Federal court ‘inclined’ to impose the $100M fine against StarKist
San Francisco, CALIFORNIA — Based on records with the federal court in San Francisco, US District Court Judge Edward M. Chen is “inclined” to impose the $100 million criminal fine - as agreed in the plea agreement — against StarKist Co., whose sentencing hearing has been continued to later next month.
StarKist pled guilty last year for its participation in fixing the price of canned tuna in the U.S.
The company has maintained that it cannot pay more than $50 million in fine, and that it cannot sell its shares in Indian packaging technology firm Techpack.
However, prosecutors argued that the $100 million fine is the only way to punish StarKist, whose “ownership of Techpack can and should be accounted for when determining its ability to pay a $100 million criminal fine.”
Last week, both parties appeared in court for a status hearing, where StarKist’s minority ownership interest in Techpack was discussed. The parties argued about its value and liquidity, according to court records.
The US Justice Department had revealed in court filings that the value of Techpack is at $154 million. But StarKist disagreed.
During last week’s hearing, the court and the parties discussed StarKist’s recent income trends, as well as recent developments in a separate federal civil case (against StarKist and pending at the San Francisco federal court) and the parties’ assessment of likely costs of resolving the civil claims, according to court records.
Chen indicated that a “key component of StarKist’s ability-to-pay hinges on the value and liquidity of Techpack, and that the most likely path to liquidity is the impending Techpack merger.”
(Separate court filings by USDOJ show that the anticipated merger is between Techpack and Dongwon Systems, one of the subsidiaries of South Korea based Dongwon Enterprises, which is StarKist’s parent company.)
StarKist presented at last week’s hearing that the merger is still expected, “but it is delayed for unarticulated reasons which StarKist contends is not related to the criminal fine,” says court records.
StarKist was unable to inform the court of what consideration it would receive from the anticipated merger — i.e., the amount or value of publicly traded stock in Donwong Systems — or the expected timing of the merger. Furthermore, StarKist has not provided an independent appraisal of Techpack’s minority-share value.
“Hence, the only evidence of value are the prices paid for Techpack shares by StarKist and the book value,” according to court records, which note that Chen reminded the parties that the plea agreement sets a fine of $100 million. And the burden is on the defendant to prove inability to pay in order to reduce the fine amount.
Chen indicated that, based on the record before the court, “it is inclined to impose a fine of $100 million but acknowledged there are a number of variables which could impair StarKist’s ability to pay the plaintiffs pursuant to settlement or judgment in the ongoing civil action” before the federal court in San Diego.
The US Probation Office suggested that the court may have the power to reduce the fine or restructure payment schedule if circumstances evolve which demonstrate StarKist’s inability to pay.
In conclusion, the court ordered the parties to meet and confer with U.S. Probation to determine whether conditions of probation can be fashioned to impose a $100 million criminal fine while affording some relief if that fine impairs StarKist’s ability to pay restitution.
Chen rescheduled sentencing hearing for Sept. 11th and ordered the parties to file a joint status report by Sept. 4th.