JSG Trading Corp. v. Dept. of Agriculture

• Decision Date: 05 January 2001
• Docket Number: No. 00-1011,00-1011
• Citation: 235 F.3d 608
• Parties: (D.C. Cir. 2001) JSG Trading Corp., Petitioner v. Department of Agriculture and United States of America, Respondents
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 608

235 F.3d 608 (D.C. Cir. 2001)

JSG Trading Corp., Petitioner v. Department of Agriculture and United States of America, Respondents

No. 00-1011

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 1, 2000

Decided January 5, 2001

[Copyrighted Material Omitted]

On Petition for Review of an Order of the U.S. Department of Agriculture

Robert M. Adler argued the cause for petitioner. With him on the briefs were Gary C. Adler and John M. Himmelberg.

M. Bradley Flynn, Attorney, U.S. Department of Agriculture, argued the cause for respondents. With him on the brief were James Michael Kelly, Associate General Counsel, and Margaret M. Breinholt, Acting Assistant General Counsel.

Before: Sentelle, Randolph, and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Randolph.

Randolph, Circuit Judge:

This case returns to us after remand on JSG Trading Corp.'s petition for review of a Department of Agriculture order adjudging it guilty of commercial bribery and revoking its license to sell produce under the Perishable Agricultural Commodities Act. We outlined many of the financial dealings at issue here in JSG Trading Corp. v. United States Dep't of Agric., 176 F.3d 536 (D.C. Cir. 1999), and will assume familiarity with that opinion. This time around JSG challenges the sufficiency of the evidence and raises three questions: (1) did the Department apply the wrong legal standard for commercial bribery? (2) were the payees principals in the victim companies, thereby precluding a finding of commercial bribery? and (3) is license revocation excessive? We answer no to each and deny the petition.

I.

Section 2(4) of the Perishable Agricultural Commodities Act of 1930 (PACA) forbids "any commission merchant, dealer or broker * * * to fail, without reasonable cause, to perform any specification or duty, express or implied, arising out of any undertaking in connection with any such [produce] transaction." 7 U.S.C. § 499b(4).¹ The Department has drawn from this language a duty of produce sellers not to corrupt agents and employees of their buyers, and has styled the breach of this duty "commercial bribery." In brief, this duty is breached--and commercial bribery results--when a seller offers consideration to a buyer's agent or employee, without the knowledge of the principal or employer, with intent to induce purchase of the seller's product. See In re Sid Goodman & Co., 49 Agric. Dec. 1169 (1990), aff'd, 945 F.2d 398 (4th Cir. 1991) (table), and In re Tipco, Inc., 50 Agric. Dec. 871 (1991), aff'd, 953 F.2d 639 (4th Cir. 1992) (table).

JSG Trading Corp. is a New Jersey-based PACA licensee engaged in buying and selling produce. L&P and American Banana are produce dealers at the Hunts Point Market in New York City. L&P and American Banana purchased tomatoes from JSG through purchasing agents--Anthony Gentile for L&P Albert Lomoriello for American Banana. In early 1993, the Department began investigating whether JSG sought to covertly influence Anthony Gentile and Albert Lomoriello to purchase more tomatoes from JSG on behalf of their respective principals in violation of PACA S 2(4), as interpreted in Goodman and Tipco. The Department identified what it considered questionable transactions and accounting practices, several of which an Administrative Law Judge found were commercial bribes. The ALJ ordered JSG's license revoked. See In re JSG Trading Corp., 56 Agric. Dec. 1800 (1997). The Department's Judicial Officer affirmed the ALJ's findings and order. See In re JSG Trading Corp., 57 Agric. Dec. 640 (1998).

II.

A. Substantial Evidence

An agency's adjudicative orders must be supported by "substantial evidence," 5 U.S.C. § 706(2)(E), which is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion" when taking "into account whatever in the record fairly detracts from its weight." See AT&T Corp. v. FCC, 86 F.3d 242, 247 (D.C. Cir. 1996) (quoting NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 300 (1939), and Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951)); McCarty Farms, Inc. v. Surface Transp. Bd., 158 F.3d 1294, 1300-01 (D.C. Cir. 1998). There is substantial evidence to support the Judicial Officer's finding that JSG's payments, described below, to Anthony Gentile, to his wife Gloria Gentile, and to Albert Lomoriello were commercial bribes under Goodman and Tipco.

