Peanut company’s history includes profits, issues

Hugh Parnell, the man who founded the peanut company now famous for one of the biggest product recalls in the nation’s history, peddled ice-cream sandwich machines from Baltimore to Miami in the 1960s.

• For all the latest developments on the peanut crisis and the salmonella outbreak, with an updated list of recalled items, plus background on the scare, go to the AJC's special report: ajc.com/peanuts.

Clients complained they couldn’t buy peanuts in bulk in the South. So, Parnell decided, brokering and distributing specialty nuts was the business for him.

“I bought a chopping machine and a few bags of peanuts,” Parnell told the Lynchburg News & Advance in 1983, “and went to work.”

Parnell and his family built the Peanut Corp. of America (PCA) into a thriving peanut and peanut butter emporium with production plants in Georgia, Texas and Virginia. Hugh Parnell’s oldest son, Stewart, now runs the company from a two-story building behind his home in an upscale suburb outside Lynchburg, Va.

Stewart Parnell did not comment publicly last week as PCA faced an onslaught of charges that rats, roaches and unsanitary conditions plagued the company’s now-shuttered plant in Blakely. The company has released statements saying its top priority is “to ensure the public safety.”

Eight deaths and more than 550 illnesses from salmonella poisoning have been linked to peanut butter produced at the southwest Georgia factory. Federal authorities are considering criminal charges against PCA. More than 1,550 products have been recalled.

“They’re trying to make it seem like he’s killing people,” said Stewart’s brother, Hugh Brian Parnell.

Family members last week shooed away reporters seeking to interview Stewart Parnell. By some accounts, Stewart Parnell, 54, is a hard worker whose life revolves around PCA, family, flying, tennis and fishing.

PCA came to Blakely in 2001. Stewart Parnell had met David Royster Jr., a businessman from Shelby, N.C., who ran the peanut-processing plant in Blakely “with mixed results,” according to PCA’s Web site.

The Blakely plant had many corporate fathers dating back to 1983: the J.R. Britt Peanut Co.; Georgia Food & Nut Processors; and Casey’s Food Products. By 1987, Royster was on board.

The Parnell-Royster relationship would prove lucrative. The Blakely plant, which blanched, roasted, granulated, salted and packaged peanuts, as well as made peanut butter, tripled revenue by 2004, turning its first profit in 15 years, according to PCA’s Web site.

By then, PCA had bought a peanut blanching facility, where a peanut’s skin is separated from its nut, in eastern Virginia. Revenues there hit $5 million, according to PCA.

Texas — peanut gateway to the lucrative West Coast markets — proved the most ambitious expansion. In 2004, Stewart Parnell and Royster opened a new plant in Plainview near Lubbock to process and package peanuts.

“We continue to grow by realizing that quality and freshness of product are what bring our customers back,” Stewart Parnell said on the company Web site.

Last year, according to Dun & Bradstreet, PCA did $25 million in sales, up from $15 million three years earlier. It employed 90 people in Texas, Georgia and Virginia.

Peanut Corp. manufactured roughly 2.5 percent of the nation’s processed peanuts. And Stewart Parnell served as a peanut-quality adviser to the U.S. Department of Agriculture — until he was removed from the board last week.

PCA and trouble aren’t strangers.

In the fall of 1989, an Oklahoma peanut broker sold raw and roasted peanuts to the Parnells and shipped them to their previous Texas plant in Gorman. PCA turned some of the peanuts into peanut butter that was sold the following year to the American Candy Co.

American Candy turned the peanut butter into nearly 8,000 cases of Kisses for Wal-Mart. Not a single Kiss, though, crossed a candy-lovers’ lips.

On Sept. 14, 1990, PCA sent out an “Urgent Food Recall” notice to American Candy and maybe three-dozen other recipients of the Parnells’ peanut butter, according to a lawsuit filed in Bedford County Circuit Court in Virginia. A month earlier, the Food and Drug Administration informed the Parnells that the peanuts used to make the peanut butter “contained unacceptable high levels of alfatoxin,” a toxic mold. Consequently, PCA’s peanut butter and dark roasted peanut granules “exceed FDA established tolerance level for aflatoxin.”

Hugh Parnell told American Candy he’d dispose of the bad peanut butter and credit their account for any loss.

American Candy wasn’t mollified. It sued PCA for $150,000 — the cost of the tainted peanut butter, storage and replacements. In May 1993, PCA’s insurance company paid $90,000 to settle the case, according to the lawsuit.

The Parnells had already begun litigation against their supplier, Nutra Nut Corp., claiming much of the peanut shipment was “stale and/or rancid.” They sought $200,000; they settled for $10,000, according to court papers.

In another lawsuit, reported in the Richmond Times-Dispatch, Zachary Confections Inc. of Frankfort, Ind., sued PCA in late 1991. Zachary claimed a 40,020-pound shipment of nuts contained an unacceptably high level of aflatoxin. The company, which makes chocolate-covered peanuts, candy corn and bridge mix, discovered the mold before its PCA-supplied products were sold, according to Zachary’s attorney John Maley.

Stewart Parnell said that “we have federally graded inspection certificates showing that those peanuts were good.”

The case was settled for an undisclosed amount, according to Indiana court records.

In 1995, the Peanut Corp. of America, along with Parnell’s Pride brand peanuts, was sold to Morven Partners, according to Parnell’s brother, Hugh Brian Parnell. Billionaire investor John Kluge’s Morven gobbled up a slew of peanut processors in the 1990s.

The Parnell sons became management consultants for Morven. The elder Parnell retired.

By decade’s end, though, Stewart Parnell had re-purchased the PCA and Parnell’s Pride brand names. He rebuilt the company into a national player.

In Lynchburg, though, Stewart Parnell kept a low profile.

“This episode is really the first time I’ve heard of them,” said Rex Hammond, president of the Lynchburg Regional Chamber of Commerce.

In a brief interview, Hugh Brian Parnell said work and family occupy his brother’s time. “He doesn’t drink, smoke or socialize,” said Hugh Brian Parnell, who brokers peanuts for PCA for a 3 percent commission. “He’s a family man. You never see him without a grandchild around.”

Stewart and Gloria Parnell live in a wooded suburb outside Lynchburg (pop. 70,000), which sits alongside the James River in the foothills of the Blue Ridge mountains. They built their red-brick, yellow-sided Cape Cod home in 1986. The property’s value: $465,000, according to public records.

A boat and a slew of cars and trucks filled the parking area behind the house one day last week. One car’s license plate read: “Stewgo.”

An avid tennis player, Parnell is a member of Oakwood Country Club in Lynchburg. He’s also a keen fisherman with a home in Nags Head, N.C., flies his own plane for business and pleasure – “though I don’t know how much longer he’ll own it,” his brother said.

In Texas, Stewart Parnell gets high marks.

“He’s A-1, just a fine gentleman to work with, very honest and straightforward,” said David Evans who heads up Plainview’s industrial authority. “It’s very sad about their problems. But I wish him well. I enjoy having them in the community.”

- Dan Chapman reported from Lynchburg, Va. and Margaret Newkirk from Atlanta. News researcher Richard Hallman contributed to this article.