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Ex-Ice Cream CEO Faces Criminal Trial

Jury selection in the federal government's case against the onetime CEO of ice cream company Blue Bell, which was at the center of a listeria outbreak that killed three people and sickened 10, started Monday.

The executive, Paul Kruse, faces six charges of wire fraud and a count of conspiracy to commit wire fraud over his alleged role in misleading Blue Bell customers about the outbreak. On July 27, the judge overseeing the case rejected Kruse's attempt to escape the charges.  

"[It's] a very unique situation where a CEO of a company can end up going to jail or for conduct that took place on his watch," said Paul Benson of Michael Best & Friedrich LLP, who represents food companies.

The last similar trial was in 2014 over a salmonella outbreak that caused nine deaths and made 700 people ill. Two former Peanut Corporation of America executives, brothers Michael and Stewart Parnell, were convicted in Georgia federal court of fraud, conspiracy and obstruction of justice for enabling the sale of contaminated peanut products.

Even though Texas officials told Blue Bell in February 2015 that two ice cream products had tested positive for listeria, the company didn't alert the public or issue a recall, instead telling its delivery drivers to remove those products from the stores, according to the federal government.

Two weeks later, another product tested positive for listeria. The ice cream was finally recalled in March 2015 following the discovery of listeria at another plant in Oklahoma.

Five years later, the Texas ice cream maker agreed to plead guilty to two misdemeanor counts of distributing adulterated ice cream products and to pay a criminal fine and forfeiture totaling $17.25 million. Blue Bell also agreed to pay $2.1 million to resolve civil False Claims Act allegations related to the contaminated products being sold to federal facilities.

One key issue at trial is likely to be whether Blue Bell was too slow to order a recall, with the government apparently planning to argue that Kruse did not want to order one because it would mean publicly announcing the listeria results, according to Kruse's pretrial filings.

"This argument is doubly wrong: Blue Bell had no legal duty to initiate a recall unless directed to do so by the FDA, which never happened, and neither Blue Bell nor (more importantly for these purposes) Kruse owed a duty of disclosure to Blue Bell's customers," Kruse said in a July 8 filing.

The case is USA v. Kruse, case number 1:20-cr-00249, in the U.S. District Court for the Western District of Texas.

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