Egg industry gets cracking as lawsuits fly

Thursday, February 24, 2011

by BETTER FARMING STAFF and SUSAN MANN

A former employee alleges that a Strathroy egg marketing company and others in the province’s egg industry used fraudulent practices that compromised producer profits and consumers’ food safety. 

The sworn allegations, in court documents filed by London resident Norman Bourdeau, have not been proven in court and are vigorously denied by the organizations and individuals involved.

In a statement of claim filed Oct. 7, 2010 by L.H. Gray against Bourdeau, the company denies his allegations. 

Bourdeau says he worked for L. H. Gray & Son for 15 years providing information technology services, including document management, communications, email and programming. He is in litigation with L.H. Gray. He also wants the Ontario Farm Products Marketing Commission to investigate his claims and hold a public inquiry. The Commission oversees Ontario's regulated farm marketing system. 

L.H. Gray is the second largest egg producer, grader and marketer in Canada, Bourdeau notes in a Dec. 20, 2010, letter addressed to the Commission’s chair, Geri Kamenz. 

In a phone interview Chief Financial Officer John Leitch told Better Farming that based on instructions from legal counsel he couldn’t comment specifically but said “L.H. Gray certainly denies all of the allegations that have been made. L.H. Gray certainly takes all of these allegations extremely seriously and we are prepared and will defend them very vigorously.”

In his submission to the Commission, Bourdeau refers to himself as “the Whistleblower” and alleges that his former employer illegally included about $150 million worth of cracked eggs into Grade A packages sold to retail, institutional and food service sectors. 

The eggs pose health risks “since the potential for bacterial contamination from wash water entering cracked eggs is possible,” he states. Bourdeau alleges that Egg Farmers of Ontario “condoned this activity.” The marketing organization represents the province’s supply-managed egg producers.

Bourdeau further alleges that the company made false reports to the marketing organization and shared the proceeds of “fraudulent profit” with producers, including some with ties to Egg Farmers’ board and administration. 

Kamenz acknowledges Bourdeau’s request for a public inquiry is "before the Commission." He declined comment on the allegations because the matter is before the courts.  When asked if the commission would have to wait for the matter to go through the courts before dealing with the situation, Kamenz explained that it would be inappropriate for him to comment.

In October, 2010 L.H. Gray, Bourdeau’s former employer, initiated legal proceedings against him in a London Superior Court of Justice. Among its claims, the company lists breaches of contract, fiduciary duty, confidentiality and good faith obligations as well as intentional interference in economic relations. L.H. Gray is claiming $15 million in damages.

In court documents, the company alleges that Bourdeau signed a confidentiality agreement in 2009. It fired him in March 2010, alleging that Bourdeau had played a role in an ongoing legal action it faces from an industry competitor.

That company was Best Choice Eggs and its parent company Sweda Farms Ltd., which in 2009 filed a claim against Gray and Burnbrae Farms, alleging the two companies tried to sabotage its business by stealing customers and using confidential information and defamation. Sweda is claiming $16 million in damages. 

On Feb. 12, 2010,Sweda also commenced an action against the Ontario Egg Producers (now known as Egg Farmers of Ontario), Mark Beaven, a former Egg Farmers operations manager, and Harry Pelissero, its general manager.

Beaven left that job in November 2008 and is now executive director of the Canadian Animal Health Coalition. He declined to comment on why he decided to leave. 

Beaven explains that the suit against him concerned an investigation but says he has now been released from the court action by a so-called Mary Carter agreement. He referred any further questions to the Egg Farmers of Ontario lawyers, noting he is no longer with the marketing board.

Beaven says Bourdeau’s allegations are “very concerning to me for the possible damage that they can do to this industry.”

“If these allegations are true, it would potentially erode the public confidence in the system, which is unfortunate because the producers are excellent producers, they’re excellent farmers and the system itself is a very strong, it’s a great system, it ensures a top quality product for a reasonable price and that to me is a good thing.”

In court documents L.H. Gray alleges that information Bourdeau provided prompted a Superior Court Justice in Whitby to issue an ex parte order that would put data storage material and other documents in the hands of Sweda Farms. The Feb 12, 2010 order prohibited L.H. Gray from destroying or deleting business documents.

L.H. Gray also alleges that Bourdeau stole about one million confidential and commercially sensitive documents from the company and provided about 800 pages to Sweda Farms Ltd.’s owner, Svante Lind in 2009 and 2010.

In December, Bourdeau launched a counter action against L.H. Gray, company president Bill Gray, Scott Brookshaw, the company’s vice president of processing, and John Leitch, L.H. Gray’s chief financial officer, claiming $25 million in damages. 

Bourdeau alleges company officials threatened to fire him if he did not sign a confidentiality agreement, wrongfully terminated his contract and diminished his business reputation through defamatory statements. He also alleges that in 2009, Bill Gray ordered him to delete more than 4,000 emails after being served with Sweda’s statement of claim.

Harry Pelissero, general manager of Egg Farmers of Ontario, says a Feb. 22 injunction granted by the court prohibits him from making detailed comments. The injunction seals some information in the court file because of its sensitivity. 

Pelissero says what he can say is they’re aware of the package of material that was sent to the commission by a former L.H. Gray employee. He says Bourdeau sent the package and “we take the package seriously and we’re working co-operatively with the commission.”

Pelissero says they don’t know if the commission will launch an inquiry into Egg Farmers of Ontario.

Court documents indicate egg producers supplying L.H. Gray received copies of Bourdeau’s submission in February.

Producers are concerned about the impact the submission to the commission will have on supply management for the industry, alleges Brookshaw in an affidavit. “They are wondering whether this was an attempt to scare producers and is intended to threaten the industry. Others have questioned the integrity of L.H. Gray,” he alleges.

L.H. Gray and Bourdeau head back to Superior court in London March 1. BF