Peanut Corporation of America files for liquidation

LYNCHBURG — Peanut Corp. of America, the Lynchburg-based company at the center of a deadly nationwide salmonella outbreak, filed for bankruptcy here today in federal court.

The filing means the 33-year-old company is going out of business and is selling its assets to pay its debts.

“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,” said Roanoke bankruptcy attorney Andrew Goldstein, who is representing the Peanut Corp.

Federal investigators have linked the salmonella outbreak — which has sickened at least 600 people and contributed to as many as nine deaths — to the Peanut Corp.’s plant in Blakely, Ga., which investigators believe sent tainted peanut products to some 50 manufacturers of cookies, crackers and ice cream.

The company shut down the Georgia plant last month and closed a second plant in Plainview on Feb. 10.

The company owns a third plant, where peanuts are shelled and peeled, in Suffolk, but the heart of its operation is in Georgia. Peanut-industry insiders say the plant there typically has processed 35 million pounds of raw peanuts per year, or 1.6 percent of all peanuts processed in the United States annually.

In papers filed in U.S. Bankruptcy Court in Lynchburg, the company laid out the toll it has taken as its plants have remained idle: between 100 and 199 creditors, and a debt range of $1 million and $10 million.

“This bankruptcy filing, while regrettable, will allow for an orderly liquidation of the company,” Goldstein said. “It is in the best interest of creditors that all actions against the company be assembled under one roof.”

In court documents, company officials said they had considered trying to reorganize the company under Chapter 11 bankruptcy protection but realized it wouldn’t work. The filing doesn’t provide any specifics about why Chapter 11 didn’t work for the Peanut Corp.

“ .¤.¤. The Company was unable to implement any of the potential options in order to remedy its financial situation,” the court documents said.

The company said the recall of its products on Jan. 13, 18 and 28 had hurt it financially, and another blow came on Feb. 5, when the U.S. Department of Agriculture’s Agricultural Marketing Service proposed to keep Peanut Corp. and its Suffolk plant from doing business with the federal government.

A Food and Drug Administration probe found the company shipped peanut products that tested positive for salmonella 12 times since 2007. In some cases, Peanut Corp. received a second test that came back negative for salmonella before shipping, according to one report. In other cases, peanut products were shipped after testing positive for salmonella but before results were in from the second test.

The family of a 72-year-old Minnesota woman who died has filed suit against the Peanut Corp., and the U.S. Department of Justice has opened a criminal investigation.

Contact Rex Bowman at (540) 344-3612 or .