Bad China Products. Hey, It's A Criminal Thing.

I am a frequent speaker at conferences on China manufacturing/China sourcing/China products. Oftentimes, I talk about what foreign companies must do to avoid liability. Civil liability. I think some years ago I would mention something about how criminal liability was always possible and some lawyer does usually mention this at these seminars, but always in passing. In other words, someone might put criminal liability in the long list of what can go wrong when buying bad product from China.

After today, I will be putting "criminal liability" back on my list.

This just out Bloomberg news stories details how the US federal grand jury in Kansas City just today issued criminal indictments against a whole slew of people and companies involved in last years well-publicized pet food poisonings.

This is big and it will no doubt have us civil lawyers scrambling to our books to figure out what it takes for there to be criminal liaiblity. I am guessing there has to be at least some element of intentional act for criminal liability to apply here. In other words, those indicted must be believed to have known they were acting in contravention of the law when they made, sold, shipped out, or purchased the pet food and presumably, they knew the product was not what it was made out to be. Criminal lawyers, can you help me out here?

According to the article, "the government said that mixing melamine with wheat gluten made it appear to have a higher protein level." This tainted wheat gluten was used in the hazardous pet food. The article describes the criminal charges as follows:

Las Vegas-based ChemNutra and its owners, Sally Miller and Stephen Miller, were charged with 26 misdemeanor counts alleging they delivered adulterated food and introduced it into interstate commerce. The executives and the company were also charged with one felony count of participating in a wire-fraud conspiracy to defraud companies that purchased the contaminated gluten.
In a separate indictment, Xuzhou Anying Biologic Technology Development Co. and Suzhou Textiles, Silk, Light Industrial Products, Arts and Crafts I/E Co. were charged with 26 felony counts. Mao Linzhun and Zhen Hao Chen, executives with the companies, also face 26 felony charges.

Kansas City is the site of all this because "the products were shipped to the port in that city, according to the Justice Department."

It will be very interesting to see if the Chinese government cooperates with the US attorneys' office. Part of me says it will not because it has a history of not doing so, but a larger part of me says it will because it needs to do so to bolster world opinion regarding Chinese products.

This is big.

We will be back with more on this story when we know more.

UPDATE: China Bystander has a nice post up on this. CB is betting China will not cooperate.

Comments

You beat me to posting on this, but I think any criminal attorney will need to see a copy of the complaint before it is possible to comment at length about what is the likely criminal liability. After your article (and one on CNN Money), I can foresee the wire fraud charges going forward against the executives of the US based companies that did this. I believe wire fraud is rather broad from my limited experience, but that is from my day's as a plaintiff's attorney (when we co-operated with the SEC on some cases).

(As for the Chinese companies, I suppose I am a little more dubious about the cooperation of the Chinese government in this case)

Posted by: Thomas Chow | February 6, 2008 3:34 PM

The funny thing about business is that people rarely consider when their conduct crosses the line from risky practices to criminal conduct.

Three thoughts, recognizing that the info available is too limited to offer any serious commentary.

First, the U.S. likely won't need China's cooperation to make its case. It would help, but the breadth of federal prosecutions is staggering. Welcome to the New World of crime.

Second, criminal conduct generally requires intent, but that's proven via conduct, not some mental process that eludes evidence. One is presumed to intend the natural consequences of one's acts.

Third, conscious avoidance of knowledge of malevolent acts doesn't absolve the defendant.

This sounds like some interesting stuff, and I look forward to hearing more about it. Or better yet, defending against it.

Posted by: Scott Greenfield | February 7, 2008 3:41 AM