March 12, 2009
Peanut Corporation of America president Stewart Parnell declined to answer questions this morning upon arriving to U.S. Bankruptcy Court.
Parnell shook his head when asked by reporters to comment before the 9:30 a.m. hearing, in which the embattled company is expected to face questions from creditors.
Federal officials have linked Peanut Corp. to 650 salmonella cases. The company may be linked to eight salmonella-related deaths.
Although today’s hearing concerns bankruptcy matters, attorneys representing people with salmonella injury and death claims against the peanut processor showed up as well.
Attorney Bruce Clark, of Seattle-based law firm Marler Clark, represents 75 claims against Peanut Corp., including one death.
“PCA, when the dust settles, will have nothing. But one thing it does have is an insurance policy that will address bodily injury claims,“ Clark said outside the courthouse this morning.
Court documents filed March 6 show Peanut Corp. has almost $11.4 million in assets and $4.8 million in debt. It has nearly 500 creditors.
“The creditors are going to take a bath, that’s for sure. We hope if we lawyers representing injured persons do our job, our clients are going to get a full and fair recovery from insurance assets,“ Clark said.
Clark said he doesn’t expect Parnell to speak during the hearing.
The first bankruptcy meeting for the Lynchburg-based peanut company believed to be at the root of a nationwide salmonella outbreak is set to begin this morning here in U.S. Bankruptcy Court.
The defunct Peanut Corp. of America filed for Chapter 7 protection on Feb. 13. The company, which processed peanuts and made peanut butter for bulk distribution, has been linked to more than 650 cases of salmonella, according to the Centers for Disease Control, and may be connected to at least eight deaths.
In one of the largest food recalls in U.S. history, more than 2,100 potentially unsafe products have been listed for recall by the Food and Drug Administration.
Today’s meeting, called a “section 341 meeting,” will be creditors’ first chance to question Peanut Corp.
Bankruptcy lawyer Heidi Shafer of the Cox Law Group in Lynchburg said it’s also an opportunity for the trustee — the person who oversees the distribution of the bankrupt company’s money and property — to verify Peanut Corp.’s assets, income and expenses. Cox, speaking generally of bankruptcy proceedings, is not connected to the PCA case.
Steven Walt, a professor at the University of Virginia School of Law, said that in more than 90 percent of Chapter 7 cases, the company or person filing for bankruptcy protection has no way to pay all their debts.
“In general, it’s a mass-production affair,” he said of 341 meetings. “Creditors’ lawyers walk in with a bunch of files. They don’t have much to say.”
That may be different in this case, though, Walt said.
Court documents filed March 6 show the company has almost $11.4 million in assets and $4.8 million in debt. Injury and wrongful death lawsuits against the company may also weigh on the proceedings, he said.
Trustee Roy Creasy, a Roanoke-based attorney, said he’s unsure what to expect in this morning’s meeting.
“It’s going to be interesting because we have some Fifth Amendment issues,” Creasy said in an interview Wednesday.
He said he expects Peanut Corp. President Stewart Parnell to attend. But, Creasy said, he did not expect Parnell to answer any questions that could implicate him in any criminal or negligent behavior that could hurt him in an FBI investigation or those civil suits.
Walt said wrongful death claims are given special protection from interference from bankruptcy proceedings.
“What will it get them, though?” he said. “My guess is not much.”
After the meeting, the professor said, it is Creasy’s job to determine the priority of claims against Peanut Corp.’s assets. In most cases, he said, debts secured by property get paid first. And in most cases, he added, those debts exceed unsecured debts such as bills from suppliers.
Among secured creditors, court documents filed by Peanut Corp. list automobile credit lenders and SunTrust Bank, with more than $500,000 secured by property at the company’s Georgia manufacturing plant.
There are also unsecured debts listed in the hundreds of thousands of dollars, but the bulk of the nearly 500 creditors listed in filings are for less than $7,000. Many are listed with a value of $1.