Washington Insider--Wednesday

Execs Sentenced for Tainted Peanuts

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Senate Passes Livestock Price, Grain Standards Bills

The Senate on Sept. 21 cleared by unanimous consent a three-bill reauthorization package, including reauthorization of mandatory livestock price reporting and the U.S. Grain Standards Act, both of which expire on Sept. 30. The cleared bill would renew the two programs until Sept. 30, 2020.

The package (HR 2051) would also reauthorize the National Forest Foundation, a nonprofit organization chartered by Congress. The reauthorization would be good through Sept. 30, 2018, with $3 million in funding for each year of authorization.

Among the differences in the package versus the House, the Senate version does not make livestock mandatory price reporting an essential service that would continue in a government shutdown. The House bill (HR 2088) would have given hog, cattle and sheep producers a guarantee that USDA would post prices paid for animals and wholesale meat cuts without disruption.

Sen. Debbie Stabenow, D-Mich., ranking member of the Senate Ag panel, said provisions in the bill requiring USDA to do more extensive reports would capture more sales transactions. "This reauthorization contains several new provisions that promote market transparency by capturing a greater volume of livestock transactions," Stabenow said. "These changes are supported by producers and will help them make informed decisions when marketing their animals."

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Railroads Struggle to Meet PTC Deadline

An extension to the deadline for Positive Train Control (PTC) installation is in the works, according to House and Senate leaders, but railroad operators are concerned that unless Congress sets aside wireless spectrum for PTC, they will be unable to complete the system.

Just 39% of freight railroads and 29% of commuter railroads are expected to have PTC equipment installed on time, the Federal Railroad Administration (FRA) estimated in August. Congress mandated in 2008 that PTC be installed by 2016.

Railroads say lack of dedicated wireless spectrum is the latest stumbling block they have faced with PTC implementation. Other problems include acquiring the components needed from a limited pool of manufacturers and delays getting Federal Communications Commission (FCC) permits for communications infrastructure.

The cost of investments for development and installation have already totaled $1.3 billion and are expected to reach $1.9 billion, CSX said. They project full implementation of PTC will not be achieved until 2018 at the earliest.

Unless a delay in the PTC requirement comes through, expectations are that railroads may stop carrying freight along corridors where PTC is not yet installed and that could increase shipping costs and cause bottlenecks to develop in the U.S. supply chain for a host of products.

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Washington Insider: Execs Sentenced for Tainted Peanuts

The Food and Drug Administration (FDA) is in the process of implementing a new law that gives it broader authority to force food processing plants to operate more effective food safety programs, including penalties for company executives. FDA is counting on recent headlines to help its cause, observers say.

In any event, the 28-year sentence handed out this week to food company exec Stewart Parnell, formerly owner of the Peanut Corporation of America plant, drew press attention. Parnell's plant was found to be the source of tainted products that killed nine people and sickened 714, but the sentence seems to signal the government is taking food safety violations seriously.

Parnell's sentence was for a salmonella outbreak in 2008 and 2009 that triggered one of the largest food recalls in U.S. history. Press reports indicate these cost Peanut Corporation's customers an estimated $143 million.

The case took a somewhat strange course. Parnell and two co-defendants, also sentenced Monday, were not charged with any deaths or even for making people ill. Instead, they were charged with defrauding corporate customers such as Kellogg, which turned the company's peanuts and peanut butter into finished products with disastrous results.

A federal jury convicted Parnell of knowingly shipping contaminated peanut butter and of faking results of lab tests intended to screen for salmonella. In all he was found guilty of 67 criminal counts.

His brother, food broker Michael Parnell, was also convicted and sentenced to 20 years in prison. The plant's quality control manager, Mary Wilkerson, got five years. Defense attorneys said they plan to appeal both the sentences and convictions.

U.S. Attorney Michael Moore of Georgia's Middle District, whose office prosecuted the case, called it "a landmark with implications that will resonate not just in the food industry but in corporate boardrooms across the country." Bill Marler, an attorney who specializes in food-safety cases and represented many of the salmonella victims in civil lawsuits, said, "The fact that he was prosecuted at all is a victory for consumers."

At Peanut Corporation's plant in Blakely, Georgia, federal investigators had reported finding a filthy plant overrun with roaches and evidence of rodents, all ingredients for brewing salmonella. They also uncovered emails and records showing lab tests results indicating salmonella in products shipped to customers in spite of test results. Some batches were never tested at all, but were shipped with fake lab records saying salmonella screenings were negative.

Emails prosecutors presented at trial showed that Parnell once directed employees to "turn them loose" after samples of peanuts tested positive for salmonella and then were cleared in another test. Several months before the outbreak, when a final lab test found salmonella, Parnell expressed concern to a Georgia plant manager that the delay "is costing us huge $$$$$." Parnell's company filed for bankruptcy shortly after it was shut down in 2009.

Defense attorneys argued the sentence was overly harsh, "If you compare it with other food-safety criminal cases, it's tremendously out of line," one told the press.

In April, two former egg executives in Iowa were sentenced to three months in jail for their role in a 2010 salmonella outbreak linked to more than 1,900 illnesses. In May, ConAgra Foods agreed to pay $11.2 million to settle federal charges that it shipped salmonella-tainted Peter Pan Peanut Butter that sickened at least 625 people in 2007. No company executives were charged in that case and no charges were made that officials knowingly shipping tainted product. Now that FDA has new authority to levy criminal charges in food safety cases, it is expected that tool will become more prominent in FDA enforcement actions.

The key issue overall is that FDA, which is responsible for food safety for some 80% of the food products in the U.S. cannot reasonably afford the level of product scrutiny routinely given to meat and poultry -- which are considered more severe food safety threats than other products, so it must necessarily depend on companies to prevent contamination but formerly had only limited means to insure cooperation.

Once the new rules are fully implemented, the agency is expected to require both stronger surveillance tools and the exercise of stronger company vigilance. Certainly, the Parnell case has fixed the industry's attention, although it remains to be seen how effectively the agency will be able to mobilize its new authorities to insure safer food, Washington Insider believes.


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(GH/CZ)