Tag Archives: blue bell

Blue Bell’s Ex.-CEO charged in conspiracy to cover up Listeria outbreak

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Christopher Mele of the New York Times writes the former chief executive of Blue Bell Creameries was charged with conspiracy in connection with his repeated efforts to cover up what became a deadly outbreak of listeria in some of the company’s products in 2015.

In addition, the company pleaded guilty to two misdemeanor counts of distributing adulterated ice cream products and agreed to pay a total of $19.4 million in fines, forfeitures and civil payments — the second-largest amount ever paid to resolve a food safety case, officials said. (Chipotle Mexican Grill last month agreed to pay a $25 million fine related to charges stemming from more than 1,100 cases of foodborne illnesses.)

Prosecutors charged that Blue Bell, which is based in Brenham, Texas, about 75 miles northwest of Houston, distributed ice cream products that were manufactured under unsanitary conditions and contaminated with Listeria monocytogenes.

Three deaths and 10 hospitalizations across four states were tied to the 2015 outbreak, the Centers for Disease Control and Prevention reported.

The former chief executive, Paul Kruse, who was also Blue Bell’s president, directed a scheme to cover up the discovery that some products tested positive for listeria, according to court papers. He directed a company employee to stop a testing program for listeria even after two samples sent to a lab came back positive, court records said.

Further, Mr. Kruse did not order the recall of the affected products despite Blue Bell filing a report to federal regulators that it was recalling them “as quickly as possible,” court papers said.

For a period of more than two months in 2015, Mr. Kruse learned from state and federal officials as well as third-party labs that test samples of at least seven company ice cream products made at two different plants had tested positive for listeria, court papers said.

Yet, prosecutors contend, he repeatedly minimized, ignored or tried to cover up the problem products, which included Blue Bell Great Divide Bar and Chocolate Chip Country Cookie, despite concerns raised by company employees and customers, including a Kansas hospital and a Florida school.

For instance, he directed employees to tell customers that there had been an unspecified issue with a manufacturing machine rather than that samples of the products had tested positive for listeria, officials said.

On Feb. 17, 2015, Mr. Kruse rejected sending a draft news release about two products that tested positive for listeria, the withdrawal of those products and a warning to consumers about the potential health consequences. Mr. Kruse instructed the company executive who brought him the proposed release that it was unnecessary, court papers said.

Chris Flood, a lawyer for Mr. Kruse, said on Friday that his client was innocent of the charges.

Faith-based food safety sucks

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In a decision issued [June 19, 2019] in Marchand v. Barnhill et al., No. 533, 2018 (Del. June 19, 2019), the Delaware Supreme Court reversed the dismissal of a stockholder derivative lawsuit against the members of the board of directors and two officers of Blue Bell Creameries USA, Inc.

The lawsuit arose out of a serious food contamination incident in 2015 that resulted in widespread product recalls and was linked to three deaths. The Delaware Supreme Court, applying the “duty to monitor” doctrine enunciated in In re Caremark International, Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), and noting the very high hurdle to claims under it, nonetheless ruled that the plaintiff had adequately alleged the requisite bad faith by the members of the Blue Bell board.

Plaintiff did so by using information obtained in a Section 220 books and records demand to show facts supporting their contention that the Company did not have in place “a reasonable board-level system of monitoring and reporting” with respect to food safety, which the Court deemed to be “a compliance issue intrinsically critical to the company’s business.”

After concluding that “food safety was essential and mission critical” to Blue Bell’s business, the Supreme Court ruled that bad faith was adequately pled by alleging “that no board-level system of monitoring or reporting on food safety existed.” The Court thus declined to dismiss a claim that the directors breached their duty of loyalty, potentially exposing directors to non-exculpated (and potentially not indemnifiable) monetary damages.

In light of the Blue Bell decision, boards of directors should review carefully their board processes and procedures to ensure that “reasonable compliance system and protocols” are in place with respect to “safety and legal compliance” and other regulatory and business threats that may pose significant risks for their particular company.

