Peanut Corp. files Chapter 7

ATLANTA --- 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.


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

The 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 closed this week after preliminary tests came back positive for possible salmonella.

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

Companies file Chapter 7 to liquidate assets and distribute the proceeds to creditors. A trustee is automatically appointed to oversee the process.

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.

The government is working on a criminal investigation into the case, and more than a dozen civil lawsuits have been filed. This week, Peanut Corp. president Stewart Parnell repeatedly refused to answer questions before the House Energy and Commerce investigations subcommittee, which is seeking ways to prevent another outbreak. But e-mails surfaced indicating he ordered products the company knew were tainted to be shipped anyway.

Reached by telephone, Mr. Parnell said his attorneys had advised him not to talk.

"If I could do it, I would," he said.

Food safety lawyers are optimistic that victims and their families can still 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. 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 on behalf of more than 40 possible victims.


DALLAS --- Companies that received peanut products from a West Texas plant where a filth-infested crawl space was discovered began destroying their products Friday to comply with a recall.

The recall could eventually involve more than 100 companies that ordered peanut products from the Peanut Corp. of America plant.

Texas health officials ordered the recall Thursday after discovering dead rodents, feces and feathers in a crawl space above a production area. Officials have said a ventilation system sucked debris from the crawl space into an area where peanuts are processed.

The recall involves all peanut products since the plant's 2005 opening.