Peanut Corporation of America
|Defunct||February 13, 2009|
|Headquarters||Lynchburg, Virginia, United States|
Number of locations
|Blakely, Georgia; Suffolk, Virginia; Plainview, Texas|
|Stewart Parnell, Pres. & CEO
David Royster, Vice-Pres.
|Products||Peanut butter, peanut paste, peanut meal, whole and chopped peanuts|
|Revenue||$25.0 million (2007)|
Number of employees
Peanut Corporation of America (PCA) was a peanut-processing business founded in 1977 and headquartered in Lynchburg, Virginia. The company was forced out of business after being found to be the source of a massive salmonella outbreak in the United States during 2008 and 2009.
PCA operated processing facilities in Blakely, Georgia; Suffolk, Virginia; and Plainview, Texas. The company primarily serviced the "institutional food" market, providing peanuts, peanut butter, peanut meal, and peanut paste to schools, prisons and nursing homes, as well as food processors who used them in products such as cookies, snacks, ice cream and dog treats, and also low-budget retail outlets such as dollar stores.
Peanut Corporation of America had 90 employees and did $25 million in sales in 2008. The company manufactured roughly 2.5 percent of the nation’s processed peanuts, focusing on the low end of the consumer market.
The company began a long history of food quality issues in 1990 when it was sued by American Candy Company after the FDA discovered that PCA's peanut butter exceeded the FDA tolerance level for aflatoxin, a mold toxin. American Candy had turned the peanut butter into 8,000 cases of "kisses" for Wal-Mart, which were not shipped. Another lawsuit was brought by Zachary Confections Inc. of Frankfort, Indiana, in 1991 after a 40,020-pound shipment of nuts from PCA was found to have an unacceptably high level of aflatoxin. There had been concerns about sanitation at the company since at least the mid-1980s.
In late 2008 and early 2009, nine people died and at least 714 people in 46 states, half of them children, fell ill due to food poisoning from eating products containing contaminated peanuts, according to the Centers for Disease Control and Prevention (CDC). Among persons with available information, 23% reported being hospitalized. The real numbers were believed to be much higher, since for every reported case of salmonella, another 38 cases go unreported, according to the CDC. A combination of epidemiological analysis and laboratory testing by state officials in Minnesota and Connecticut, the Food and Drug Administration (FDA), and the CDC enabled the FDA to confirm that the sources of the outbreak of illnesses caused by Salmonella typhimurium were peanut butter, peanut paste, and peanut meal produced by the Peanut Corporation of America (PCA) at its Blakely, Georgia processing plant.
This infection triggered the most extensive food recall ever in US history. As of April 22, 2009, it involved at least 361 companies and 3,913 different products manufactured using PCA ingredients. The recall included everything produced at the Blakely plant since January 1, 2007. as well as everything ever produced at the Plainview, Texas plant. Products supplied for some school lunches were pulled, and the Federal Emergency Management Agency (FEMA) even recalled emergency meals sent after a massive ice storm. (Since the storm left many without power, the United States Postal Service went door-to-door in Kentucky to warn residents and hand out 600,000 flyers from FEMA.) Food banks nationwide had to discard thousands of pounds of food in time of high demand from millions of US families in need.
The recall did not involve major-brand peanut butters, since PCA primarily serviced only low-budget and institutional providers, but many consumers reacted by avoiding peanut products altogether, driving down the sales of all brands of peanut butter by nearly 25 percent. This caused great harm to the industry and farmers, already suffering from low prices due to the 2008 bumper crop and the deepening economic crisis. Early estimated losses to the US peanut industry because of this outbreak would be on the order of $1 billion.
The Washington Post reported on February 15 that it had been an open secret among peanut insiders in Georgia, Virginia, and Texas that PCA had serious sanitation issues. David Brooks, a buyer for a snack company, said that it was well known PCA was "a time bomb waiting to go off."
Food and Drug Administration (FDA) inspectors reported, following a two-week inspection of the Blakely, Georgia, plant in January 2009, that the company had information that its peanut-butter products were tainted with salmonella but shipped them anyway after "re-testing" them. This occurred at least 12 times in 2007 and 2008. FDA inspectors also found mold growing on the plant's ceiling and walls, foot-long gaps in its roof, dead insects near peanuts, and holes in the plant big enough for rodents to enter. Inspectors found that the company also did not clean its equipment after finding contamination, and did not properly segregate raw and finished products. In 2007 the company shipped chopped peanuts on two occasions even after salmonella was confirmed by private lab tests. The company had previously refused to divulge production test records until federal officials invoked the food safety provisions of a federal anti-terrorism law (the 2002 Public Health Security and Bioterrorism Preparedness Response Act). As a result of this refusal and the incident in general, the Georgia State Senate passed a bill requiring peanut product manufacturers to report any contamination within 24 hours, failing which felony charges would result.