Equally important, boards should document the procedures followed to identify significant risks, including advice from management, counsel and other advisors, as well as the processes and procedures implemented to provide for board reporting and appropriate supervision of these risks, and maintain written records of the implementation of these processes and procedures in practice. The principal basis upon which the Court in Blue Bell found the record to support the complete failure to impose any board-level “system of controls” with respect to food safety was the absence of any written board procedures or documented discussion on the topic, and the lack of any mention of food safety in board minutes in periods before the food contamination outbreak, despite previous food safety issues that allegedly had arisen in previous years, including positive tests for listeria in Company facilities beginning in 2013.

The Blue Bell decision makes clear that oversight with respect to these kinds of issues is a board-level responsibility, and goes beyond mere compliance with laws. The Delaware court opined that “the fact that Blue Bell nominally complied with FDA regulations does not imply that the board implemented a system to monitor food safety at the board level.”

“In short,” the Delaware Supreme Court ruled, “to satisfy their duty of loyalty, directors must make a good faith effort to implement an oversight system and then monitor it.” While “routine regulatory requirements, although important, are not typically directed at the board,” companies should ensure that they have written processes and procedures in place for the board to be timely informed about, and to monitor regularly, compliance, safety and business developments that are important to the company, or may be viewed as critical to the company in hindsight. [1]

This decision, while only on a motion to dismiss, illustrates the continued importance of the Caremar kdoctrine as a strand of Delaware law governing the conduct of directors. While the burden for withstanding a motion to dismiss a Caremark claim is high, and the theory remains “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment,” [2] it can be met. Caremark is an important tool in the Delaware jurisprudential arsenal for enforcing what Delaware courts view as reasonable director conduct, and when applied sends a powerful message because of the potential it creates for personal director liability.

11.jul.19

Harvard Law School Forum on Corporate Governance and Financial Regulation

Brian Frawley, Joseph Frumkin and Krishna Veeraraghavan

https://corpgov.law.harvard.edu/2019/07/11/bad-faith-monitoring-on-food-safety-issues/

What is the infectious dose of Listeria? Who are susceptible?

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The relationship between the number of ingested Listeria monocytogenes cells in food and the likelihood of developing listeriosis is not well understood.

listeria4Data from an outbreak of listeriosis linked to milkshakes made from ice cream produced in 1 factory showed that contaminated products were distributed widely to the public without any reported cases, except for 4 cases of severe illness in persons who were highly susceptible. The ingestion of high doses of L. monocytogenes by these patients infected through milkshakes was unlikely if possible additional contamination associated with the preparation of the milkshake is ruled out.

This outbreak illustrated that the vast majority of the population did not become ill after ingesting a low level of L. monocytogenes but raises the question of listeriosis cases in highly susceptible persons after distribution of low-level contaminated products that did not support the growth of this pathogen.

Infectious dose of listeria monocytogenes on outbreak linked to ice cream, United States, 2015

Emerging Infectious Diseases, December 2016, Volume 22, Number 12, https://dx.doi.org/10.3201/eid2212.160165

http://wwwnc.cdc.gov/eid/article/22/12/16-0165_article

Recall creep: cookie dough edition

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Listeria-positive linked recalls, similar to Facebook stalkers, creep. That’s what they do.

Same with clowns in the woods.choco_chunk

The typical event seems to go like this. Someone downstream in the buyer world or a government group finds a product with a pathogen. They call the supplier. The supplier looks at their system, maybe not understanding how regulators look at zones, sanitation clean breaks and environmental sampling, decides they will have a limited recall.

FDA or state investigators show up, assess the system, say, ‘hey, you really might have a larger problem here than you think’ and the recall creeps.

I dunno if that’s what is happening with Aspen Hills, a cookie dough processor who supplied their products to a bunch of ice cream companies (full disclosure, cookie dough ice cream is probably my favorite flavor).

It started with Blue Bell a couple of weeks ago, an expansion Monday and now Blue Bunny, Chocolate Shoppe and Publix are in on this.

Aspen Hills has nothing on their website about the recalls. Oops.

