[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
    THE SALMONELLA OUTBREAK: THE ROLE OF INDUSTRY IN PROTECTING THE 
                          NATION'S FOOD SUPPLY

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 19, 2009

                               __________

                           Serial No. 111-18


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

   HENRY A. WAXMAN, California,      JOE BARTON, Texas
             Chairman                  Ranking Member
JOHN D. DINGELL, Michigan            RALPH M. HALL, Texas
  Chairman Emeritus                  FRED UPTON, Michigan
EDWARD J. MARKEY, Massachusetts      CLIFF STEARNS, Florida
RICK BOUCHER, Virginia               NATHAN DEAL, Georgia
FRANK PALLONE, Jr., New Jersey       ED WHITFIELD, Kentucky
BART GORDON, Tennessee               JOHN SHIMKUS, Illinois
BOBBY L. RUSH, Illinois              JOHN B. SHADEGG, Arizona
ANNA G. ESHOO, California            ROY BLUNT, Missouri
BART STUPAK, Michigan                STEVE BUYER, Indiana
ELIOT L. ENGEL, New York             GEORGE RADANOVICH, California
GENE GREEN, Texas                    JOSEPH R. PITTS, Pennsylvania
DIANA DeGETTE, Colorado              MARY BONO MACK, California
  Vice Chairman                      GREG WALDEN, Oregon
LOIS CAPPS, California               LEE TERRY, Nebraska
MIKE DOYLE, Pennsylvania             MIKE ROGERS, Michigan
JANE HARMAN, California              SUE WILKINS MYRICK, North Carolina
TOM ALLEN, Maine                     JOHN SULLIVAN, Oklahoma
JAN SCHAKOWSKY, Illinois             TIM MURPHY, Pennsylvania
HILDA L. SOLIS, California           MICHAEL C. BURGESS, Texas
CHARLES A. GONZALEZ, Texas           MARSHA BLACKBURN, Tennessee
JAY INSLEE, Washington               PHIL GINGREY, Georgia
TAMMY BALDWIN, Wisconsin             STEVE SCALISE, Louisiana
MIKE ROSS, Arkansas                  PARKER GRIFFITH, Alabama
ANTHONY D. WEINER, New York          ROBERT E. LATTA, Ohio               
JIM MATHESON, Utah                   
G.K. BUTTERFIELD, North Carolina     
CHARLIE MELANCON, Louisiana          
JOHN BARROW, Georgia                 
BARON P. HILL, Indiana               
DORIS O. MATSUI, California          
DONNA CHRISTENSEN, Virgin Islands    
KATHY CASTOR, Florida                
JOHN P. SARBANES, Maryland           
CHRISTOPHER MURPHY, Connecticut      
ZACHARY T. SPACE, Ohio               
JERRY McNERNEY, California           
BETTY SUTTON, Ohio                   
BRUCE BRALEY, Iowa                   
PETER WELCH, Vermont                 

                                  (ii)
              Subcommittee on Oversight and Investigations

                    BART STUPAK, Michigan, Chairman
BRUCE L. BRALEY, Iowa                GREG WALDEN, Oregon
  Vice Chairman                        Ranking Member
EDWARD J. MARKEY, Massachusetts      ED WHITFIELD, Kentucky
DIANA DeGETTE, Colorado              MIKE FERGUSON, New Jersey
MIKE DOYLE, Pennsylvania             TIM MURPHY, Pennsylvania
JAN SCHAKOWSKY, Illinois             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas
DONNA M. CHRISTENSEN, Virgin 
    Islands
PETER WELCH, Vermont
GENE GREEN, Texas
BETTY SUTTON, Ohio
JOHN D. DINGELL, Michigan (ex 
    officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Bart Stupak, a Representative in Congress from the State of 
  Michigan, opening statement....................................     1
    Prepared statement...........................................     4
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     7
    Prepared statement...........................................     9
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    12
    Prepared statement...........................................    14
Hon. Nathan Deal, a Representative in Congress from the State of 
  Georgia, opening statement.....................................    16
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................    16
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    18
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................    19
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................    20
Hon. Bruce L. Braley, a Representative in Congress from the State 
  of Iowa, opening statement.....................................    21
Hon. Betty Sutton, a Representative in Congress from the State of 
  Ohio, opening statement........................................    22
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................    22
Hon. John Sullivan, a Representative in Congress from the State 
  of Oklahoma, prepared statement................................    86

                               Witnesses

Martin Kanan, President and Chief Executive Officer, King Nut 
  Company........................................................    25
    Prepared statement...........................................    27
David Mackay, Chief Executive Officer, Kellogg Company...........    32
    Prepared statement...........................................    34
Heather Isely, Co-Owner, Vitamin Cottage Natural Food Markets, 
  Inc............................................................    44
    Prepared statement...........................................    45


    THE SALMONELLA OUTBREAK: THE ROLE OF INDUSTRY IN PROTECTING THE 
                          NATION'S FOOD SUPPLY

                              ----------                              


                        THURSDAY, MARCH 19, 2009

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:04 a.m., in 
room 2123, Rayburn House Office Building, Hon. Bart Stupak 
(chairman of the subcommittee) presiding.
    Present: Representatives Stupak, Braley, DeGette, 
Schakowsky, Christensen, Sutton, Dingell (ex officio), Waxman 
(ex officio), Walden, Deal, Burgess, and Gingrey.
    Also Present: Representative Schauer.

  OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Stupak. This meeting will come to order. Today we have 
a hearing titled ``The Salmonella Outbreak: The Role of 
Industry in Protecting the Nation's Food Supply.'' The 
Chairman, Ranking Member and the Chairman Emeritus will be 
recognized for a 5-minute opening statement. Other members of 
the subcommittee will be recognized for 3 minutes. I will 
begin.
    As reports state, mold was observed growing on the ceiling 
and walls. Rainwater was observed dripping into the plant's 
peanut butter processing areas; six dead mice. Air filters were 
littered with feathers. A live roach and several dead roaches 
were observed in the firm's wash room. REPs, rodent extra 
pellets, were too numerous to count where observed.
    The pictures you are seeing and the quotes I am reading 
come from Federal inspections of the facilities in Georgia and 
Texas, operated by the Peanut Corporation of America. At the 
subcommittee's first hearing on February 11, 2009, we heard 
testimony about filthy conditions and at least a dozen positive 
salmonella tests that PCA received in 2007 and 2008. Today the 
subcommittee will continue its investigation by hearing from 
representatives of three companies that bought products from 
these polluted PCA facilities, Kellogg Company, the King Nut 
Company and the Vitamin Cottage Natural Food Markets.
    We will ask a series of questions today. First, we will ask 
why their food safety procedures failed to prevent the 
contamination of their products. The written testimony 
submitted for today's hearing suggests that some of the 
companies believe PCA was entirely at fault, and that they 
should not be held responsible for the safety of ingredients 
they bought from a disreputable supplier. PCA certainly 
deserves its share of the blame, and there are ongoing criminal 
investigations of its actions, but all three of these companies 
put their own labels on these products. They put their names on 
them. They represented to the public that these products were 
safe to eat, and they sold them to consumers, who became ill 
and in some cases died. Placing all the blame on PCA would mean 
that food processors have no responsibility for ensuring the 
safety of their ingredients, and I simply can't agree with 
that. I cannot agree with that.
    Second, we will ask whether these companies should have 
known or suspected problems with PCA before the outbreak. In 
written testimony submitted today, Martin Kanan, the president 
and CEO of King Nut, states that PCA's president Stewart 
Parnell informed King Nut on January 7, 2009, that he had no 
knowledge of any salmonella issues with his products. The 
documents tell a different story. On the same day, January 7, 
Mr. Parnell sent an e-mail to King Nut's vice president for 
finance and administration, Joe Valenza. In this e-mail PCA's 
president Mr. Parnell forwarded a news account of the emerging 
outbreak to King Nut's vice president and said, Joe, I am sure 
it is something we did. Eleven minutes later, King Nut vice 
president replied, I am recalling everything. Four minutes 
later Mr. Parnell replied, now my heart is really in my throat. 
I think I am going to church tonight.
    Third, we will ask why none of these companies ever asked 
PCA officials to disclose their positive tests for salmonella. 
If your supplier tests positive, this is something definitely 
you should find out, and it is certainly something your 
customers deserve to know. Even industry insiders recognize 
this.
    In an e-mail on February 5, 2009, an official at a private 
food safety auditing firm wrote to a coworker, the biggest 
problem was with the positive micro data that they ignored. 
This data was not initially available for the FDA either. They 
had to really pry into their documentation before uncovering 
the additional test results.
    Fourth, we will ask why these companies relied on audits by 
AIB, a firm that was selected and paid by PCA. There is an 
obvious and inherent conflict of interest when an auditor works 
for the same supplier it is evaluating. And several documents 
show evidence of this cozy relationship. On December 22, 2008, 
PCA's auditor e-mailed Sammy Lightsey, the manager of PCA's 
Georgia plant, to give him advanced notice of an upcoming 
inspection. He stated, you lucky guy. I am your AIB auditor, so 
we need to get your plant set for any audit. The result of that 
audit was a superior rating. The conclusions were completely 
different when the auditors were not paid by PCA.
    Today we will release several audits that have yet to be 
made public. They were concluded not by a PCA auditor hired by 
PCA, but by internal auditors working for Nestle USA. In 2002, 
Nestle auditors found that PCA's Georgia facility had no plan 
to address microbiological hazards like salmonella. Their audit 
found, quote, potential for microbiological cross-
contamination, and concluded that PCA was not in compliance 
with housekeeping, sanitation and pest control standards. The 
audit noted rodent droppings in the break room cabinets, live 
flour beetle in the blancher room, four dead beetles found in 
storage screens in the bleacher room, dead insects found on the 
interior perimeters. The audit warned that it is critical that 
these deficiencies are addressed, but its findings in 2002 were 
similar to the Federal investigation several years later.
    Nestle USA also conducted an audit of Nestle's Texas in 
2006 and came to similar results. As a result, Nestle USA 
rejected PCA as a supplier. We will ask the other companies 
here today, why did they not do the same? If they had, perhaps 
some of the illnesses and deaths would have been avoided.
    In conclusion, I ask unanimous consent that the documents, 
my opening statement and the binder prepared by staff be 
entered into the official record. Without objection, so 
ordered.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T7815A.001
    
