Supplier of tainted peanut butter suspended from federal contracts

The company at the center of a probe into a nationwide outbreak of food poisoning from tainted peanut butter has been banned from doing business with the federal government, the Agriculture Department announced on Thursday.

Peanut Corporation of America and its subsidiary, Tidewater Blanching LLC, have been suspended for one year from receiving prime- or sub-contracts from any federal agency, and from participating in any federal program.

USDA also has started the process of debarring the company, which would carry a stiffer penalty of a three-year ban on government business (the one-year suspension would be included in those three years).

The company reportedly sold tainted peanuts to private sector distributors and to the government even after internal tests showed that its products were contaminated with Salmonella bacteria. The outbreak has spread to 43 states and has killed eight people and sickened 575 others, federal officials said.

The Federal Acquisition Regulation outlines three general categories of misbehavior that can result in excluding a contractor from government work: evidence of a crime related to business integrity, either willful or unintentional failure to meet standards outlined in a contract, and any other "serious or compelling" misconduct.

"The actions of PCA indicate that the company lacks business integrity and business honesty, which seriously and directly hinders its ability to do business with the federal government," said David Shipman, acting administrator of USDA's Agricultural Marketing Service.

PCA, which did not respond to a request for comment, has 30 days to appeal the government's suspension decision.

Since 2000, PCA has received more than $4.3 million in government contracts, all from USDA, according to federal procurement data tracked at USASpending.gov. The bulk of the contracts were earned through full and open competition, although PCA frequently competed as a small business. The corporation's last contract was in September 2007 and was worth nearly $363,000, according to the Web site.

On Thursday, USDA revealed that 32 truckloads of PCA-roasted peanuts and peanut butter had been sold to the government between January and November 2007, and used for a free lunch program that serves lower-income children. The food ended up in schools in California, Minnesota and Idaho, but federal officials said there have been no reported illnesses at any of the locations.

According to investigators at the Food and Drug Administration, a private laboratory informed PCA of Salmonella contamination in its products 12 times between June 2007 and September 2008. The company, which has since issued a recall of its tainted peanuts, continued to sell its products after obtaining a negative contamination determination from a different laboratory, investigators said.

The Justice Department now is deciding whether to pursue criminal charges in the case.

PCA said in a statement on Wednesday that there "were regular visits and inspections of the Blakely facility by federal and state regulators during 2008. Independent audit and food safety firms also conducted customary unannounced inspections of the Blakely facility in 2008. One gave the plant an overall 'superior' rating, and the other rated the plant as 'meet or exceeds audit expectations.'"

FDA inspectors, however, spent three weeks at the facility last month and found a laundry list of unsanitary conditions, including dirty equipment, mold on the ceiling and both live and dead cockroaches.

. The January trip marked the first time the FDA had visited the facility since 2001; the agency had outsourced its annual inspection work at the Blakely, Ga., plant to state agencies. During a Senate hearing on Thursday, lawmakers chastised FDA for failing to discover the peanut outbreak and for recent nationwide contaminations involving spinach, lettuce and beef.

"To say that food safety in this country is a patchwork system is giving it too much credit," said Sen. Tom Harkin, D-Iowa, chairman of the Senate Agriculture, Nutrition and Forestry Committee. "Food safety in America has too often become a hit-or-miss gamble, and that is truly frightening. When Americans can't count on the safety of basic items that go into our children's lunch boxes, then we are in big trouble."

On Wednesday, PCA President and Chief Executive Officer Stewart Parnell will testify before the House Energy and Commerce Oversight and Investigations Subcommittee. Also scheduled to testify are Frank Torti, acting commissioner of the FDA, and Thomas Irvin, commissioner of the Georgia Department of Agriculture.