Criminal probe adds to Abbott's formula woes: Prosecutors' investigation of contamina | ABT Message Board Posts

Abbott Laboratories

  ABT website

ABT   /  Message Board  /  Read Message



Rec'd By
Authored By
Minimum Recs
Previous Message  Next Message    Post Message    Post a Reply return to message boardtop of board
Msg  99 of 109  at  2/24/2023 7:49:41 PM  by


Criminal probe adds to Abbott's formula woes: Prosecutors' investigation of contamina

 Publisher logo. Links to publisher website, opened in a new window.

Criminal probe adds to Abbott's formula woes: Prosecutors' investigation of contamination at Michigan plant could lead to fines or even jail time


A year after safety lapses at Abbott Laboratories' baby formula plant in Sturgis, Mich., triggered a nationwide formula shortage, potential criminal liability hangs over the company and its executives.

Following infant illnesses and deaths, whistleblower complaints, a formula recall and eventually a plant shutdown, the U.S. Department of Justice opened a criminal investigation into conduct at Abbott's plant. Since the formula saga began, Abbott has taken much of the blame for the shortage, had plant safety issues exposed and has seen a steep decline in formula sales. But the DOJ investigation could deepen the damage from an episode that has already hurt the company's bottom line and brand name.

If prosecutors bring criminal charges, potential penalties include steep fines for Abbott, as well as fines and even jail time for company executives. Food safety law experts say the DOJ is likely assessing whether Abbott and individual executives broke provisions in the Food, Drug & Cosmetic Act of 1938, which prohibits the sale of poisonous or unsanitary food and ingredients, as well as preparing and packing of food in unsanitary conditions.

Investigators could charge the company and employees with misdemeanors, or with felonies carrying more severe penalties. It's also possible the DOJ will close the investigation without bringing any charges.

Misdemeanors are easier to prove, says Bill Marler, a Seattle-based food safety attorney who represented victims in food poisoning cases against Chipotle, ConAgra and Jack in the Box. Prosecutors would only need to prove Abbott produced formula in unsanitary conditions, a reality already documented in FDA reports.

An inspection in January 2022 found bacteria on machinery that comes in direct contact with formula, as well as on the floor and doors of the plant. And FDA chief Dr. Robert Califf told federal lawmakers that the agency found "egregiously unsanitary conditions" in Abbott's plant during inspections, including standing water, a leaking roof and damaged equipment susceptible to bacteria growth.

"It's a layup for a misdemeanor charge against Abbott and/or particular executives who were in charge of that plant," Marler says.

Felonies would be harder to prove, requiring evidence that the company and leaders intended to defraud or mislead consumers and regulators, or that Abbott is a repeat offender.

Potential penalties for misdemeanors vary, depending on whether a violation caused a death. A misdemeanor that does not cause death comes with a fine of up to $100,000 and a year in prison for an individual, and a fine of up to $200,000 for a corporation, according to the FDA website. A misdemeanor that results in death, or a felony, is punishable by a fine of up to $250,000 and up to three years in prison for an individual, and a fine of up to $500,000 for a corporation.

Because the U.S. Centers for Disease Control & Prevention was unable to definitely link Abbott to four reported illnesses and two deaths of infants who consumed the company's formula, the company and executives appear unlikely to face steeper fines and longer jail time.

The DOJ declined to comment about the investigation. Abbott did not respond to Crain's multiple requests for comment but told Bloomberg News it is cooperating with the investigation.


Recently, federal prosecutors have shown a willingness to charge executives with crimes. High-profile cases include criminal fraud prosecutions of Theranos founder Elizabeth Holmes, FTX CEO Sam Bankman-Fried, the founders of Chicago-based Outcome Health and former high-level executives at Chicago's Commonwealth Edison. Holmes was convicted and sentenced to 11 years in prison. Bankman-Fried, the Outcome founders and the former ComEd executives have pleaded not guilty.

"That's the way to deter this type of behavior," says Peter Pitts, co-founder of the Center for Medicine in the Public Interest and former associate commissioner of the FDA. "When an executive recognizes that it's going to be more than the company paying a fine — that (they) might go to prison — I think that is an important deterrent."

In other food safety cases, the DOJ filed criminal charges against Texas ice cream company Blue Bell Creameries and its former CEO in 2020 following a listeria outbreak tied to deaths and illnesses. The company agreed to pay a $19 million fine and plead guilty to two misdemeanor charges. The former CEO, who was charged with a scheme to cover up shipping of contaminated products, pleaded not guilty. After an initial mistrial, a second trial has been scheduled for later this year.

In 2015, Peanut Corp. of America owner Stewart Parnell was sentenced to 28 years in prison after being convicted of covering up contaminated peanut products that led to a deadly salmonella outbreak.


The DOJ investigation into Abbott comes as the company works to recapture lost formula sales. Its nutrition business, which includes formula, saw sales drop 10% to $7.5 billion last year. As of Feb. 14, Abbott's stock was down 13% from a year earlier, while the S&P 500 Healthcare Index was up 2.5%.

CEO Robert Ford told investors last month Abbott is working to get formula back on shelves and begin growing the nutrition segment at a "pre-pandemic" level between 4% and 6% annually. Abbott dominated U.S. infant formula sales until its products came off shelves and the FDA allowed more foreign suppliers into the market.

Additionally, some analysts worry that permanent changes to the Special Supplemental Nutrition Program for Women, Infants & Children, or WIC, program, which has fostered market concentration in many U.S. states, could hurt Abbott's ability to regain market share, too, as state governments spread contracts among more manufacturers to reduce the risk of future shortages.

"Future state WIC contracts could be at risk which could keep share recapture efforts elusive over the next several years," Mizuho Securities analysts wrote in an October report.


     e-mail to a friend      printer-friendly     add to library      
Recs: 0  
   Views: 0 []
Previous Message  Next Message    Post Message    Post a Reply return to message boardtop of board

Financial Market Data provided by