The payments at issue here consisted of: 35 checks to Anthony Gentile totaling $62,535.60; payments to Gloria Gentile, including an unjustified gain on a stock sale; a check for $5,600 to G&T Enterprises, a company Gloria Gentile set up for tax purposes; and seven checks to Albert Lomoriello totaling $9,733.45.²

JSG tendered numerous "innocent" explanations for these transactions and the bizarre accounting practices surrounding them, none of which is persuasive. For instance, JSG insists that the checks made out to Anthony Gentile were "circular" because they were redeposited in JSG's accounts with no money ever reaching the payee. According to JSG, "none of the monies reflected by these checks ever reached Mr. Gentile or [was] otherwise paid by JSG to any person (or any entity) for his benefit." Final Brief of Petitioner at 18. The checks, JSG claims, functioned as "clips," a mechanism to reconcile accounts: "these 'clips' were used ... in order to permit L&P to pay less than JSG's invoiced prices in order to make up for a loss on prior purchases." Id. at 20 n.19. But writing checks payable to another company's purchasing agent and then re-depositing them into one's own account is hardly a recognized or plausible way to reconcile accounts between a seller and the payee's principal, the buyer. The normal function of checks is to move money from one account to another, not to keep it in place. Making checks payable to L&P's purchasing agent and then re-depositing them does not appear, as JSG claims, to "permit L&P to pay less than JSG's invoiced prices." The Judicial Officer had ample evidence for finding JSG's explanations chimerical, particularly in light of the inability of JSG's officers to give a coherent explanation of this unusual accounting procedure; JSG's treatment of the payments in its records as profit-sharing with Mr. Gentile and as reductions in Mr. Gentile's debt to JSG; and the apparent relationship between the amount of each check and a per-box commission noted in JSG's records.³ See 58 Agric. Dec. at 1064-77.

The Judicial Officer was also on solid ground in rejecting JSG's explanations for its payments to Mrs. Gentile and Mr. Lomoriello. No evidence indicates the payments were compensation for any legitimate service rendered. Much evidence tends to show that the payments were secret per-box commissions intended to induce the purchase of more tomatoes from JSG. See 58 Agric. Dec. at 1061-64 & 1081-88. We have doubts, however, about the $5,600 check to Mrs. Gentile's company, G&T. In its opposition to JSG's motion to dismiss the case on remand, the Department appeared to concede that the payment to G&T was not a commercial bribe, a statement inconsistent with its position in this court. See Complainant's Response to JSG's Motion to Dismiss and for Entry of Judgment at 5 & n.2; Joint Appendix at 389. At any rate, we cannot see how the $5,600 payment could affect the outcome of this case. The remaining payments to Mr. and Mrs. Gentile and Mr. Lomoriello amply support revocation of JSG's PACA license.

B. Legal Standard for Commercial Bribery

JSG claims the Judicial Officer misapplied the commercial bribery standard articulated in Goodman and Tipco. In our first opinion in this case, we held that the Judicial Officer erred in substituting a per se test for Goodman's and Tipco's intent-to-induce and secrecy standard. See 176 F.3d at 54346. Under the per se test, any payment to a purchasing agent above a de minimis threshold constituted a commercial bribe, regardless of intent and secrecy. We remanded for the Judicial Officer either to justify or to abandon the per se test. He adopted the latter course.

On remand, the Judicial Officer interpreted PACA's duty requirement as imposing on "each commission merchant, dealer, and broker ... an obligation ... to avoid making or offering a payment to a purchasing agent to encourage that agent to purchase produce from the commission merchant, dealer, or broker on behalf of the agent's principal or employer, without fully informing the purchasing agent's principal or employer of the offer or payment." 58 Agric. Dec. at 1051. He disaggregated this obligation into a four-part test:

Proof that: (1) a commission merchant, dealer, or broker made a payment to or offered to pay a purchasing agent; (2) the value of the payment or offer was more than de minimis; (3) the payment or offer was intended to induce the purchasing agent to purchase produce from the commission merchant, dealer, or broker making the payment or offer; and (4) the purchasing agent's principal or employer was not fully aware of the payment or offer made by the commission merchant, dealer, or broker to the purchasing agent, raises the rebuttable presumption that the commission merchant, dealer, or broker making the payment or offer violated section 2(4) of the PACA.

58 Agric. Dec. at 1051. The presumption is rebutted by the absence of any one element. See id.

JSG perceives in this phrasing of the test three substantial and unexplained departures from Goodman, Tipco, and our opinion in JSG Trading Corp.: (1) failure to require a specific corrupt intent to induce; (2) equation of secrecy with the payee's principal's or employer's lack of full awareness of the payment or offer; and (3) omission of a quid pro quo requirement. This new test, JSG insists, is the per se test redux, and will "turn countless normal business transactions in to [sic] bribes." Final Brief of Petitioner at 33-34.

The Judicial Officer's test is...