SW Legal studies in Business

Company Can Lose License to Work for Paying Bribes Extorted by Inspector

Appeals court held that a food company could lose its license to operate based on the criminal conviction of a company officer who paid a bribe to a government inspector. Even if paying such bribes was common in the industry, and was extorted by the inspector, the company is responsible.

Topic Criminal Law
Key Words

Bribery; Extortion; License

C A S E   S U M M A R Y

K&H ran a facility in New York City where it was licensed to buy and sell produce under the Perishable Agricultural Commodities Act (PACA). The company was owned and run by Michael Hirsch, Barry Hirsch, and John Thomas. U.S. Department of Agriculture (USDA) inspectors certify the freshness of commodities. It is well known that many USDA inspectors are corrupt and take bribes to certify commodities as fresh when they are not. Companies that do not pay bribes may be forced to wait a long time for an inspection, by which time the quality of produce drops. One inspector, when caught, cooperated with investigators and was wired so as to document bribes. John Thomas gave the inspector a bribe and was then convicted of bribing a public official. The USDA then charged K&H with violating PACA by bribing an inspector. The company argued that the bribes were extorted by USDA inspectors because, if not paid, produce would be allowed to sit and rot without certification. K&H was fined $180,000 and had it license revoked by the USDA. K&H appealed.


Affirmed. Even if a merchantís payments to federal inspectors were induced by extortion, such extortion is not a reason under PACA for the merchantís failure to perform the implied duty to refrain from bribing produce inspectors. John Thomas was vice president of H&K so he was well connected to the company president, as they worked together running the company, so the company can be held responsible for the violation and lose its license to be in the industry.


Kleinman & Hochberg, Inc. v. USDA, 497 F.3d 681 (D.C. Cir., 2007)

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