Test and ye shall find: Listeria in Blue Bell ice cream, again

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A supplier of cookie dough that Blue Bell Creameries blamed for a possible listeria contamination of some of its ice cream products said Thursday that its product tested negative for the pathogen before it was sent to the Texas-based company.

listeria-blue-bellBlue Bell announced Wednesday it was recalling select flavors of ice cream distributed across the South and made at its Sylacauga, Alabama, plant after finding chocolate chip cookie dough from a third-party supplier — Iowa-based Aspen Hills Inc. — that was potentially contaminated with listeria.

Blue Bell halted sales, issued a voluntarily recall of all its products in April 2015 and shut down its three plants due to bacteria contamination that was linked to 10 listeria cases in four states, including three deaths in Kansas. The company, headquartered in Brenham, about 70 miles outside Houston, resumed selling its products about four months later. Before resuming production, the company said it had implemented new cleaning and sanitizing procedures at its facilities, as well as new testing programs and new employee training.

The iconic ice cream brand is beloved in Texas, where people impatiently awaited its return to store shelves after the recall.

No illnesses have been reported from the latest recall of ice cream distributed in Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North and South Carolina, Tennessee and Virginia, Blue Bell said.

Blue Bell said on Thursday in an email to The Associated Press that it found listeria contamination in packages of cookie dough ingredient received from Aspen Hills.

But a statement from Aspen Hills said its cookie dough product tested negative for listeria before it was shipped to Blue Bell and that the “positive listeria results were obtained by Blue Bell only after our product had been in their control for almost two months.”

Aspen Hills said that Blue Bell is the only customer who received the cookie dough product “included in our voluntary recall.” Blue Bell has been a customer of Aspen Hills since January.

Texas health officials fine Blue Bell a little following Listeria outbreak

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Karen Robinson-Jacobs of Dallas News reports Blue Bell Creameries has been fined $850,000 by Texas health officials as a penalty for a Listeria outbreak, announced last year, that sickened 10 people and lead to a total shut down of company operations.

blue.bell.jul.15Three people died, but the company may only end up paying a fraction of that amount.

Under an enforcement agreement announced Friday between Brenham-based Blue Bell and the Texas Department of State Health Services, $175,000 must be paid within 30 days. The remaining $675,000 will be paid only if the company violates the terms of the agreement in an 18-month period, according to the state agreement.

Assuming all goes well with monitoring and testing, “upon successful completion of the eighteen-month term, the remaining balance of funds held in abeyance will be forgiven by” the state, the agreement said. 

Officials with Blue Bell could not be reached for comment.

Attorney Bill Marler, who specializes in representing victims of food-borne illness, said he thinks the fact that Blue Bell was hit with a fine is noteworthy.

“If it is $1 or $1 million, I think any fine for producing bad food sends a powerful message,” said Marler. “Any fine is very unusual. That is why any amount is significant. “

He said he has not heard whether any fines were levied by Oklahoma or Alabama, home to additional Blue Bell plants, but added “I would imagine they will.”

Under the agreement, makers of the iconic Texas brand will continue to test and monitor the ice cream following last year’s outbreak of Listeria monocytogenes linked to Blue Bell products made in Brenham.  

Research firm PrivCo estimated that, due to the recall, Blue Bell’s 2015 sales plummeted by nearly 60 percent to $288 million.

Blue Bell says Listeria likely spread in Oklahoma plant drainage

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Blue Bell Creameries told federal inspectors that it believes Listeria spread at its Oklahoma plant through a drainage system, but the company said it couldn’t identify a single source of Listeria that contaminated equipment at its flagship facility in the Central Texas town of Brenham.

blue.bellThe Texas-based ice cream company revealed the findings in documents sent to the Food and Drug Administration, KXAS-TV in Dallas-Fort Worth reported Friday.

In its filing to the FDA, Blue Bell said cleaned equipment that came into contact with products made at its Broken Arrow, Oklahoma, plant was being stored in a small room with a floor drain. The company said an investigation revealed that particles at the plant may have carried listeria and washed into the building’s drainage system, gone through the room’s drain and settled on the clean equipment.

“We believe that this mechanism — particles emitted from a drain — was the most likely source of listeria,” Blue Bell wrote in the February filing.

The company said it no longer uses the room for equipment storage, and that the drain was removed and the floor replaced.

listeria4Blue Bell also told the FDA that it believes listeria likely entered its Brenham plant from “various potential sources” and settled on some pieces of equipment, but that investigators “could not identify a single common source of listeria in the facility.”