On February 6, 2009, the FDA reported that the company shipped tainted products under three conditions: (1) without retesting, (2) before the re-test results came back from an outside company, and (3) after a second test showed no bacterial contamination. In all three cases, the initial positive result means that the product should have been destroyed. Food safety experts say salmonella can live in pockets of peanut butter, so that one batch could test both negative and positive. In that case, it should have been destroyed, they said.
Additionally, an FDA report dated September 15, 2008, stated that an export shipment to Canada originating from the Blakely plant was found to be contaminated; the FDA blocked it from being reimported into the US because the peanuts contained a "filthy, putrid or decomposed substance", as well as metal fragments.
Former employees interviewed by the Chicago Tribune stated that conditions in the plant were "filthy and nasty," and that they would never eat the peanut butter or allow their children to eat it. One employee remembered seeing a family of baby mice in a tote of peanuts, and others recalled having to step over standing water inside the building after heavy rain. Another former employee told CBS News that he saw a rat dry-roasting in a peanut area. Another told ABC News that workers had no idea the company had positive salmonella tests because "that information is not for the average employee to see."
In 2001, FDA inspectors also found that products were potentially exposed to insecticides, according to a report obtained by The Associated Press.
Documents released February 11 by the US House Energy and Commerce Committee showed that the company shipped products to customers even before receiving results of salmonella tests, and the company stopped using a private laboratory because too many tests done there showed contamination. A lab tester told the House panel that the company discovered salmonella at its Blakely plant as far back as 2006.
The company's plant in Plainview, Texas, which opened in March 2005 and employed 30 people, was never licensed in that state as a food manufacturing facility; the state had not done any inspections until the problems with the Georgia plant became news. The Texas plant blanched, dry- and oil-roasted, and chopped peanuts, then shipped them to food companies across the country. The Texas inspection in January 2009 found some unsanitary conditions, such as unclean sections of a peanut-roasting line. It also reported that several internal company laboratory tests dating back to November had found no salmonella or other contaminants. However, on February 10, 2009, company officials announced that the Texas plant had been shut down, after samples taken on February 4 tested positive for salmonella. Former workers at the Texas plant interviewed by the New York Times said that the facility was "disgusting". It said the plant shared many of the problems found in the plant in Georgia, including a badly leaking roof and rodent infestation. A former plant manager told Good Morning America that he had repeatedly complained to the company owner, Stewart Parnell, about unsanitary conditions, including "water leaking off a roof and bird feces washing in", but Parnell would not authorise money for necessary repairs.
On February 12, Texas health officials ordered an unprecedented recall of all products ever shipped from the Texas plant since it opened in 2005, after discovering that the plant's air handling system was drawing in debris from a crawl space containing "dead rodents, rodent excrement and bird feathers" into production areas. State health officials said they issued the sweeping recall because they did not know how long the unsanitary conditions had existed at the plant.
The plant had been certified for organic production in November 2005, based on what state officials later called incomplete information obtained by an inspector with the Texas Department of Agriculture. However, the company failed to apply for a Texas health certificate, which would have triggered a visit by state inspectors. State health officials were not aware the plant existed until the company released a list of its plants around the country.
The company had previously operated a plant in Gorman, where the company originally started in 1977. David Brooks, the snack food company buyer, said that he inspected this plant three times in the mid-1980s to determine whether to buy peanuts from PCA. The plant flunked each time for what he called "just filthy" conditions, including dusty beams, leaky roofs, and birds flying through the building. The Gorman operations transferred to Plainview when Hale County officials issued $2 million in tax-free revenue bonds to help the company convert a long vacant Jimmy Dean sausage factory into a peanut plant. Local officials, including a county health inspector, toured the new plant and approved its opening, although the state said it never knew the plant existed. The plant was located along a major highway, across from a large Wal-Mart distribution center; it had four highly visible signs in the front and a billboard bearing a picture of a peanut. A state inspector who drove by the plant "a few times" on his way to other inspections never stopped because it was not on his list. State officials said the company was solely to blame for failing to obtain the food manufacturer's license when the Plainview plant opened.
