The Rise And Fall of A Peanut Empire

Virginia-Based Firm Is At Center of Outbreak

Just weeks ago, Stewart Parnell was running a peanut company from a converted garage behind his house outside Lynchburg, Va. His family business supplied ingredients to some of the biggest names on supermarket shelves: Kellogg, Sara Lee, Little Debbie. The federal government was a customer, too, buying his peanuts for poor school children, disaster victims and military troops. He even advised the Department of Agriculture on peanut quality.

Today, Parnell's peanut empire has filed for bankruptcy protection. He is the target of a federal criminal investigation, civil claims are piling up in courthouses around the country and he has been vilified from Georgia peanut fields to Capitol Hill.

He is accused by federal investigators of intentionally sending into the stream of commerce peanut products contaminated with salmonella bacteria. The government has directly linked Parnell's peanuts to nine deaths and 637 cases of salmonella illness in 44 states and Canada, with thousands more illnesses suspected.

The outbreak, which began in September and continues, has triggered the largest food recall in U.S. history. More than 2,000 products made with Parnell's peanuts have been pulled from stores. The entire peanut industry is suffering, as frightened consumers reject peanut products altogether. The cost of the recall to food manufacturers is in the millions and climbing.

"I'd like to ask him, 'How did you think this was going to work out for you?' " Rep. Michael C. Burgess (R-Tex.) said at a congressional hearing on the scandal earlier this week.

Parnell, who initially released public statements that pledged cooperation with government investigators, now refuses to answer questions. His media spokeswoman also does not respond. Friends and family members say they have been asked by his attorneys not to talk to anyone about Parnell.

The question is even more vexing considering the proud, rags-to-riches tale that Peanut Corporation of America featured on its Web site before the world came crashing down around Stewart Parnell.

Parnell and his father, Hugh, ran a business selling peanuts to candy and ice cream makers in 1977 when growers in rural Gorman, Tex., persuaded them to acquire a small roasting facility there. The privately held business struggled at first, generating $50,000 in sales the first year, but the Parnells expanded by supplying bakeries, snack manufacturers and others.

"Have you ever eaten a Nutty-Buddy? How about Trail Mix? Then you've tasted our product," Hugh Parnell told the Lynchburg News & Advance in a 1983 article about the company a year after annual sales had grown to $12 million.

By 1994, the Gorman plant had ballooned to 65,000 square feet, with 95 employees and more than $30 million in yearly sales. Then the Parnells cashed out, selling the company. Hugh Parnell retired; Stewart Parnell and his two younger brothers remained as consultants.

But Stewart Parnell was restless. He bought back the Gorman plant in 2000, then went into business with another investor who had been struggling with a peanut plant in Blakely, Ga. Three years after Parnell took over, revenue at that plant had tripled. The company also began operating a facility in Suffolk, Va.

As the Texas peanut industry moved westward, so did Parnell, shuttering the Gorman plant and opening one in Plainview, halfway between Lubbock and Amarillo. An experienced pilot, Parnell shuttled between the facilities frequently, according to Hugh Parnell Jr., describing his older brother as a "hands on" manager.