The company said it focused on cleaning affected pieces of equipment or removing it altogether, cleaning and sanitizing the plant and enhancing sanitation procedures and testing programs.

“We identified and implemented specific corrective actions to address the likely source, and adopted comprehensive facility-wide programs to enhance our overall ability to confront any possible sources of contamination,” Blue Bell spokesman Joe Robertson said Sunday.

Learning from previous outbreaks: Blue Bell edition

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I don’t know what gets CEOs, COOs, CFOs attention when it comes to food safety. Whom reports to whom appears to matter when it comes to the values that support a good food safety culture.recall-master675

Some of the industry food safety folks I interact with say they have a direct line to the decision-makers and work together to nimbly react to food safety issues. Others say that the powers-that-be don’t understand the science, risk assessment and consequences. And won’t do much until there’s a crisis.

Paraphrasing one of the food safety nerds who has power:

I’ve convinced the CEO that finding listeria ourselves is a good thing because we can get to the source; that’s changed the culture of QA folks in the plants. We look, find and fix. And there’s money to support it.

That’s good.

Other food safety folks report that they have to put more money into hairnets, reducing their budget food handwashing tools because the COO thinks orphan hairs is the most unhygienic thing. Risk factor vs. yuck factor at its best.

I’m increasingly cynical that the above is unique and most don’t study the litany of outbreaks and learn from them. Many execs don’t see their companies as the next Blue Bell, and as Powell says, believe their own press releases.

Diana Wray of the Houston Press summarizes Blue Bell’s last year as part of coverage of a U.S. Department of Justice criminal investigation.

For a second there it seemed like Blue Bell was really going to put the whole listeria outbreak behind it. Ever since Blue Bell restarted production back in August, both the officials running the “little creamery in Brenham” and the public have treated the return of Blue Bell ice cream to grocery store shelves as a grand rebirth for the company. It was almost as if the whole listeria thing had never happened.

Almost.

Blue Bell may still be in the midst of a comeback tour, but the company is now facing a U.S. Department of Justice investigation over the listeria outbreak earlier this year that forced the company to recall all of its products and almost sent Blue Bell over the financial edge.

According to a CBS News report, the Justice Department is trying to figure out what Blue Bell management knew about the potentially deadly hazards in their plants and when they knew it.

Still, the company was circling the drain until Fort Worth oil man Sid Bass stepped in with an injection of $125 million this summer in exchange for a one-third stake in the company. And for a little while, despite the OSHA reports of worker injuries and the allegations of unsanitary conditions that reportedly left Blue Bell’s factories incredibly vulnerable to contamination, it looked like Blue Bell was going bounce right back. In fact it seemed likely that the company would simply hire back some of the workers that had been laid off, restart the factories and go back to putting ice cream on the shelves without any real consequences.

Sure there was a federal lawsuit filed by David Shockley, a man who was working at an elderly care center in Houston and regularly eating the ice cream when he became ill with what was determined to be listeria meningitis in October 2013. And of course Blue Bell had been forced to furlough 1,400 employees and lay off about 1,450 from it’s 3,900-person workforce. But despite all of that, the public has been remarkably forgiving, all three factories are now up and running and Blue Bell products are slated to be back on shelves in 15 states by the end of January.

So far neither the feds nor Blue Bell have confirmed or denied the investigation into the company. However, considering who’s spearheading the investigation, Blue Bell management could be facing some pretty serious allegations.

But we’re just down homey folk: Who knew what when as Dept. of Justice investigates Blue Bell for Listeria outbreak

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CBS News reports that the U.S. Department of Justice has started an investigation into Blue Bell after their ice cream was linked to a deadly Listeria outbreak earlier this year that killed three people.

listeria4An FDA investigation found Listeria in all three of Blue Bell’s production plants located in Alabama, Oklahoma and Texas. Records indicated that the company knew one plant was contaminated at least as early as 2013.

The FDA investigation uncovered other troubling problems, including condensation dripping directly into ice cream and unsanitary equipment. Last April, Blue Bell shut down all three production facilities, and all ice cream was recalled.