According to state inspection records, the PCA blanching operations in Suffolk, Virginia, had some of the same food safety problems found in the company’s Georgia plant. Inspectors in 2008 found mold on "totes" holding peanuts, counted 43 mouse droppings on the floor, and saw a live bird walking and flying inside the warehouse. The Virginia plant employed 13 workers and was shut down the day PCA filed for bankruptcy.
Tommy Irvin, commissioner of the Georgia Department of Agriculture (GDA), requested criminal investigation of the Georgia Bureau of Investigation (GBI) as the organ responsible for inspections contracted by the FDA. GDA and GBI officials had said they would consider pursuing manslaughter charges if federal authorities did not take up the case. On January 30, 2009, federal health officials announced that a criminal investigation had been launched by the US Justice Department for possible prosecution under provisions of the 1938 Federal Food, Drug, and Cosmetic Act.
On February 4, Georgia officials said they would not prosecute the company, because the two state laws under consideration (reckless conduct and adulteration of food) were only misdemeanors and would only allow for minor penalties. Vernon Keenan, director of the Georgia Bureau of Investigation, said: "Any potential prosecution is most appropriately handled at the federal level".
On February 9, 2009, the Federal Bureau of Investigation (FBI) announced that it had joined the criminal investigation of the company. Search warrants were executed on the Blakely plant as well as PCA's corporate headquarters in Lynchburg. Following a raid by its agents, the FBI sealed off the Blakely plant. On February 21, 2013, four former officials of the company were named in a 75-count indictment on charges related to salmonella-tainted peanuts and peanut products. The former processing plant manager for Peanut Corporation, Samuel Lightsey, reached a plea agreement on May 8, 2014. Lightsey was then available to the government as a witness at the trial, scheduled to begin in July 2014.
Parnell and his brother were convicted in September 2014 of 71 criminal counts, including conspiracy, fraud and other federal charges. In July 2015, Federal authorities recommended a sentence of life imprisonment for Stewart Parnell.
On September 21, 2015, U.S. District Judge W. Louis Sands stated during the sentencing phase that: “We place faith that no one would intentionally ship products to market that are contaminated…. Consumers are at the mercy of food producers for the safety of the products. These acts [of the convicted PCA executives] were driven by profit and the protection of profit … thus greed.”
Sands told Stewart Parnell that he had “taken risks for years,” that they were “eventually discovered and traced back” to his corporation, and that, unfortunately, “thousands of people suffered and nine died” from Parnell’s knowing disregard for public health and safety.
In addressing defendant Mary Wilkerson, the former QA manager at PCA, Judge Sands stated: “You were not a top executive in PCA, and your attorney painted a picture of you as a minor player in this case. You were aware of what was going on and played a role in concealing the problem. That was not actually a minor role in this case,” he concluded.
The court sentenced Stewart Parnell to 28 years in prison, while his brother, Michael received a sentence of 20 years. The plant's quality assurance manager was sentenced to 5 years.
Both Daniel Kilgore and Samuel Lightsey (both former plant managers at PCA) became government witnesses in the case, providing testimony during the 2014 trial for consideration of limited sentencing. On October 1, 2015, the court imposed a sentence of three years in prison for Samuel Lightsey and six years in prison for Daniel Kilgore.
On February 13, 2009 – less than 24 hours after the Texas recall – Peanut Corporation of America announced it was filing for Chapter 7 bankruptcy and permanently halted operations. Bankruptcy lawyer Andrew Goldstein said that the company had considered filing for Chapter 11, but decided to liquidate because all of its plants had been shut down and there was no way it could carry on business. Consumers Union criticised the move, saying that the bankruptcy filing would shield the company from liability suits, although in reality, the bankruptcy filing merely delays any claims against the company. The "automatic stay" provisions of Section 362 of the United States Bankruptcy Code do not apply to any individual who does not file for bankruptcy. Thus, to the extent that misconduct by a non-debtor individual can be shown, persons injured by the company's practices will be able to pursue that relief. Criminal actions may still be brought against those responsible. Additionally, suppliers faced claims from consumers for products purchased from PCA.
Government contract ban
On February 5, 2009, the US Department of Agriculture (USDA) announced that Peanut Corporation of America and a subsidiary, Tidewater Blanching LLC, were banned from all federal government contracts and subcontracts for one year, saying the company: "lacks business integrity and business honesty, which seriously and directly hinders its ability to do business with the federal government."
