Peanut plant owner dodges bankruptcy hearing questions

LYNCHBURG, Va. — At his company’s initial bankruptcy hearing Thursday, the president of Peanut Corp. of America, blamed for a national salmonella outbreak, once again declined to answer most questions from attorneys and court officials.

This time he left almost all of the talking to his daughter, who also served as the company’s bookkeeper.

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Associated Press

Peanut Corporation of America’s President Stewart Parnell arrives with his daughter, Grey Adams, who also managed PCA accounts, to U.S. Federal Court in Lynchburg, Va., Thursday, March 12, 2009, for a creditors meeting with trustees for Chapter 7 bankruptcy proceedings.

• 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.

Asked simple questions about his company’s history and its business dealings, Stewart Parnell smiled slightly and quietly said, “I don’t know,” or — nodding toward daughter Grey Adams — “she knows more than I do.”

When asked by an attorney about whether he knew if and when his company shipped out salmonella-tainted products, Parnell refused to answer, taking his Fifth Amendment right not to give self-incriminating evidence.

Even Grey Adams said she couldn’t answer simple questions, however — such as the monthly salary the company paid her mother to be the office manager in Peanut Corp.’s home office headquarters in a building behind the Parnell’s Lynchburg home.

Asked at one point whether the company that had nearly $20 million in sales last year paid any dividends to its shareholders — namely, Parnell and his partners — she replied, “What’s a dividend?”

Adams also said she had no knowledge of any salmonella-tainted products that were shipped from her family’s plants.

The U.S. Justice Department and state investigators are looking into whether Parnell and Peanut Corp. violated criminal law in the salmonella outbreak.

At a congressional hearing in Washington last month, Parnell similarly took the Fifth, leaving lawmakers and the world wondering why he apparently may have knowingly shipped salmonella-tainted peanut products from his plants in Blakely, Ga., and Plainview, Texas, that are blamed for making 683 people sick and may have caused nine deaths.

What is becoming clear is that Peanut Corp. and Parnell will likely be paying relatively little to the victims of the salmonella outbreak, instead leaving its insurance company and its customers to bear most of the monetary costs of the crisis.

Almost all of the $11.3 million in assets the company listed in its bankruptcy filing will likely be split between its secured creditors and lenders, such as SunTrust Bank, said bankruptcy court trustee Roy Creasy. Included in the assets is about $4 million for its Blakely plant and its equipment.

The hundreds of salmonella victims who have or are expected to sue the company, meanwhile, will likely split $24 million from an insurance policy that the company had to cover bodily harm and injury claims, according to an attorney involved in the case.

In an odd twist of fate, exactly how much they might get may depend on when they got sick, said Ron Simon, a Houston attorney who represents several victims.

According to Simon, Peanut Corp. renewed its $12 million policy with the Hartford insurance company on Oct. 1 of last year.

Victims who can prove they got sick before Oct. 1 — fewer than a dozen, he said — will likely split $12 million from the annual policy. Victims who got sick after Oct. 1 — almost all the rest of the more than 683 so far — will probably end up splitting another $12 million from the current year’s policy, according to Simon.

“It all depends on when you got sick,” he said.

Most of the money in any settlement, though, will probably come from Peanut Corp.’s other victims — the companies that it supplied.

Bruce Clark, a principal in the Marler Clark law firm that also represents families of people who have died or were sickened by salmonella, said he is trying to reach a settlement with two of the company’s biggest customers, King Nut Cos. and cereal and cracker maker Kellogg Co. Both companies have been named in lawsuits by his firm, Clark said.

“We’re trying to get all the parties to the table … (and) make a deal,” Clark said. He added that he thinks King Nut has a $10 million insurance policy that would cover people sickened by salmonella-tainted products, while Kellogg, he said, had potentially “unlimited” funds.

Any settlement could be small compared with the other monetary costs of the crisis. Companies like King Nut and Kellogg have already had to pay tens of millions to recall thousands of products. As of this week, more than 3,400 products have been recalled and the list continues to grow.

In Georgia and other parts of the Southeast, the salmonella outbreak could cost the peanut industry $1 billion in lost production and sales, according to estimates from the Georgia Peanut Commission.

At Thursday’s hearing, bankruptcy trustee Creasy raised questions about a private airplane that Parnell used to visit his plants in Georgia and Texas, along with business trips he took to Nevada and the North African country of Morocco.

Creasy also asked about the company’s headquarters, which Peanut Corp. built behind the Parnell’s home apparently using a loan it got from Parnell himself.

He and Adams also discussed some of Peanut Corp.’s early expenses as it tried to stay in business while the salmonella crisis was beginning to spread in January.

According to Adams, the company initially paid about $100,000 to a Washington law firm “to help with the recall and deal with the FDA,” Adams said.

It paid another $77,000 to two public relations firms to try and do damage control, she said.

Ultimately, though, too much damage had been done for the company to stay in business, and on Feb. 13, it filed for Chapter 7 bankruptcy liquidation.