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Salmonella Fallout Leads Peanut Corp. to File for Bankruptcy

Feb 13, 2009 | Parker Waichman LLP
Peanut Butter Labeled High Risk

PCA Filed For Bankruptcy

Peanut Corp. of America (PCA), the much-maligned  company behind a massive salmonella outbreak, has filed for bankruptcy.  The Chapter 7 Bankruptcy means that PCA's assets will be liquidated.

Nine people have died and more than 600  have been sickened in the salmonella outbreak linked to PCA peanut products.  Since the outbreak began, PCA, which provides ingredients to 85 other food firms, has recalled everything made at its Blakely, Georgia plant since January 2007.  More than 2000 products made by other firms, including the Kellogg Company and General Mills, have also been recalled. The recalls are so widespread that the Food & Drug Administration (FDA)  has even set up an online  database to help consumers track them.  

PCA Shipped Peanuts Positive For Salmonella

Recent  inspections of the Georgia plant found that PCA shipped peanuts that tested positive for salmonella contamination at least a dozen times in 2007 and 2008. At the time of that discovery, PCA officials told the FDA  that those peanuts tested negative for the bacteria in a second round of testing.  But  the FDA reported last Friday that  PCA actually shipped some of the peanuts before the second tests were completed. Other lots were shipped without testing and, in some cases, no second test was performed even after the first one came back positive.

Those same inspections of the Blakely plant also turned up mold, roaches and a leaking roof.  The plant has been closed since last month.

Conditions at another PCA plant in Plainview, Texas were not much better.  Earlier this week, that plant was shuttered after salmonella contamination was discovered there.  Yesterday, the Texas Department of Health recalled everything made in Plainview after it found dead rodents, rodent excrement and bird feathers in a crawl space above a production area.  According to the Associated Press, the plant’s air handling system was pulling debris from the infested crawl space into production areas.   Despite having been in operation since 2005, the Plainview facility was unlicensed, and had never been inspected before the salmonella outbreak.

PCA's bankruptcy petition was filed in United States Bankruptcy court for the Western District of Virginia.  The company's headquarters is located in Lynchburg, Virginia.  A statement from PCA's attorney put blame for the bankruptcy on the fallout from the salmonella outbreak.

"Given the events of the past month, including the broad-based recalls of the products sold by the company and its subsidiary in Plainview, Texas, the company has no alternative but to cease operations," the statement said. "This bankruptcy filing, while regrettable, will allow for an orderly liquidation of the company."

Last month, the Justice Department joined the FDA in a  criminal probe of PCA.  Earlier this week, the  FBI executed search warrants at the PCA Georgia plant and at its headquarters in Virginia.

PCA owner Stewart Parnell had been subpoenaed to testify at a  Congressional hearing earlier this week, and although he appeared, he invoked his constitutional right not to incriminate himself.

Need Legal Help Regarding Salmonella Outbreak?

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