- The Washington Times - Saturday, February 14, 2009

ATLANTA (AP) | The peanut-processing company at the heart of a national salmonella outbreak is going out of business.

The Lynchburg, Va.-based Peanut Corp. of America filed for Chapter 7 bankruptcy in U.S. Bankruptcy Court in Virginia on Friday, the latest bad news for the company that has been accused of producing tainted peanut products that may have reached everyone from poor school children to disaster victims.

“It’s regrettable, but it’s inevitable with the events of last month,” said Andrew S. Goldstein, a bankruptcy lawyer in Roanoke who filed the petition.

The salmonella outbreak was traced to the company’s plant in Blakely, Ga., where inspectors found roaches, mold and a leaking roof. A second plant, in Plainview, Texas, was shuttered this week after preliminary tests came back positive for possible salmonella contamination.

So far, the outbreak has been suspected of sickening more than 630 people and may have caused nine deaths. It also has led to more than 2,000 product recalls, one of the largest recalls in U.S. history.

Companies file Chapter 7 to liquidate their assets and distribute the proceeds to creditors. A trustee is automatically appointed to oversee the wind-down, as opposed to a Chapter 11 filing, which gives a company breathing room while it tries to reduce its debts and continue in business. The company said in the filing that its debt and assets both ranged between $1 million and $10 million.

The board had considered a Chapter 11 bankruptcy but decided on an outright liquidation. It said in a court filing that the recalls had been “extremely devastating” to the company’s financial condition.

“We kicked the tires on trying to reorganize, but the fact of the matter is they’ve absolutely closed down,” Mr. Goldstein said. “They’re prevented from carrying on business. There didn’t seem like there would be any prospects.”

The company’s problems have multiplied since the salmonella link to its Georgia plant.

The government is working on a criminal investigation in the case, and more than a dozen civil lawsuits have been filed. This week, Peanut Corp. president, Stewart Parnell, repeatedly refused to answer questions from the House Energy and Commerce oversight and investigations subcommittee, which is seeking ways to prevent another outbreak.

But e-mails surfaced indicating that he ordered products to be shipped even though the company knew they were tainted.

Reached by telephone, Mr. Parnell said his attorneys had advised him not to talk. “If I could do it, I would,” he said.

Despite Friday’s bankruptcy filing, food safety lawyers are optimistic that victims and their families still can be compensated. The bankruptcy proceeding could postpone litigation against the company, but lawyers plan to push a judge to allow civil lawsuits to go forward anyway. And many have also filed lawsuits against Solon, Ohio-based King Nut Co. and Battle Creek, Mich.-based Kellogg Co., which they say used the tainted ingredients in their products.

“Even if Peanut Corp. doesn’t have enough insurance and enough assets to cover the damages, King Nut and Kellogg will have to step up,” said Bill Marler, who has filed seven lawsuits against the company and represents more than 40 possible victims.

Fred Pritzker, a food safety lawyer in Minneapolis who filed a wrongful-death lawsuit against the company, said the bankruptcy filing could delay justice for his clients.

“For all the people whose loved ones have been killed or people who have been out of work or suffered serious injury or who have incurred medical bills, right now they’re just left with a lump of uncertainty,” he said.

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