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"I thought apple juice should be made from apples"

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by

Mary Leonard

on 4 September 2013

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Transcript of "I thought apple juice should be made from apples"

Resolutions
Ultimately The non apple apple juice was sold until march 1983.

Neils Hoyvald and John Lavery were indicted on consumer fraud.

Hoyvald was indicted for 358 violations of the Food, and Drug and Cosmetic Act.

Lavery was indicted for conspiricy, eighteen counts of mail fraud and 429 violations of federal food and drug laws.

They were both convicted how ever convictions were later OVERTURNED because the trial was held in the wrong jurisdiction.

Beach Nut ultimately pleaded guilty to 215 felony counts for violations of federal food and drug laws and agreed to pay only 2 million in fines.

tragically still netting 58 million on the fake apple juice scheme

"I thought apple juice should be made from apples"
-LiCari

Analysis
Jerome J. LiCari
Implications of the ethical dilemma in this case are:
1. The Shadow of Mismanaged Information


Financial Background of the Beech-Nut Case
Beech-Nut & The No-Apple-Juice Apple Juice
Beech- Nut Nutrition Corporation Apple Juice Lawsuit
Primary Plant Facilities in Canajoharie, NY, headquarters outside of Philadelphia. Beech-Nut was the 2nd largest maker of baby foods in the USA, with roughly 15% market share (comparable to Heinz’s market share), compared to Gerber’s 70%.
In 1977 Beech-Nut Vice President John Lavery & President Neils L. Hoyvald signed an agreement with a wholesaler run by Zeev Kaplansky Interjuice Trading Corporation, to purchase apple juice concentrate.
Due to Adulteration rumors flying about the juice industry, Beech-nut's director of research and development, Jerome J. LiCari, wanted to test the new supplies for purity and quality.

Jerome LiCari was the director of research and development for Beech-Nut Nutrition Corporation.
At the time of LiCari's employment, this company was the second-largest baby food manufacturer in the United States.
LiCari and his chemists discovered that the adulteration rumors were in fact true, he brought this issue to the attention of Lavery, who then communicated to LiCari that "he was not a team player and could be fired if he shared this information"
Due to Lavery and Hoyvald's lack of responsibility, this led LiCari to become a courageous follower
Neils Hoyvald
John Lavery
2. The Shadow of Irresponsibility


Beech-Nut
Challenge
Participate in Transformation
Leave
The Dilemma
Universal (the supplier) well below the market price of apple concentrate.
Beech-Nut constantly emphasized on their company’s new line of products being created with “all natural ingredients
Suspicion followed by investigation revealed Beech-Nut had KNOWLINGLY distributed Universal’s fraudulent concentrate product to parents all over the US
As result, Beech-Nut nut’s top executives were indicted & convicted on 429 counts of male-fraudulence
1978
30% of the total sales
$250,000 a year on a $50 million operating budget
20-25%
90% of its apple concentrate
1979
sold Beech-Nut to Nestle for $35million
$60 million in capital improvements and marketing
1981
The company lost $2.5 million on sales of $62 million
1982
Promised a profit of $700,000 on a negative cash flow of $1.7 million
1986
fell from 20% in 1986 to 17% in 1988
1987
$2 million by federal courts for violations of federal food and drug laws
$7.5 million, later increased to $10 million
1988
came to an end in March 1988
guilty verdict
prison terms were carried
Being the Vice President of Beech-Nut, Lavery should have taken care of the issues with the false ingredients within the companies products, instead he portrayed:
The Shadow is Mismanaged Information

-The Leaders in this situation have more access to information than do other in the organization. Mismanaging information and engaging in deceptive practices with information is casting a shadow
-Unethical Leaders:
-Deny having knowledge that is in their possession: Withhold information that followers need
Neils Hoyvald was the President and CEO of Beech-Nut, however, when the negative information was given to him... he chose to do nothing about it. He is casting
The Shadow of Irresponsibility

-These types of leaders act irresponsibly when they fail to make reasonable efforts to present follower misdeeds, ignore or deny ethical problems, don't show responsibility for consequences of their directives, deny their duties to followers
Both John Lavery and Neils Hoyvald were examples of: Derailed Leaders.
If you look at it from Lavery's angle, he was holding John LiCari's job over his head if he were to do anything with the information that he discovered by testing the product
In Hoyvalds case, he knew about these issues as the President and CEO of the company and did not do anything about it. He had this responsibility as the leader of the company, and mistreated his power and acted in an evil manner.
Discussion Questions:
1. Where, if anywhere, do you think the "smoking guns" or "red flags" are in the case?

2. What do you think about "a deal too good to be true" as an ethical decision rule?

3. What is the relationship between "evidence" and "proof" in this case?
Media regarding Beech-Nut
Full transcript