Peanut Corp. is going out of business

February 14, 2009 at 12:00a.m.

ATLANTA (AP) — The peanut processing company at the heart of a national salmonella outbreak is going out of business.

The Lynchburg, Va.-based Peanut Corp. of America filed for Chapter 7 bankruptcy in U.S. Bankruptcy Court in Virginia on Friday, the latest bad news for the company that has been accused of producing tainted peanut products that may have reached everyone from poor schoolchildren to disaster victims.

“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 salmonella outbreak was traced to the company’s plant in Blakely, Ga., where inspectors found roaches, mold and a leaking roof. A second plant in Plainview, Texas, was shuttered this week after preliminary tests came back positive for possible salmonella contamination. So far, the outbreak has been suspected of sickening more than 630 people and may have caused nine deaths. It also has led to more than 2,000 product recalls, one of the largest recalls in U.S. history.

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.