Richard Greener - The Knowland Retribution

Nathan looked at Louise. She was busily going through her notes. Tom waited several seconds, then said, “Louise?” She felt ready. Nathan was waiting for her to dish up magic. Confident she had the stuff, Louise was equally aware of the importance of taking it out of the box just right. She opened her attache case and spread her notes in front of her for easy reference, point by point.

“This is very difficult, especially after hearing Dr. Roy, so let me just lay it out.” She paused while Tom cleared his throat and Nathan shifted uneasily in his chair. Then, she dove in. “Six plants distribute ground beef to the same market as Knowland’s Lucas plant, which is to say the southeast. Each of the six is owned by a different company. When something like this occurs, it’s not all that easy to track down the exact source of the meat.”

“You know this to be so?” Tom said.

She saw the nascent glimmer in Nathan’s eye. “I do. There have been a surprising number of E. coli incidents over the past ten years. They usually locate the source, but it takes time. And sometimes they never quite get it at all. The stores mix meat, one plant with the other, and it’s not as easy as you might think to separate out one from the other. The story is the people getting sick. By the time the source is identified the story has played itself out. Bad hamburger makes page one. Five or six months later, the story about who did it ends up on page fourteen, in a box. Few read it, and most of them forget it before their second cup of coffee. But,” and again she paused for effect, “assume things do go badly. Assume that someone does get sick, or worse. Assume the legal vultures all come down from the trees. They will. But they don’t know who to sue. So, they sue all six companies. The packers either settle or deny. That’s a lawyer’s decision. If you settle, you have it sealed. Probably Knowland settles. Why? If someone does get serious, there will be records. How much went to the chili and dog food people? That’s all written down. There is documentation. It may not all be accurate, and may not exactly follow the rules, but it’s there. Sooner or later some plaintiff’s attorney will put it together. The other five may feel they have nothing to hide, in which case they will deny. One or two may have problems of their own we don’t know about, stuff they don’t want looked into. So maybe they settle. That’s what Knowland does. Purely a lawyer’s decision. No admission of anything. Confidentiality rules. No investigation that means anything. And all of this is months down the road.”

Wesley said, “At what cost? How much?”

“Less than what you were talking about. Twenty to fifty thousand for someone who’s hospitalized. And if, God forbid, there’s something else, a half million, a million, tops two or three. Historically, that’s what it’s been.”

Tom said, “Something’s not clear. Aren’t there inspectors crawling all over the plant? Why don’t they do the recall and shut it down?”

Louise felt high as a kite. Meeting a twenty-five-year-old bartender as horny as she or a delivery boy with unlimited stamina also made her feel this way. She heard her voice, symphonic, in the distance.

“They don’t have the power. The system is built the American way. It’s there to protect the industry as well as the people who eat the meat and do the work. We are not Communists here. If you want to take a plant off line, or do practically anything else, you have to report it up the chain. And that’s when things slow down. Reports get lost. Reviews take time. There are always appeals. You want to know about recalls? The entire Department of Agriculture cannot order a recall. All they can do is recommend.”

Nathan, suddenly back from the dead, joyously barked: “You know what? This is the greatest country on earth.”

Louise reached into the spread of notes. “Let me read you something. It’s from the New York Times. This is purely mainstream.” She held up a printout. “It’s about a plant called Shapiro, similar to Knowland. Dozens and dozens of violations. Nobody lifted a finger. Inspectors everywhere. All of them know what’s going on, but they also know the law. They know they can’t do a thing. This is a quote from several inspection reports. They wrote this over and over: ‘Preventative measures not implemented and/or not effective.’ Do you follow that? What does that mean? Nothing. It’s not supposed to.”

Louise beamed at her colleagues. “Until 1992 nobody thought E. coli could kill. Then a couple of people died from eating Jack in the Box hamburgers. That’s a fast food chain on the west coast. After that they tweaked the system. Passed some regulations. All of which led to what? The rates of E. coli did not change and life goes on.”

Tom said, “This is great to hear. But where does it get us?”

“The inspection system is set up to fail,” Louise said. “Imagine the worst does happen. People go to the hospital. Maybe one or two succumb. It was bound to happen. And everyone’s exposed. The industry, the government agencies, politicians, whatever. The general trend is to cover it up and make it go away. Some people, a couple of liberal papers perhaps, show a little interest. Otherwise, what happens? Cable and the networks march along. They take the message they’re given and work it. What I’m saying is that as a practical matter, we may find that moving ahead need not impose prohibitive risks.”

Nathan said, “We keep the plant running?”

“I’m not saying that, Nathan. That’s something I cannot say, especially after hearing Dr. Roy. That’s not a decision I want to make. I’m saying that if you decide to go that route, there may be ways to manage it. I’m not saying it will be easy. We’ll have a lot of mountains to move. But as a practical matter…”

Tom said, “Thank you, Louise. Frankly that’s more good news than I expected.” Then he sat back, fingertips touching.

“As I see it,” said Tom, “we have three options. First, we can advise Second Houston to recall its ground beef and then postpone or cancel the IPO, with all the consequences Wesley has outlined. Second, we can advise Second Houston to say nothing about any bad meat already out there, hope it takes weeks for the stink to reach Knowland, if it does at all, go forward on our end with the IPO, and deal with adverse effects later on. These will include exposure to Alliance, Second Houston, and potentially to us, in terms of the clients we put into this, and perhaps the value of our own warrants and options down the line. Third and finally, we can advise Second Houston to go forward, to publicly deny any responsibility for anything, and to settle claims on a confidential basis following advice of counsel. We move our clients in and out of both Second Houston and Alliance a bit more quickly than we planned. Simultaneously, Louise starts working now to position the following message: meat packing is not a pretty business, and it’s absolutely un-American to scapegoat one company out of many.”

Nathan said, “What happens to the price of meat?”

Louise said, “I’d expect a hit to the industry. But it shouldn’t last very long. I think we’d see some short-term losses, but no lasting damage. Obviously there are no guarantees.”

Wesley said, “I can’t think of anything else. One puts us dead in the water. Two puts us waiting to die. Option three gives us a working shot. All we need is a little nerve.”

Tom said, “There’s one more point that should be made. By allowing this IPO to move forward without disclosing what we know, we are in violation of statute. I’m not suggesting we let that taint our judgment. I just want to have it clearly said, because it’s a part of the picture.”