Sources tell CBS News that the Department of Justice is trying to determine what Blue Bell management knew about potentially deadly hazards in their plants, and when they knew it.

The most extensive violations were found in Oklahoma, where the FDA released 16 separate positive tests for listeria on equipment and in ice cream from March 2013 through January 2015.

Last October, Gerald Bland who worked at the Blue Bell factory in Brenham, Texas, described to CBS News, unsanitary conditions on the factory floor.

“On the wall by the 3-gallon machine, if it had rained real hard and water sat on the roof, it would just trickle down,” Bland said.

Rain water from the roof would leak into the factory.

Another worker, Terry Schultz, told us that his complaints to management about unclean conditions went nowhere.

“The response I got at one point [from management] was, ‘is that all you’re going to do is come here and bitch every afternoon?'”

The message Schultz took management’s response was, “Production is probably more important than cleanliness.”

All three of Blue Bell’s plants are now back up and running, and by the end next month, its ice cream will be back on the shelves in 15 states.

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Blue Bell: The rise and fall (and rise again?) of an ice cream empire

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Mark Collette of the Houston Chronicle writes that Paul Kruse’s father had warned him about the perils of family-run businesses, but he couldn’t escape his place as the obvious heir of a dawning ice cream empire.

blue.bell.jul.15After ascending to the corner office in 2004, Kruse delivered Blue Bell Creameries to its greatest height, becoming the No. 1 U.S. brand.

This year, it took barely two months to undo everything.

Ironically, Blue Bell’s food-poisoning crisis could give it a one-up on competitors, because it already has been forced to make expensive changes to equipment and safety protocols that other ice cream makers soon will have to emulate under new federal regulations. It took most of the year to upgrade while other brands gobbled up market share.

Under Paul Kruse, Blue Bell’s annual sales grew by 70 percent from 2006 to 2014, versus just 8 percent for the entire U.S. industry, according to figures from the market intelligence firm Euromonitor. It rose from fifth to third in U.S. market share. Relative to its own past, it abandoned any notion that slow was better, roughly doubling the geographical reach it had attained in the previous century. In 2014, for the first time, Blue Bell stole the No. 1 spot in brand sales from Dreyer’s, the longtime U.S. favorite.

Before the listeria crisis struck in March, it sold more than $333 million, according to Euromonitor figures updated in August. As a privately held company, Blue Bell doesn’t publicly disclose sales. But by that reckoning, it had, in one quarter, sold more than half of what it did in all of 2010 – and peak summer sales hadn’t even set in yet.

All that production came with a price. Brenham plant workers said sanitation was hurried. Hot water ran low. And federal records showed that problems reached to plants in Oklahoma and Alabama, negating the possibility that the listeria outbreak was a failure of one supplier, one machine or one employee. Somewhere amid all that growth, reality couldn’t keep up with the clean country image. Worse, it hadn’t been keeping up for years. Epidemiologists this year determined that illnesses from as early as 2010 were caused by Blue Bell – retroactive medical sleuthing made possible by the DNA database.

Had Blue Bell folded, it would have joined the majority of third-generation businesses, only a small percentage of which survive into the fourth, according to various consulting firms.

Unlike public companies, which send CEOs packing after six years on average, family bosses are entrenched, raising a host of challenges, said Andrew Hier, senior partner of the Cambridge Family Enterprise Group. They may have more difficulty coping with shifts in technology over time. Decision-making becomes more complicated in the so-called “cousin generation,” with more personalities at the table. Though privately held, Blue Bell now has hundreds of shareholders. Kruse’s cousin, Greg Bridges, is the vice president of operations.

After 10 illnesses and three deaths linked to Blue Bell, it now has been forced to modernize. It faces a task like Odwalla, the homegrown juice brand roiled by E.coli poisonings in 1996, and, more recently, Chipotle, the fast-food burrito chain plunged into crisis from at least four separate disease outbreaks in a span of months.

Odwalla had to abandon its raw-is-better philosophy and start pasteurizing its juices. Similarly, Chipotle is instituting pathogen testing standards unlike any others in fast food.

And lots more.