    [GRAPHIC] [TIFF OMITTED] T7815A.002
    
    [GRAPHIC] [TIFF OMITTED] T7815A.003
    
    Mr. Stupak. I next turn to my friend and colleague, Mr. 
Walden of Oregon, for an opening statement, please.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Thank you very much, Chairman Stupak.
    Since our last hearing of February 11, more facts have 
surfaced, and more people have been sickened by salmonella-
contaminated products from the Peanut Corporation of America, 
including 13 cases in my home State of Oregon. The American 
public and the industries remain angry, they remain confused, 
and they are saddened by the outbreak and subsequent recall. 
This frustration is clearly understandable.
    Now people want to assign blame. I want to go even further. 
Let us assign some blame and address the weak points in our 
food safety regulations that allowed this to happen. Let us 
make this the last time we have to have a hearing to examine 
what went wrong and finally fix the problems at hand.
    The current reactive system of random samples has failed 
time and again, which brings to mind the famous saying by 
Albert Einstein, the definition of insanity is doing the same 
thing over and over again and expecting different results. We 
need to shift from the current reactive food safety system that 
depends heavily on product testing to a proactive and 
preventive strategy that relies on modern scientific standards 
and safety controls that detect and eliminate food-borne 
contamination as far up the chain as possible.
    I bring to your attention H.R. 1332, the Safe FEAST Act, a 
bipartisan bill that has been introduced by our colleagues 
Congressman Jim Costa of California and Adam Putnam of Florida. 
It does just that. It is my understanding that a similar 
measure will be introduced in the Senate by Durbin and Gregg.
    Our best chance for achieving our goal is for every 
participant in every step of the production, from the farm to 
the retail store, to take a hard look at the way they are doing 
things now and ask themselves, how can I improve? Then we need 
to hold their feet to the fire in implementing those 
improvements, farmers, retailers, the Food and Drug 
Administration, the State health service, and hospitals. The 
companies before us today who purchased products from PCA and 
private third-party firms who visited PCA and certified them 
each have a role in improving this process.
    Peanut Corporation of America is an extreme case of bad 
actors who I believe recklessly endangered consumers, and the 
majority of the blame rests on their shoulders. PCA allegedly 
knowingly released contaminated product to consumers and 
companies, falsified test results and violated countless good 
manufacturing product practices. All of us are disgusted by the 
continuous horrid actions taken by the company.
    Now, the food processors that I have spoken with in Oregon, 
some large, others smaller, have told me they do not produce or 
sell items that they would not feed their own children or their 
grandchildren. They have extensive vendor certification 
processes. They go through third-party audits, and each of them 
know it is in their company's best interest and their 
consumers', because without that, it is impossible to stay in 
business. PCA did not operate by these standards.
    I want to pull up a couple of pictures as well. On the 
screen are pictures taken of PCA's plant in Plainview, Texas, 
where contaminated products were produced and shipped into 
commerce. This is a picture--you really need to understand, 
this is the intake screen over the air that goes in to where 
the food has already been processed. Now, it is hard to really 
see clearly what is on this screen, but it doesn't take much 
imagination to believe there is at least one rotting rodent on 
that screen. These two pictures that follow are also of dead 
rodents. And what is especially disgusting is these are rodents 
that, again, are around the air intake that brought air in, in 
theory pure air, brought it in and put it over the processed 
product.
    How does this go undetected in initial screenings? How do 
auditors go in and not spot this in the beginning? How did this 
company get a clean third-party audit? Something is wrong with 
the system. These are dead rodents and other contaminants that 
were present on and around PCA's air-handling equipment that, 
as I said, blows fresh air onto clean peanut products.
    Media outlets report that this PCA plant had not been 
inspected by Texas health regulators or the FDA. That is 
because PCA violated the law by failing to register and apply 
for a food-manufacturing license from the State, another 
example of PCA's abhorrent behavior.
    Hopefully the companies here today can help us understand 
what they do to ensure the quality and safety of their products 
and identify potential places for improvement. What are their 
supplier qualifications, and should more be required? What 
enhancements can be made? These three companies represent a 
variety of food manufacturers, including large establishment 
companies that have been in business for decades to small 
family-run companies that were all negatively impacted by PCA's 
recall.
    We need your help in designing a process that works for the 
safety of food in America. The testimony today may be useful to 
enhance our legislative efforts, but the subcommittee should 
keep this case study in context because the deaths and 
illnesses from this outbreak were caused by one bad actor who 
clearly, in my opinion, violated the law. So the best way to 
protect young children, like 3-year-old Jake Hurley from my 
home State of Oregon, is to prevent it by stopping the bad 
apples like PCA, build in food safety measures at firms, and 
increase the strength of regulatory inspections by giving FDA 
access to all test results, especially those that are positive 
for contaminants during inspections, and expose and deter the 
bad actors.
    Thank you, Mr. Chairman.
    Mr. Stupak. Thank you, Mr. Walden.
    [The prepared statement of Mr. Walden follows:]

