Another death to add to the nine already attributed to the peanut cum salmonella affair. This one is the company itself and the jobs of its employees. The Peanut Corporation of America (PCA) is going belly up. I don't mean Chapter 11 (reorganizing under the bankruptcy laws). I mean Chapter 7, as in liquidating. I wonder if this is an effort to wring as much private cash out of the business as possible before it gets its nuts sued off of it.
So one company, many jobs, the deaths of 9 people and the illness of more than 600 others, half of them children. In dollar terms there's also the lost sales revenue from other uncontaminated peanut butter products that consumers understandably don't want to buy now until the dust settles.
Industry lobbying against food safety regulations has turned out to be a pretty expensive business in terms of lives and dollars.
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You know, I watched a bit of the hearings today (taped during the week by CSPAN.) The impression that I picked up was that food inspectors are overwhelmed with work, and are having trouble prioritizing.
If I hear one more time that "We know better how to spend our money than the government does, so cut our taxes," I will ask that person when they plan on taking up food inspection as a hobby with their precious tax savings.
Mike - Agreed. The politicos (both sides of the aisle, but especially the Repubs) have run ro (re)election for so long on "eliminating wasteful governmental spending" and granting tax cuts that the Average Joe thinks that all the Government services he expects, from food inspections to safe bridges to real oversight of the banking and investment communities is paid for by some magic pot that he doesn't have to contribute to. Somebody needs to remind them (us) that you only get what you pay for.
The Industry simply has one less competitor. Demand for peanut butter will recover.
As to the shareholder of the closed company, their personal assets from dividends, salaries and bonuses received during years of shoddy practices are protected. They won't go to trial or do jail time. Those who died or became ill can not recover much if anything now that they are in Chapter 7.
And any regulations imposed after this will be sure to favour the bigger companies, since they will write the regulations, thus reducing competition from smaller competitors with increasing complexity and costs that will do little to ensuring product is safe.
The Industry has no regrets. The system works for them, just like it works for the banksters and other big industries. Monopoply capitalism at it's best, or worst.
Reaganarchists are so small minded they don't realize they are fighting for anarchy. Anarchy is not about freedom, because only the big and the bad can win when there is no regulation, no police, no government services.
Reaganarchy has achieved one of its goals: the delusion that the only way to get ahead is to wrest whatever you can from everyone else. This is called a 'behavioral sink' in social psychology. The outcome is never good, for anyone.
Peanut company lied on salmonella testing, FDA finds
Some batches were not retested for the bacteria before shipping, the agency says -- though Peanut Corp. of America said they were. February 7, 2009
"The FDA did not formally announce the new findings about the company's testing, but rather made small revisions Thursday to an online report about the investigation. Only when a Washington Post reporter discovered the changes did the news become more widely known."
...
... the company objected to the initial 483 report, arguing that the first test was only "presumptive" and that it was not definitive for contamination.
The investigators went over the data more carefully, matching testing and shipping dates -- and reached a grimmer conclusion. They found that in many cases the products had been shipped before the second test was completed or in the absence of a second test.
In a statement e-mailed to reporters on Friday in response to questions, the FDA said: "In the course of gathering information during an investigation, it is sometimes necessary that FDA refine reports and other documents based on new facts that are discovered or further provided by records or by the firm."
http://www.latimes.com/news/science/la-sci-peanut-fda7-2009feb07,0,4163…
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The LATimes link to that is broken; here is the "amended" text
http://www.fda.gov/ora/frequent/483s/pcaamend483red.pdf
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Hearing testimony:
http://www.fda.gov/ola/2009/salmonella021109.html
Statement of
Stephen F. Sundlof, D.V.M., Ph.D.
Director, Center for Food Safety and Applied Nutrition
Food and Drug Administration
February 11, 2009
"After a more detailed review of the many records obtained during this inspection, FDA determined that certain information provided by PCA management during the inspection was not consistent with FDAâs subsequent analysis of the companyâs records. Therefore, on February 5, 2009, FDA issued an amended Form 483 to present the variety of testing and shipping circumstances reflected by the firmâs records.
FDAâs environmental sampling at the plant found two Salmonella strains, neither of which were Salmonella Typhimurium, the outbreak strain. Presently, CDC is not aware of any illnesses definitely connected to these other Salmonella strains. Although these samples did not match the outbreak strain, state sampling and analysis of unopened finished products indicate that PCA products shipped from the Blakely plant were contaminated with the Salmonella outbreak strain.
Further, FDAâs review of the firmâs testing records -- which were not disclosed to FDA and state inspectors during earlier routine inspections -- revealed that there were instances in 2007 and 2008 in which the firm distributed product in commerce that tested positive for Salmonella.
FDA has recently confirmed that our Office of Criminal Investigations (OCI) is conducting an ongoing criminal investigation. "
Over the past 20 years our food safety inspection program has been allowed to die a slow and painful death. Slow because USDA and FDA are continuing their unification turf war with decreasing funding, and painful because American citizens are suffering greatly. I see this as a part of the Wal-Mart syndrome of buy cheap and pass the savings up the corporate ladder. Sure, Peanut Corporation of America is guilty and should pay the consequences. However, I think that all those snack cracker and other manufacturers who used those products are just as guilty. Afterall, food manufacturers are supposed to have vendor assurance programs in place (not 3rd party auditors, but their own people -- people with a vested interested) who should have caught the gross structural, sanitation, and operational problems at PCA. While conducting a systems analysis and a documentations review, even serious esoteric problems like "laboratory shopping" and preliminary release/ship should have been uncovered and corrected long before State and Federal inspectors got involved! Citizens cannot rely on federal oversight for protection. The food industry has mechanisms in place to minimize the efffects of rogue manufacturers such as this. However, when your primary motivation is to buy cheap and retire young, you have to take the bitter with the sweet!
This strikes me as an interesting case of skewed incentives leading to accepting a lot of "tail risk." That is:
a. There's a possible, but low-probability, event (contamination leading to a bunch of deaths and illnesses, tracked back to your plant). Maybe in your ten-year career as a plant manager, the probability of this happening is only one in ten thousand.
b. The downside if this happens is that you lose your job, probably can't find work in your field again, and that your company goes out of business. But you get to keep previous salary and performance bonuses. Perhaps you have some kind of insurance policy (or think you do) that will shield you from personal liability in such cases.
c. Defending against this risk adds to your costs in ways that affects your likely payoffs by quite a bit--perhaps it tends to shorten your career, because your costs end up higher than those of other plant managers.
It may be rational for a somewhat risk-tolerant plant manager to not defend against this risk. In some sense, he's gambling with the whole company's value, but he's risking only his future compensation, which is much smaller. Also, people are generally really awful at reasoning about low-probability events, so it's probably pretty easy for the plant manager to delude himself into thinking that "this isn't ever gonna happen."
This parallels a lot of the financial crisis, and I'm really drawing from some of the commentary (especially from Taleb Nassim) on the financial crisis in thinking about this.
Comments?