An additional layer of controversy hangs over a federal bankruptcy case in Albuquerque, New Mexico, over the fate of Sunland Incorporated's shuttered peanut plant in Portales.
North Carolina's Hampton Farms made the highest bid at a Mar. 20 auction staged by the court only to be told minutes before approval of the sale the following day that a hearing had been called after a Canadian firm had placed a late-hour phone bid to the Bankruptcy Court's trustee in the case.
The troubled plant was closed after a nationwide salmonella outbreak that sickened 42 people was traced back to products made at the plant in 2012.
In spite of a $20 million product purchase by Costco, Sunland's prime customer, to bailout the company, Sunland officials announced they were filing Chapter 7 bankruptcy proceedings with the court.
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The trustee in the case, Clarke Coll, had earlier recommended the court award the sale of the plant and assets to California-based Ready Roast for $18.5 million. But the court opted for a formal auction to be staged. At the close of that auction it was believed Hampton Farms' $20 million bid was the highest received.
But following the acceptance of the Hampton bid, the court was told that a last minute phone bid had been received by Canada's Golden Boys Food and that a hearing would be held to determine if a new auction should be ordered. That second auction was scheduled and during action on Friday, Golden Boys outbid a revised bid from Hampton Farms.
Lawyers for the North Carolina peanut producer agreed to remit that new bid under protest, but their $25.1 million secondary bid was eclipsed by Golden Boys $26 million cash offer.
Hampton Farms is expected to file an appeal with the court over the call for that second auction, adding another twist to what has been a series of complications associated with closing the plant.
Also of concern were the circumstances involved in Sunland's unexpected move toward bankruptcy after receiving financial help not only from Costco but also from local officials in Portales through economic development funds made available to help keep the plant open and to secure local jobs.
Court officials say it was trustee Clarke Coll who asked U.S. Bankruptcy Judge David Thuma to reopen the auction, saying that any extra dollars raised through the bidding process could help Sunland's unsecured creditors recoup funds. Hampton Farms' attorneys asked the judge to honor last week's auction results, arguing it was important to preserve the integrity of the bidding process.
Tom Nolan, vice president of sales and marketing for Hampton Farms, said last week that the company was "very disappointed" in the outcome and concerned that by awarding the bid to another company that New Mexico and Texas peanut producers, who historically sold their crop each year to Sunland, may not benefit as well under other plans by other companies that also have a history of buying peanuts produced in China.
At the time the Portales plant was closed, Sunland was the largest producer of U.S.-raised organic peanut butter in the nation.
Hampton officials say they believe they followed all bidding guidelines as provided by the court and said as a positive gesture they were willing to raise their bid in the best interest of the community and the U.S peanut industry.
Attorneys for the North Carolina company noted that the company followed all the rules and procedures, and had raised the offer several times throughout the process.
Earlier this year, Coll had recommended Sunland be sold to Ready Roast Nut Co. of California for $18.5 million.
"Hampton Farms has been actively promoting and marketing U.S.-produced Valencia peanut butter while many of its competitors have turned to foreign sources for peanuts available for less money," a Hampton representative said after the hearing last week.
At least one peanut grower in Texas last year said he believed FDA's aggressive inspections that closed the plant may have been an attempt to show the agency was willing to flex their muscles to force food plants to become compliant with the Federal Food Safety Modernization Act.