Peanut Corp. of America files for bankruptcy

The peanut processing company at the heart of a national salmonella outbreak filed for bankruptcy Friday, a sign the beleaguered company plans to cease business in the wake of the health scare.

The Virginia-based Peanut Corp. of America filed for Chapter 7 bankruptcy protection in bankruptcy court in Lynchburg, Va. The Chapter 7 filing allows for an orderly sale of the company’s assets to pay creditors.

“It’s regrettable, but it’s inevitable with the events of last month,” said Andrew S. Goldstein, a bankruptcy lawyer in Roanoke, Va., who filed the petition.

The nationwide salmonella outbreak that has sickened some 600 people and may have caused nine deaths was traced to the company’s plant in Blakely, Ga., where inspectors found roaches, mold and a leaking roof. A second plant in Texas was shuttered this week after preliminary tests came back positive for possible salmonella contamination.

Companies file Chapter 7 to liquidate their assets and distribute the proceeds to creditors. A trustee is automatically appointed to oversee the wind down, as opposed to a Chapter 11 filing that gives a company breathing room while it tries to reduce its debts and continue in business. The company said in the filing that its debt and assets both ranged between $1 million and $10 million.

“It is in the best interest of creditors that all actions against the company be assembled under one roof,” Goldstein said.

The government is working on a criminal investigation into the case, and more than a dozen civil lawsuits have been filed.

Peanut Corp. president Stewart Parnell repeatedly refused to answer questions Wednesday before the House Energy and Commerce investigations subcommittee, which is seeking ways to prevent another outbreak. But e-mails surfaced indicating he directly ordered products the company knew were tainted to be shipped anyway.

Reached by telephone, Parnell said his attorneys had advised him not to talk. “If I could do it, I would,” he said.