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article imagePeanut Corporation of America Declares Bankruptcy

By Bob Ewing     Feb 14, 2009 in Business
The Peanut Corporation of America, the company at the centre of a major food recall that has sickened around 600 people has declared bankruptcy.
The Peanut Corporation of America (PCA) is responsible for the nation's salmonella outbreak that has sickened some 600 people and may have led to the deaths of eight others. PCA has declared bankruptcy.
The bacterial infection traced to Peanut Corporation of America's (PCA) Blakely, Ga., plant led to one of the biggest product recalls in U.S. history; some 1,800 products have been stripped from store shelves since last month, because they contained or may have contained contaminated peanut butter or peanut paste.
PCA filed a Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for the Western District of Virginia. the company claims the mass recall had an "extremely devastating" impact on its finances. Under Chapter 7 companies liquidate their assets to repay creditors rather than reorganize.
Consumer advocates are unhappy with this move.They say it threatens to let the company off the hook, even though the Food and Drug Administration (FDA) says it knowingly shipped tainted products.
Consumers Union (CU)claims the entire episode illustrates the need for Congress to overhaul the FDA, beef up funding and empower the agency to impose stiff penalties and take other steps to ensure the country's food supply is safe.
“It is unacceptable for corporations to put consumers' health at risk, and then simply declare bankruptcy and go out of business when they get caught,” Jean Halloran, director of CU's Food Policy Initiatives, said in a statement.
“PCA’s declaration of bankruptcy will, among other things, shield it from liability suits filed by consumers who became sick or whose loved ones died as a result of eating PCA's peanut products."
The company filed for bankruptcy protection just days after its president Stewart Parnell refused to testify at a House hearing about the outbreak.
Rep. Henry Waxman, D-Calif., during the hearing, released e-mails in which Parnell grumbled about losing money during the salmonella recall and indicated that he knew his products were contaminated but sent them out anyway.
“The FDA must be given the power and budget it needs to prevent companies from operating the way PCA did," Halloran said.
"Congress should require the FDA to visit every food processor at least once a year and it should require all such facilities to register with the FDA and pay a registration fee that will offset the cost of increased inspections.”
Both the FDA and the FBI are conducting a criminal investigation of the company.
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