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Plea deal calls for egg company to pay $6.8M fine for mislabeling, bribery, tainted products

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IOWA CITY, Iowa - An Iowa company has agreed to pay $6.8 million in fines for selling old eggs with false labels for years as well as the tainted products that caused a nationwide salmonella outbreak in 2010, according to a plea agreement released Monday.

Quality Egg LLC, once one of the nation's largest egg producers, is expected to plead guilty Tuesday to charges of bribing a U.S. Department of Agriculture inspector to approve sales of poor quality eggs, selling misbranded eggs and introducing adulterated food into interstate commerce. The company's owner, Austin "Jack" DeCoster, and its chief operating officer, Peter DeCoster, are expected to plead guilty to introducing adulterated food into interstate commerce, a misdemeanour.

The DeCosters face sentences ranging from probation to one year in jail, according to plea agreements filed Monday by federal prosecutors. Jack DeCoster, 79, of Turner, Maine, and his 51-year-old son Peter, of Clarion, Iowa, have agreed to pay $100,000 fines each.

U.S. District Judge Mark Bennett must approve the plea agreements and sentence the DeCosters who, along with Quality Egg, could also be ordered to pay restitution to victims. The agreements allow the DeCosters to appeal any jail terms.

Bill Marler, an attorney who represents dozens of the salmonella victims, said the $6.8 million fine was "quite stunning" and the largest he's heard of in 20 years of practicing food safety law. The fines and potential jail time send "a very strong message to companies that food safety is paramount," he said.

The documents add new details to the unethical and unsafe business practices at Quality Egg, which operated a network of businesses in rural northern Iowa that produced more than 1 million eggs daily. The government blamed its tainted shell eggs for a 2010 salmonella outbreak that led to thousands of cases of food poisoning and the unprecedented recall of 550 million eggs. The DeCosters have since left the industry.

Investigators found no evidence that the DeCosters knew they were selling tainted products in 2010. But as corporate officers, they were in positions to "detect, prevent and correct the sale of the contaminated eggs" had they known, the plea agreements say.

The investigation also found no evidence that the DeCosters knew that Quality Egg deliberately mislabeled eggs from 2006 to 2010 to fool regulators and consumers about their age and circumvent laws in California, Arizona and elsewhere that require eggs to be sold within a month or less of their processing dates.

In that scheme, company manager Tony Wasmund directed and approved a practice of putting false processing and expiration dates on eggs that had been in storage for several days or weeks to make them appear far fresher. In some cases, eggs were shipped without labels so that wholesalers could add inaccurate processing and expiration dates when they arrived. Many of the eggs had been in storage for 14 to 40 days or longer.

The practice allowed Quality Egg to avoid having to sell surplus eggs for half price to a breaker facility, where they are sanitized and turned into a liquid product. Instead, the "distressed eggs" were sold to wholesalers at a higher price; only eggs that were mouldy went to a breaker, Wasmund told investigators. Investigators failed to identify anyone who was sickened by the practice.

Wasmund and another employee also bribed a USDA inspector at least twice to approve pallets of shell eggs that did not meet minimum quality standards. In particular, the pallets had too high a percentage of eggs that were cracked, leaking, dirty or inedible. The inspector, who has since died of natural causes, accepted a cash bribe of $300 in April 2010 and at least one more of an unspecified amount for releasing those eggs without the required reprocessing, the plea agreement says.

Wasmund is expected to be sentenced in September on a bribery conspiracy charge, under a plea agreement in which he co-operated with prosecutors.

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