as having originated in Indonesia, Malaysia, Mongolia, Thailand, and Vietnam, instead of China.

Despite these admissions, the U.S. Attorney’s office in Chicago allowed Groeb Farms and a second company — Honey Holdings — to enter into deferred prosecution agreements.


Lisa Noller, a partner at Foley & Lardner in Chicago, represented Groeb Farms.

“Groeb Farms received a grand jury subpoena,” Noller told Corporate Crime Reporter in an interview last week. “They called me in to represent them. We began an internal investigation. As a result of the investigation, we took a variety of actions.”

“We revamped the company’s compliance program.”

“We worked with the employees who were involved with accepting foreign shipments of honey to make sure they could recognize red flags, or even yellow flags.”

“We revised their supplier audit program so that when they conducted foreign supplier audits, there was some accountability built into that system.”

“We worked with the Board of Directors and the executives to make sure they understood the anti-dumping duties and the requirements associated with them.”

“We terminated employees who we believe did not have those interests at heart.”

“We started working with the government to cooperate and to provide documents that were responsive to the grand jury subpoenas, but that would also further their investigation more broadly into the honey industry.”

“And we did that because we recognized that the executives we terminated had some exposure. And the company of course could be responsible for their actions. So, we were responsible to put the company into compliance and move it forward.”

“Our strongest argument for the deferred prosecution agreement was that an indictment would force the company to declare bankruptcy and close up shop. And the company employs about 125 people in some economically depressed areas. And some of these folks have worked for Groeb Farms their entire lives.”

“The company is based in Onsted, Michigan. And the unemployment rate in Onsted is quite high.”

What was the evidence you put forward that an indictment would have driven the company into bankruptcy?

“We provided financial statements to the government,” Noller said. “We also did an analysis of the economic conditions of the three economic areas where Groeb Farms operates. We shared that information with the government.”

How would an indictment have led to a disruption in their business?

“It would have put them in default in some of their bank credit agreements. It also would have resulted in many of the downstream customers ceasing to do business with Groeb Farms.”

“We showed the government that the company customers have requirements that those who supplied them with products do not have felony convictions. The downstream customers care. And they would pull business. We also have a government contract. And a felony conviction would likely prevent the company from doing business through a debarment program.”

“The collateral consequences of an indictment were going to cause this small company to close their doors and likely declare bankruptcy.”

“What we explained to the government was because of the market share that Groeb Farms has, a compliant Groeb Farms in that percent of the marketplace is much better than no Groeb Farms being replaced by other companies that weren’t necessarily going to follow the law.”

“And with a compliant Groeb Farms, they know that at least 30 percent of the market is operating lawfully.”

You were talking about a felony conviction. But a lesser plea wouldn’t have driven the company out of business, right?

“It might have,” Noller said. “The reason is that some of the downstream customers require that they not do business with any entities that have any conviction. We noticed that.”

You agree that smaller companies tend to get slammed with a guilty plea. Why was it different in this case?

“I would like to think it’s because of all the measures we took prior to opening negotiations with the U.S. Attorney’s office,” Noller said.

“You open the Filip Memo. And we went category by category to make sure that we were positioning ourselves in the best possible light in each of those categories.”

“When we sat down with the government, we were able to say — we terminated the employees who were responsible. The collateral consequences are dire.”

“The company doesn’t have the ability to pay a big fine or withstand a felony conviction. The compliant marketplace is not in the Filip memo, but it’s a compelling argument.”

What do you mean by the compliant marketplace?

“Having a Groeb Farms with its market share, turning itself around and making sure it’s compliant is better than it being forced out of business and having companies breaking the law step into its place.”

“The market share has to go somewhere.”

How do you know that companies that are breaking the law would fill the vacuum?

“If you look at what the government has done, they have indicted a wide variety of players in the honey market. From the public record and the statements that the government has made, you can take from that that the industry has a lot of problems.”

Are you saying that there is systemic wrongdoing?

“Yes,” Noller said. “Prior to 2001, all of the honey was coming from China. Then, all of a sudden, the honey stops coming from China and starts coming from a lot of other countries in Asia. It’s not that the bees in China stopped producing honey.”

In fact, the honey was still coming from China. It was just being mislabeled?

“Yes,” Noller said. “And my point is that Groeb Farms is not the only company buying that honey.”

[For a complete transcript of the Interview with Lisa Noller, see 27 Corporate Crime Reporter 10(11), March 11, 2013, print edition only.]

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