    [GRAPHIC] [TIFF OMITTED] T7815A.004
    
    [GRAPHIC] [TIFF OMITTED] T7815A.005
    
    [GRAPHIC] [TIFF OMITTED] T7815A.006
    
    Mr. Stupak. Mr. Waxman for an opening statement, please, 
sir.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman. I want to commend you 
for the tenacious way that you have held hearings and tried to 
expose what is going on in the food safety area, especially the 
glaring holes at all levels of our food safety network.
    This is the third hearing our committee has held in the 
committee of food safety. At our first hearing in February, it 
was clear that Peanut Corporation of America was more 
interested in its financial well-being than the health and 
safety of its customers. Rather than expressing regrets or 
sorrow for the illnesses the company caused, we saw internal 
communications where the company was more concerned about the 
fact they were losing money, more concerned about their 
financial bottom line.
    At that hearing we also heard from the Food and Drug 
Administration about the authorities it lacks. The FDA doesn't 
even have the authority to routinely access records documenting 
the steps manufacturers take to assure safety. FDA can't even 
order a company to recall dangerous food products. It can only 
make a request and then hope the company complies.
    Well, then in March we held our committee's second hearing 
before the Subcommittee on Health where the legislation will be 
considered. At that hearing witnesses explained that FDA cannot 
solve these critical problems alone. We rely on FDA, but there 
are over 300,000 registered food facilities throughout the U.S. 
and abroad, so we can't expect the FDA to prevent food-borne 
illnesses through inspections or post hoc investigations, so we 
rely on the companies. And today we are going to examine the 
role of industry in protecting our Nation's food supply.
    We have got three companies that we are going to hear from 
today. They purchased peanut products from PCA despite the 
filthy conditions at PCA's plants in Georgia and Texas. These 
companies relied on PCA's review of the salmonella problem. 
They included them in their--they bought the products from PCA, 
and then they took these purchases and put it under their own 
label, and then they sold it to the public.
    Well, when we heard from Dr. Stephen Sundlof, FDA's 
Director of Food Safety and Applied Nutrition, he said each 
company in the chain of manufacturing has an obligation to 
ensure that the ingredients they are using as well as their 
final products are safe for Americans to consume, and I 
wholeheartedly agree.
    Nestle was going to buy products from PCA, but Nestle sent 
its own auditors out, their own inspectors, and they found that 
the place was filthy, and they realized that it was going to be 
a danger to their customers, so they didn't buy the products.
    Kellogg realized that there may be a problem, but they 
insisted that PCA get its own inspection done, which PCA did by 
hiring a third-party auditor to inspect the facilities, and 
what they found was that under this third-party system, there 
was a for-profit auditing firm called AIB, and they gave PCA 
glowing reviews. This company was selected by PCA, it was paid 
by PCA, it reported to PCA, and it realized that if they didn't 
give a good review, they weren't going to be hired again. So 
they did an audit, and then they gave PCA a certificate of 
achievement. Peanut Corporation of America was considered 
superior. That is what the auditors said about the Peanut 
Corporation of America. At the same time we have these horrible 
pictures of what was going on with rats and infestations in 
these plants.
    Now, the question I think we want to know is how is it 
possible for a company that looks like this, with pictures of 
rodents, to receive an award like this where they are called 
superior? I think it raises a serious question of the flaw of 
these third-party inspections where there is a clear conflict 
of interest by the third-party inspector. And when you add to 
that what might be happening internationally, where foreign 
third parties are inspecting foods that we import into this 
country, it really has to make you think that there is 
something wrong, and we have got to clarify the situation. We 
have got to correct it.
    Our goal now is to develop commonsense legislation to 
improve preventive services at the front end of this process 
before one more person dies from tainted food.
    Thank you, Mr. Chairman.
    Mr. Stupak. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Waxman follows:]

    [GRAPHIC] [TIFF OMITTED] T7815A.007
    
    [GRAPHIC] [TIFF OMITTED] T7815A.008
    
    Mr. Stupak. Mr. Deal from Georgia, opening statement, 3 
minutes, please.

  OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Deal. Thank you, Mr. Chairman. Thank you for holding 
the hearing. Thanks to our witnesses for being here.
    Obviously all of us, regardless of which side of the aisle 
we sit on, are very concerned about keeping the food supply of 
this country safe. That is a function that I see has already 
been stated is a dual function. First of all, it is primarily 
preventive in nature. We must try to make sure that nothing 
contaminates that food supply and, if at all possible, to 
prevent it. And that, too, is a bifurcated function. It is the 
function of private industry, those who produce, those who 
process and those who distribute; and then there is a function 
of the Federal Government, and that is, more or less, oversight 
of all of those functions.
    The panel's makeup today obviously will focus on the 
industry side of the agenda, and there is some important 
questions I think we all need to ask, and that is, what should 
we legislatively require in terms of prevention that we are not 
doing currently? For example, should there be certification of 
independent third-party auditors? Should there be certification 
of independent labs? Should there be mandatory testing of 
product; and if so, how often and at what stage of the 
processes? Should those reports from those tests be made 
available to inspectors, both FDA, USDA and third-party 
inspectors, when they come to look at the facilities that are 
involved?
    These are all questions that are legitimate, but I think we 
all understand that a lot can be done on the private side of 
the ledger, and perhaps more should be done on the government 
side. I hope today's testimony will allow us to make some 
interaction between those two separate private and governmental 
functions so we know and have direction as to how we should 
approach this issue.
    Thank you, Mr. Chairman.
    Mr. Stupak. Thank you, Mr. Deal.
    Mr. Dingell for an opening statement, please.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Thank you, Mr. Chairman. I commend you for 
holding this hearing, and for your long-standing effort to fix 
Food and Drug so that they can do their job the way it should 
be done.
    We have been working on this in this committee for several 
years. As you will recall, last Congress you, Mr. Chairman, and 
I spent considerable time trying to get--the story of Food and 
Drug's incompetence, inability to carry out its responsibility, 
lack of resources, and general overall indifference to its 
responsibility at the leadership levels was a source of 
considerable interest by this subcommittee.
    I would note that we are now talking about dreadful lapses 
in accountability by State and Federal authorities as well as 
members of the industry in ensuring the safety of the Nation's 
food supply. This is not a new thing. We had the grapes. We had 
the jalapeno peppers and tomatoes. We had a severe problem with 
imported Chinese seafood and shellfish. We have had terrific 
problems with imported heparin, and now we have got the 
peanuts. And you, Mr. Chairman, and I have found reason to be 
highly critical of Food and Drug for lack of resources and for 
the basic statute which has not really been changed since 1962.
    As I made clear then in the subcommittee's previous 
hearings, this is not a new problem. Nine hearings were held by 
this subcommittee in the prior Congress, and we questioned the 
system designed to protect Americans from dangerous foods and 
drugs, and how it was not working, and how Food and Drug did 
not have the resources, at a cost of 1,600 or 1,700 people, 
killing 9, costing our State of Michigan nearly $1 million to 
combat, depriving businesses of revenues due to recalls. And I 
note that other businesses have been hurt by this as well as 
American consumers, who unfortunately have been killed and 
sickened.
    And I would note that the most recent outbreak of 
salmonella is clearly a result of deplorably unsanitary 
conditions at the Peanut Corporation of America's Georgia and 
Texas plants, and it clearly illustrates that the need for 
overhaul of our system for protecting the Nation's food and 
drug supply is long overdue.
    And I would note that when Georgia--well, first of all, 
Food and Drug never got in to look at the place, but finally 
Georgia went in after 8 years of inaction by FDA under 
delegated authority from FDA, and they couldn't find a thing. 
Apparently nobody in that business of inspection can find 
anything, including the seat of their pants with two hands.
    In any event, last month's hearing dealt with federal and 
State regulatory faults that contributed to the peanut butter-
related salmonella outbreak. What concerns us today is the role 
of industry in protecting the health and safety of consumers. 
Nestle, for example, refused to contract PCA as a supplier due 
to the fact that in its own due diligence it found unsanitary 
conditions at PCA's processing facilities. Georgia Food and 
Drug couldn't and didn't.
    All the same, I understand that diligence is not uniform 
across the industry. I intend to ask our witnesses frank 
questions about their operational protocols ensuring safety of 
the products supplied to them for the final process. It might 
be noted that they are showing an extraordinary level of trust 
in a system and an agency that do not work. I wish to learn 
what best practices they have in place for protecting consumer 
health and safety, as well as if they monitor the sanitary 
conditions at their suppliers' processing facilities. Finally, 
I would like to ask the witnesses assembled here today if they 
support increased and strengthened authorities for Food and 
Drug, and adequate resources and funding, and whether they are 
willing to pay a registration charge to see to it that Food and 
Drug has the funds and the resources which this skinflint 
Congress has never given them.
    Mr. Chairman, you, Chairman Pallone and I have introduced 
H.R. 759, the Food and Drug Administration Globalization Act of 
2009, which will guarantee a reliable stream of sources through 
registration fees on food manufacturers to support increased 
inspection of foreign and domestic processing plants by FDA. 
This bill is predicated on the notion that FDA must be 
strengthened not by replacing it with some new questionable 
food safety agency, bringing new layers of bureaucracy into the 
system, and whether that will come at too great a cost for the 
taxpayers.
    It is my hope that the witnesses today will recognize the 
urgency of enacting H.R. 759 and offer their support. It is a 
sensible bill. It will protect American consumers from farm to 
fork.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Stupak. Thank you, Mr. Dingell.
    Mr. Burgess for an opening statement, please. Three 
minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman. I appreciate the 
witnesses being here today.
    This is so important that we get this right going forward 
because, as Mr. Dingell already pointed out, we have had 
