Welcome
Class Action

CEO of Chicken Giant Pilgrim’s Pride Charged in Price Fix Probe

June 3, 2020, 9:00 PM

The chief executive officer of Pilgrim’s Pride Corp., America’s second-biggest chicken producer, was charged by U.S. prosecutors with conspiring to fix prices as part of an antitrust investigation of chicken-processing companies.

Jayson Penn was indicted by a grand jury in Colorado along with Roger Austin, a former vice president of the company, the Justice Department said Wednesday. They face a statutory maximum penalty of 10 years in prison and a $1 million fine.

The allegations against the leader of a top American poultry producer were the latest bombshell to hit the meat industry that’s been reeling from thousands of workers sickened by Covid-19, forcing shutdowns at processing plants. The U.S. government is also probing potential market manipulation at beef processors, who were turning big profits while farmers suffered from plant outages.

It’s rare for the CEO of a company the size of Pilgrim’s Pride to be indicted by federal prosecutors. Penn is the most high profile executive to be charged by the department’s antitrust division since Chesapeake Energy Corp. co-founder Aubrey McClendon, who was later killed in a car crash. More recently, the former CEO of Bumble Bee Foods was convicted in December of conspiring to fix prices for canned tuna.

Ongoing Investigation

The case against Pilgrim’s, which is majority owned by Brazilian food giant JBS SA, is part of an ongoing investigation into allegations of price fixing by chicken processors that came to light last year. Tyson Foods Inc. and Sanderson Farms Inc. have also received grand jury subpoenas in the investigation, according to regulatory filings. All three companies have been accused in civil lawsuits of conspiring to raise prices for broiler chickens.

Also charged Wednesday were Mikell Fries, the president of Claxton Poultry Farms, and Scott Brady, a vice president. According to the indictment, Penn, Austin, Fries and Brady conspired from at least as early as 2012 to at least early 2017 to fix prices and rig bids for broiler chickens across the U.S.

The indictment cites text messages and emails between the defendants and other unnamed employees, including one email between Penn and one of his employees in which he referred to another supplier:

“[Supplier-3] should pay for being short. It costs money for them to fill orders for which they don’t have the chickens. They have been adding market share and still trying to do – selling cheap chicken and being short. Doesn’t make sense. We are enabling the town drunk by giving him beer for Thanksgiving instead of walking him into an AA meeting.”

In another text message exchange, Penn and the same employee discuss a different supplier’s offers:

Supplier-1-Employee-3 “Buyer said we were .07 high so that must be [Supplier-3’s] price…”

PENN “They are morons”

Pilgrim’s Pride and JBS didn’t respond to a request for comment, and Claxton declined to comment.

“Executives who cheat American consumers, restauranteurs, and grocers, and compromise the integrity of our food supply, will be held responsible for their actions,” Makan Delrahim, the head of the department’s antitrust division, said in a statement.

Pilgrim’s Pride shares fell as much as 16% on the news. Tyson sank as much as 7.6% and Sanderson Farms slid as much as 14%, while JBS fell as much as 8% in Sao Paulo trading.

“This is clearly negative for our covered broiler processing companies and particularly negative for PPC,” said Ben Bienvenu, an analyst at Stephens Inc., which lowered its rating on Pilgrim’s.

(Updates with details of messages in seventh paragraph)

--With assistance from Michael Hirtzer and Isis Almeida.

To contact the reporter on this story:
David McLaughlin in Washington at dmclaughlin9@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

David Marino, Millie Munshi

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

To read more articles log in. To learn more about a subscription click here.