Peanut Corporation of America was owned by Stewart Parnell, 61, who was also president and CEO of the company. Parnell served on the US Department of Agriculture's Peanut Standards Board, which sets quality and handling standards for peanuts. He was first appointed by Agriculture Secretary Mike Johanns to the position in 2005, and was reappointed for another term that would have expired in 2011, however, on February 5, 2009, the USDA announced that the new Agriculture Secretary Tom Vilsack had removed Parnell from the board.
Parnell started in the peanut business with his father and two younger brothers in 1977. They took a struggling, $50,000-a-year peanut roasting operation and turned it into a $30 million business before selling in 1995. Parnell continued working as a consultant to the business after the family sold it, and in 2000 he left to buy his own peanut plant again in Texas. In 2001, he bought the Blakely, Georgia operation, when its operations consisted only of roasting and blanching peanuts. Parnell tripled revenue at the Blakely plant by 2004, turning its first profit in 15 years, with production regularly surpassing 2.5 million pounds of peanuts per month. However, the FDA did not know that the plant manufactured peanut butter until the 2008-2009 outbreak.
Brooks said the Parnells ran PCA on a very tight budget, buying the cheapest shoes they could find. The company operated a bare-bones front office from a converted garage behind Parnell's home outside Lynchburg, and relied almost exclusively on minimum-wage labor.
Despite more than 12 tests between 2007 and 2008 that showed salmonella contamination in his company's products, Parnell wrote an e-mail to company employees on January 12, 2009, that stated, "we have never found any salmonella at all. No salmonella has been found anywhere in our products or in our plants." Parnell ordered products identified with salmonella to be shipped and complained that tests discovering the contaminated food were "costing us huge $$$$$." In a June 2008 e-mail exchange, Parnell complained to a worker after being notified that salmonella had been found in more products. "I go thru this about once a week," he wrote. "I will hold my breath ... again." After the company was identified as the source of the outbreak, Parnell pressed federal regulators to allow him to continue using peanuts from the tainted plant. He wrote that company executives "desperately at least need to turn the raw peanuts on our floor into money."
Under Congressional subpoena, Parnell on February 11 appeared with his plant manager before a House Energy and Commerce subcommittee but repeatedly refused to testify, citing their Fifth Amendment protection against self-incrimination. Among the questions they refused to answer was one from Rep. Greg Walden (R-Ore.): "In this container, are products that have your ingredients in them, some of which are on the recall list, some of which are probably contaminated. It seems like from what we've read you were willing to send out that peanut base that went into these ingredients. I just wonder, would either of you be willing to take the lid off and eat any of these products now like the people on the panel ahead of you, their relatives, their loved ones did?" Walden revealed an e-mail from Parnell, who, referring to products that had tested positive for salmonella, wrote: "Let's turn them loose."
Stewart and Gloria Parnell live outside Lynchburg, Virginia, with a second home in Nags Head, North Carolina. Stewart Parnell is a member of the Oakwood Country Club in Lynchburg and flies his own airplane.
Parnell and his brother were convicted in September 2014 of 71 criminal counts, including conspiracy, fraud and other federal charges. In July 2015 Federal authorities recommended a sentence of life imprisonment for Parnell. On September 21, 2015 Parnell was sentenced to 28 years in prison, the stiffest punishment ever handed out to a producer in a foodborne illness case. His brother Michael Parnell was sentenced to 20 years, and the plant's former quality control manager Mary Wilkerson was sentenced to five years.
During the trial, his family was repeatedly censured by the judge. In one instance, "Stewart Parnell's sister is kicked out of courtroom for flipping off victims and the relatives of dead victims of salmonella." In another instance, Stewart Parnell's mother cornered an FBI agent in the washroom ahead of her testimony asking "How do you live with yourself?" Consistent with the actions of her son, Stewart Parnell's mother made a plea to the judge in sentencing that focused on money while ignoring the deaths and illness caused by her son's actions. Mrs. Parnell pleaded "They lost their income, all their material things and worst of all their pride." Ironically, one of the salmonella tainted brands of peanut butter was called "Parnell's Pride."
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Parnell faces life in prison, according to court documents that detailed the sentencing guidelines. His brother and food broker, Michael Parnell, faces 17 years, and a plant manager, Mary Wilkerson, could be behind bars for five years.
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