Babies and Profit

The record-breaking $2-million fine levied against the Beech-Nut Nutrition Corp., and the company’s agreement to pay federal investigative expenses and a substantial settlement with consumers, are instructive lessons to those who have dismissed the Food and Drug Administration as unnecessary and who felt the market afforded adequate protections to consumers.

In this case, fortunately, there were no deaths. There may, however, have been nutritional deficiencies for thousands of babies. For five years, ending in 1983, the company was supplying the babies with a concoction made basically of syrup and water, with “little or any apple juice,” although labeled as pure apple juice. The only apparent merit to the product was that it could be produced for something like 20% of the cost of the real thing and thus presumably was more profitable.

The company pleaded guilty to 215 felony counts of intentionally shipping millions of jars of the bogus apple juice. Three other defendants also pleaded guilty. Conspiracy charges against four people, including two former Beech-Nut executives, commenced Monday.

“It is refreshing to see a corporation come to grips with its wrongdoing and agree to an early resolution by the acceptance of today’s fine and plea,” Andrew J. Maloney, the U.S. attorney for the Eastern District of New York, commented. The guilty plea came a year after the indictment on more than 400 counts.

“We hope that such prosecutions send a strong message that consumer fraud will not be tolerated by the government,” Richard K. Willard, assistant attorney general, commented.

The Beech-Nut case developed while the FDA was undertaking a broader investigation of alleged fraud in the apple juice market. The key complaint came from a confidential source within the industry. The case attracted particular attention because Beech-Nut is the second largest supplier, after Gerber Products Co., of baby food in the United States.