Peanut Corp. of America files for bankruptcy

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Peanut Corp.'s bankruptcy filing (PDF)

Court order authorizing the bankruptcy (PDF)

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Peanut Corporation of America filed for bankruptcy Friday after other options for keeping the company afloat fell through.

The filing for Chapter 7 bankruptcy likely spells the end of the peanut firm that has been head-quartered in the Lynchburg area for more than 30 years. In this kind of bankruptcy, the company sells its assets to pay off debts.

PCA started as a family-owned company that was hardly known in its hometown area. Now it is known across the nation as the target of investigations into a salmonella outbreak that has sickened hundreds and is linked to nine deaths.

Andrew Goldstein, the Roanoke lawyer handling the bank-ruptcy case, said there was no way for the company to continue operating.

“The groundswell of stuff that happened left the company basi-cally shut down and unable to continue in business,” he said.

Goldstein emphasized that the company’s owners and officers are not filing for bankruptcy.

The announcement of the bankruptcy filing comes two days after company president Stewart Parnell appeared at a congressional hearing and re-fused to testify, citing his constitutional right not to incriminate himself. Parnell has been accused of knowingly distributing salmonella-tainted peanut prod-ucts.

Since PCA and its plant in Blakely, Ga., were linked to the salmonella outbreak last month, a number of events “have been devastating to the financial condition of the company,” accord-ing to one document the company filed in U.S. Bankruptcy Court in Lynchburg.

The plant in Georgia has been closed for more than a month, and PCA has had to conduct a massive recall of products made there.

Earlier this week, PCA shuttered its Texas plant. On Thurs-day, Texas health officials ordered a recall of everything PCA had made there.

Last week, the U.S. Department of Agriculture suspended the company and its Suffolk plant, meaning the plant could no longer do business with the government. Goldstein said that essentially shut down the Suffolk plant, also known as Tidewater Blanching Company, though he did not know when the plant finally closed.

According to a form signed by PCA’s board of directors to authorize Chapter 7 bankruptcy, PCA has been working with the Finley Group, a business strategy firm that specializes in turn-arounds and reorganizations.

The Finley Group has assisted companies such as Joseph A. bank Clothiers and Kerr Drug, according to its Web site.

With the help of the Finley Group, PCA was considering several options of staying in business. One option was a Chapter 11 bankruptcy, which buys a company time to reorganize and pay off debt.

“Somewhere along that line, that’s where the decision got made and it became apparent that a reorganization was not going to work, and a liquidation was inevitable,” Goldstein said.

By filing for bankruptcy, PCA is able to stall all of the lawsuits pending against it. At least 13 have been filed this year, including eight this week. Legal claims against the company, like PCA’s debts, get “dealt with somewhere in the process of the bankruptcy,” Goldstein said.

The company’s insurer, Hartford Casualty Insurance Co., also has filed suit to determine whether it must pay claims filed by victims of the salmonella outbreak.

Food-safety lawyers told The Associated Press after the bankruptcy filing that that they are optimistic victims and their families still can be compensated. They plan to push a judge to allow civil lawsuits to go forward anyway. Some are also suing distributors who used PCA 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 and represents more than 40 possible victims.

According to the bankruptcy documents filed in Lynchburg on Friday afternoon, PCA has between 100 and 200 creditors. Its debts and its assets fall between $1 million and $10 million.

The company directors who signed to authorize the bankruptcy filing include Parnell, David Royster III and David Royster IV.

The bankruptcy filing also asks, “Does the debtor own or have possession of any property that poses or is alleged to pose a threat of imminent or identifiable harm to public health or safety.”

The bankruptcy document for PCA selected “No.”