Suppose you really like to eat, I dunno, ice cream. You maybe have a couple of different brands of ice cream that you choose from time to time, but chances are you really like one brand in particular. If that brand got acquired by another company, you'd probably keep eating that brand of ice cream. After all, it's good ice cream!
But, what if the company that bought your favorite brand did some crimes? Be honest. You'd probably keep eating that brand, right?
What if those crimes involved almost $150 million to bribe foreign government officials? And what if you are the federal government? Umm, yikes?
Rampant consolidation in the meatpacking industry means the federal government can’t afford to cut ties with a food supplier whose Brazilian parent pleaded guilty to bribery, Agriculture Secretary Tom Vilsack told Congress in a previously unreported letter.
Democratic lawmakers had repeatedly urged the USDA to stop buying meat from JBS USA after the company’s parent, J&F Investimentos S.A., paid a $256 million fine to the U.S. in 2020 to resolve charges of bribing Brazilian officials.
But in a Nov. 2 letter obtained by POLITICO through a federal Freedom of Information Act request, Vilsack said barring JBS USA from government contracts could hurt taxpayers because the company has so few competitors.
It's really not a great look to have DOJ out there fining a company $256 million for doing some big crimes and then have USDA paying that same company's subsidiary about $39 million during the next fiscal year.
Indeed, that's one of the reasons that the federal government has a suspension and debarment process set forth in FAR Part 9.4. If someone does a crime, particularly a really bad one, the government can say "nope, you're not a responsible party, no contracts for you!"
Now, I am not your lawyer or the government's lawyer and I don't have any non-public information here, but one of the causes for debarment or suspension is a "a conviction of or civil judgment for ... [c]ommission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating Federal criminal tax laws, or receiving stolen property," which sure seems like it might require a close look.
Apparently the House Democrats thought so, too, and asked what happened with USDA's suspension and debarment process. And, apparently, Secretary Vilsack said "nah, we'll pass":
Vilsack said USDA considered “suspension or debarment proceedings regarding JBS USA” given the legal issues of its parent company and subsidiary but had decided as far back as February 8, 2021, not to proceed. He said the review focused on whether the company’s performance as a government contractor put the taxpayers at risk. Debarment, he added, is prohibited as a “punishment.”
Now, I haven't seen the USDA's letter so I sure don't want to be out here opining that the USDA got its analysis right or wrong. But on the surface, it seems like they're making a argument that a subsidiary isn't necessarily responsible for the failings of the parent company and therefore JBS USA shouldn't be punished. And sure, I guess I could buy that.
But, the USDA also went a bit further in the letter:
As part of its review, USDA also considered JBS USA and its affiliates’ significant role in the American economy and already-strained food supply chains. Vilsack pointed to “fragility in the market,” including high inflation. Should USDA cut ties with JBS USA, the company would no longer be allowed to contract with any federal agency, not just the Agriculture Department.
Vilsack emphasized that the company’s market power underscored the need for USDA’s efforts to increase competition in the marketplace, pointing to the department’s rulemakings and $1 billion in spending to increase meat and poultry processing capacity. USDA has also worked to “diversify” the sources from which it buys, he wrote.
“This case highlights the urgency of USDA’s multi-billion efforts, noted above, to increase the competitive choices in meat and poultry processing — competition that would benefit taxpayers, consumers, and producers alike,” Vilsack wrote.
Again, not trying to be out here with legal advice, and I haven't even bothered to check out the Practitioner's Guide to Debarment and Debarment, but my hunch is that the FAR probably doesn't excuse crimes just because the seller is, like, super big and important. Like, there's no freestanding "oligopoly exception" to FAR Part 9.4. That would feel like a pretty weird loophole, right?
Making matters worse on that front is that one of the affiliate companies involved pleaded guilty to a conspiracy to fix prices... So, like, if DOJ is out there saying: "the company conspired to engage in anticompetitive practices," it's a rough beat to be USDA and say "we're going to keep using them because there's not enough competition."
In the meantime, I guess we'll have to wait and see how the very real politics of it all shakes out. But given the stakes, I have to imagine there's a lot of stress eating of happening right now. I know I'd be downing at least a pintful of ice cream each night. Yikes.