Family Dollar Stores LLC Pleads Guilty to Holding Consumer Products under Insanitary Conditions

Family Dollar Stores LLC Pleads Guilty to Holding Consumer Products under Insanitary Conditions, Agrees to Pay $41.675 Million in Connection with Rodent-Infested Warehouse. This is the largest ever monetary criminal penalty in a food safety matter in US History. 

In a press release from the Department of Justice the announcement is made of this settlement. 

Family Dollar Stores LLC pleaded guilty per a release on February 26th, 2024 to holding food, drugs, medical devices, and cosmetics under insanitary conditions, related to a rodent infestation at the company’s West Memphis, Arkansas, distribution center.

A criminal information unsealed today in federal court in Little Rock, Arkansas, charged Family Dollar with one misdemeanor count of causing FDA-regulated products to become adulterated while being held under insanitary moneyary

The company, a subsidiary of Dollar Tree Inc., entered into a plea agreement that includes a sentence of a fine and forfeiture amount totaling $41.675 million, the largest-ever monetary criminal penalty in a food safety case. The plea agreement also requires Family Dollar and Dollar Tree to meet robust corporate compliance and reporting requirements for the next three years. U.S. Magistrate Judge Jerome T. Kearney presided over the company’s guilty plea and sentencing at today’s hearing.

“When consumers go to the store, they have the right to expect that the food and drugs on the shelves have been kept in clean, uncontaminated conditions,” said Acting Associate Attorney General Benjamin C. Mizer. “When companies violate that trust and the laws designed to keep consumers safe, the public should rest assured: The Justice Department will hold those companies accountable.”

“Companies distributing and selling food, drugs, medical devices, and cosmetics must ensure that these products are being held in safe and sanitary conditions,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The Justice Department will continue to work closely with the FDA to investigate and prosecute those who put public health at risk by failing to meet this important obligation.”

“Consumers trust that products purchased from retail stores such as Family Dollar are safe,” said U.S. Attorney Jonathan D. Ross for the Eastern District of Arkansas. “It is incomprehensible that Family Dollar knew about the rodent and pest issues at its distribution center in Arkansas but continued to ship products that were unsafe and insanitary. Knowingly selling these types of products not only places the public’s health at risk but erodes the trust consumers have in the products they purchase. Products shipped and sold are required to be safe for consumers and the safety of Arkansans and others are extremely important to this office. Let me be clear, if you conduct business in Arkansas and allow the shipment or sale of unsafe and insanitary products, you will be held accountable.”

“U.S. consumers rely on the FDA to ensure that their food is safe and wholesome,” said Special Agent in Charge Charles L. Grinstead of the Food and Drug Administration’s Office of Criminal Investigations (FDA-OCI) Kansas City Field Office. “When companies put themselves above the law and distribute food that has been held under extremely insanitary conditions, putting the public’s health at risk, we will see that they are brought to justice.”

In pleading guilty, the company admitted that its Arkansas distribution center shipped FDA-regulated products to more than 400 Family Dollar stores in Alabama, Missouri, Mississippi, Louisiana, Arkansas, and Tennessee. According to the plea agreement, the company began receiving reports in August 2020 of mouse and pest issues with deliveries to stores. By the end of 2020, certain stores reported receiving rodents and rodent-damaged products from the warehouse. The company admitted that by no later than January 2021, some of its employees were aware that the insanitary conditions caused FDA-regulated products held at the warehouse to become adulterated in violation of the Federal Food, Drug and Cosmetic Act (FDCA).

According to the plea agreement, the company continued to ship FDA-regulated products from the warehouse until January 2022, when an FDA inspection revealed live rodents, dead and decaying rodents, rodent feces, urine, and odors, and evidence of gnawing and nesting throughout the facility. According to the plea agreement, subsequent fumigation of the facility resulted in the reported extermination of 1,270 rodents. On Feb. 18, 2022, the company voluntarily recalled all drugs, medical devices, cosmetics, and human and animal food products sold since Jan. 1, 2021 in the 404 stores that had been serviced by the warehouse.

FDA-OCI Special Agents Chad Medaris and Daniel Allgeyer investigated the case.

Senior Litigation Counsel Patrick Runkle and Trial Attorney Alisha Crovetto of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorneys Julie Peters and Cameron McCree for the Eastern District of Arkansas prosecuted the case.

Additional information about the Consumer Protection Branch and its enforcement efforts can be found at www.justice.gov/civil/consumer-protection-branch.

Per Investing.com, Dollar Tree Chairman and CEO Rick Dreiling expressed disappointment over the issues, emphasizing the company's efforts to prevent future occurrences. Since assuming leadership, Dreiling has overseen the implementation of new safety and compliance measures.

These improvements include the creation of new roles such as a Chief Legal Officer and a Chief Ethics and Compliance Officer, as well as senior positions in Food Safety, Product Quality, and Regulatory Compliance. Each of the company's distribution centers has also achieved Good Distribution Practices certification after passing independent audits.

Family Dollar initiated a voluntary recall of all FDA-regulated products from DC 202 and has decommissioned the site. Dollar Tree plans to return to West Memphis with a new, reimagined distribution center by fall 2024, which represents an investment of over $100 million and is expected to create more than 300 jobs. This facility will emphasize safety, sanitation, and compliance, serving as a model for other centers in the network.

Dollar Tree, a Fortune 200 company, operates over 16,000 stores across the United States and Canada. This settlement concludes the legal issues stemming from the West Memphis distribution center, allowing the company to focus on its business transformation and compliance initiatives.

Dollar Tree shares are trading today at $146 mid to a high of $161. 

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