hearing after hearing after hearing, and we have done nothing 
about the problem. It is time for us to move on this, and it is 
also so important to get the policy right, because we see that 
if we get the policy wrong, people lose lives, not to mention 
the amount of dollars we lost in the recent problem.
    The aftermath of this recent outbreak of salmonella are 
still being felt. I think your sales have dramatically 
decreased, and the recalls are still being issued. None of us 
are satisfied with the lack of answers from the Peanut 
Corporation of America at our hearing earlier in February.
    We hold this hearing now to determine how the industry 
should move forward. And the problems are not just with the 
industry. Most companies want to maintain the integrity of 
their product and their trust and the relationship they have 
with the American people, the American consumer. And they have 
in place good manufacturing procedures. But when that trust is 
broken by bad actors like the Peanut Corporation of America, 
controls must be in place to swiftly address and correct the 
problem.
    And I am not an expert on food safety, but this is not 
microbiological rocket science. You heat the peanuts up to a 
temperature that is high enough to kill the bugs for long 
enough, and if your plant isn't just in violation of every 
code, your product is going to be OK. It is so easy, it doesn't 
require anything exotic like radiation or some new procedure. 
It is as old as peanut preparation has always been. It is not 
that hard to do. That is why it just defies logic and defies 
gravity that PCA wouldn't take the necessary steps.
    The logical path forward; how should Congress address this 
food safety legislation? Well, currently the Food and Drug 
Administration, in my opinion, is missing three logical 
controls that would allow them to effectively, efficiently and 
expeditiously clamp down on food-borne illness, and the first 
is access to records. Currently the Food and Drug 
Administration has no power to get the full records of a 
company. Instead, the Federal agency is like children 
requesting from a parent to have something of which they may 
not be entitled. The Food and Drug Administration has to 
politely ask the company for a position that defies logic when 
food safety--when a food safety crisis is in place.
    The Food and Drug Administration should not have to ask 
permission to go in for those records. They should be given the 
power to obtain those records.
    Second, we have got to modernize the traceability of the 
system through greater use of electronics. Now, we in the 
medical profession are routinely excoriated for the slowness 
with which we adopt electronic medical records. FDA testified 
more than 95 percent of their records are on paper, so when 
there is a food-related problem, the staff at the Food and Drug 
Administration is digging through boxes and boxes in some 
warehouse to find out who did what to whom when. These should 
be converted to an easily navigable electronic database.
    Also, companies should use the hazard access critical 
control points. The Food and Drug Administration currently 
requires juice companies and poultry companies to use this 
system, so it seems like--all meat and poultry companies to use 
this system, so it seems like it would be logical to require 
all domestic food products to do so as well.
    Third, the Food and Drug Administration should have the 
power of mandatory recalls. If a company does not voluntarily 
pull their product, and they have been identified to contain 
food-borne illnesses, the Food and Drug Administration should 
have the power to mandatorily recall its product. 
Unfortunately, with food safety, when questions arise, the 
product is guilty unless proven innocent, and that is the 
legacy that we are going to be left with because of bad actors 
in the business.
    Mr. Chairman, thank you. I will yield back the balance of 
my time.
    Mr. Stupak. Thank you.
    Ms. DeGette for an opening statement please, 3 minutes.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you very much, Mr. Chairman.
    We have had a series of hearings. I think this is about the 
thirteenth now. I am always sorry to be here because what that 
means is we haven't solved the problem yet. This salmonella 
with Peanut Corporation of America situation reminded me of a 
case I studied in law school. It is all there. All things are 
present here. We need to have the third-party inspections. We 
need to have the mandatory record provision. We need to have 
mandatory recall authority, and we need to have traceability. 
And all of these companies who are here today will talk to us 
about how having bad suppliers, having bad actors can affect 
all of the food industry.
    I particularly want to welcome Ms. Isely here today from 
Colorado and for Vitamin Cottage, a well-known business that I 
have known for years, ever since I was a young girl growing up 
in Denver. I think Vitamin Cottage is a good example of sort of 
the collateral damage that can happen when you have bad actors 
in the food system, because this is a small, family-run, 
organic foods grocer which gets its food and its provisions 
from a lot of different suppliers. It is all good to say that 
it is their responsibility at Vitamin Cottage to inspect all of 
the people that provide them food, but in truth it is virtually 
impossible for a small business to do that. And in this case--I 
will be interested to hear Ms. Isely talk about this--is they 
actually received assurances from Peanut Corporation of America 
that these peanuts were being produced in a healthful way. And 
frankly, if you are a small natural foods grocer, the last 
thing that you want to do is be making people sick, because 
that is going to affect your ability to do business, and it is 
going to affect your bottom line.
    And so instead, I think what we need to look at in this 
committee is how we can ensure that the whole food chain, the 
whole food supply chain, is safe. That means the things that I 
talked about a few minutes ago, and that everybody on both 
sides of the aisle in this committee are talking about.
    And finally I will say, I think that the Vitamin Cottage 
experience is a good example of how traceability can actually 
work well, because once these patients were identified by the 
Colorado Department of Health as having been sickened by 
salmonella, we were able to trace rather quickly back to where 
these peanuts came from. And so I think that if we could 
institute traceability throughout the whole system, we may well 
have identified this problem much sooner. We may have been able 
to recall the peanuts much sooner. Many hundreds--fewer people 
would have been sickened, and we might even have been able to 
save some lives.
    So I am eager to hear from our witnesses, too. I think they 
will add a very valuable perspective into putting all the 
puzzle pieces together to solve this broken system.
    Mr. Stupak. Thank you.
    Mr. Gingrey, opening statement, please, sir.

  OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Dr. Gingrey. Mr. Chairman, thank you.
    I want to say to Mr. Kanan and Ms. Isely that I agree with 
Congresswoman DeGette with regard to the collateral damage. I 
want to admit also that I am a physician Member almost addicted 
to peanut butter, and also am at the age where I have to take a 
number of medications on a regular basis. And let me assure 
you, when it says don't take on an empty stomach, with a little 
bit of peanut butter, the medicine goes down in the most 
delightful way. And that is what I generally do with a number 
of my pills and capsules. Now I have to worry about whether or 
not salmonella is going down with them, which is a shame.
    And, of course, we are talking about one very bad actor 
whose headquarters is not in Georgia, but certainly the plant 
was in Georgia.
    There is no question but that the safety of the American 
people is first and foremost the responsibility of government 
at every level, from providing for our national defense, indeed 
to protecting our Nation's food supply.
    Our responsibility today is to get to the bottom of this 
most recent salmonella outbreak, knowing that what we learn 
will inform the legislative work not just of this subcommittee, 
but the other subcommittees and the full committee. However, we 
must all, I think, keep in perspective that we live in a world 
of almost infinite needs, but definitely finite resources. Of 
course, I am talking about money. We also should not lose sight 
that at the core of this particular outbreak is an individual 
company, PCA, and ownership that acted, in my opinion, 
criminally.
    As I stated at the last oversight hearing, regardless of 
how high a regulatory wall we erect, there is always going to 
be someone brazen enough or stupid enough or greedy enough to 
try to climb over it. So let us remember that we should also 
review the penalties for folks who knowingly, knowingly, 
circumvent our food safety system.
    Mr. Chairman, with that, I will yield back.
    Mr. Stupak. Thank you.
    Mr. Braley for an opening statement, please.

OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF IOWA

    Mr. Braley. Thank you, Mr. Chairman and Ranking Member, for 
this hearing.
    Last year I spent a lot of time in my district visiting 
elementary schools, sitting in, about the importance of food 
safety. And if you have any doubt about the importance of this 
hearing today, I would urge you all to go visit an elementary 
school in your district during lunchtime and sit down and talk 
to kids about what impact food safety has on their lives.
    This hearing is particularly timely for me because as a 
Member of Congress from Iowa, at least 27 confirmed cases of 
salmonella traced to alfalfa sprouts have been identified in my 
State in the recent weeks. The infected sprouts were sold by an 
Omaha company to food distributors in Iowa and Nebraska, and 
further sold the product to grocery stores and restaurants. And 
while the outbreak of salmonella linked to PCA peanuts has 
received much more attention on a national basis because of the 
sheer number of illnesses and products recalled, this more 
recent outbreak, which has led to 70 confirmed salmonella 
outbreaks in 4 States, provides evidence that the PCA 
salmonella outbreak was not just an isolated incident, and 
reminds us all of the urgency of fixing our food safety system.
    This outbreak in Iowa also emphasizes something that was 
abundantly clear at last month's hearing. We need to enact 
comprehensive reforms to our food safety system that will 
necessarily encompass the entire food industry. As you all 
know, we heard troubling testimony about the unsanitary and 
unsafe conditions at PCA last month, and that led to hundreds 
of illnesses and as many as nine deaths nationwide. We also 
learned about the failure of the FDA in State investigations to 
identify problems at PCA and about the FDA's limited remedies 
under current law. That is why this hearing is so important.
    As Ms. DeGette pointed out, we are going to keep visiting 
this subject until we get it right and until there is no longer 
a need to hold these repeated follow-up hearings. And that is 
why I want to thank the Chairman and Ranking Member for their 
interest in getting this information out to the public in such 
a timely manner.
    And I yield back the balance of my time.
    Mr. Stupak. Thank you, Mr. Braley.
    Ms. Sutton, please, for an opening statement.

  OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Ms. Sutton. Thank you, Mr. Chairman. And thank you for 
holding the second hearing on the salmonella outbreak and FDA 
oversight.
    At the last hearing it became very, very apparent that the 
safety of our food supply is not as it should be. The 
salmonella outbreak that originated from Peanut Corporation of 
America has taken a disproportionate toll on Ohio. I have 
mentioned it before. But since October 2008, Ohio has reported 
100 cases, including 2 deaths, due to salmonella. This is far 
more than any other State. What is perhaps even more alarming 
is that there are still cases being reported.
    I would like to draw your attention to a news article from 
March 13 titled ``Salmonella Cases: Half Still Come from 
Crackers. Recalled Food Continues to Sicken Consumers.'' The 
article states that nearly 2 months after the initial recall, 
and despite massive publicity, Federal health officials are 
still worried that some consumers have not gotten the message. 
There are families who keep peanut butter crackers in their 
cupboards and may not realize that they were recalled; worse 
yet, reports that some stores have not pulled the contaminated 
products from their shelves.
    The bottom line, Mr. Chairman, even though these products 
were recalled, the execution of the recall was flawed. That is 
why it is so important for Congress to fix our food safety 
system, and I applaud your willingness to take on this task.
    Currently the FDA lacks the authority to issue mandatory 
recalls of tainted products. Furthermore, the FDA does not 
require proof that recalled products have been destroyed. I 
introduced the Protect Consumers Act, which gives the FDA 
mandatory recall authority. I also support other legislation 
sponsored by many in this committee that call for better 
reporting for contaminated products and tracing products once 
they are recalled.
    I am interested in hearing from our panel today that 
represents companies affected by the outbreak. I am especially 
eager to hear from Mr. Kanan and from King Nut Company, which 
is in northeast Ohio. And, Mr. Chairman, I look forward to 
working with you and all of our colleagues to fix our broken 
food inspection system.
    And I yield back.
    Mr. Stupak. Thank you.
    Ms. Schakowsky, opening statement, please.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman, for this important 
hearing. Ensuring food safety is a critical issue for this 
committee and Congress, and I am happy we are moving forward on 
this legislation.
    I began my career as a consumer product safety advocate as 
a very young housewife in Illinois--I won't give you the year--
who just wanted to pick something off a grocery shelf and know 
how long it had been sitting there, a day, a week and a year. 
And along with a small group of other similarly minded young 
housewives, and with a tremendous amount of perseverance, we 
succeeded in getting freshness dates on food packages. There 
was never any regulation, but the freshness dating, which is 
now ubiquitous, began to roll like a snowball. We never thought 
another label would be needed, ``salmonella free.''
    This is the second hearing we have had by the Subcommittee 
on Oversight and Investigations linked to the Peanut 
Corporation of America. According to the Illinois Department of 
Health, to date 10 individuals in my State have been made ill 
by that strain of salmonella. As of March 1, CDC has documented 
67 illnesses nationwide with 1 in 4 people hospitalized, and 
you know about the deaths. This outbreak has disproportionately 
affected the young, a population even more likely than adults 
to consume peanut butter and peanut butter products. Half of 
those made sick were children under the age of 16, and 1 in 5 
were children under the age of 5.
    In February, we heard testimony from Peter Hurley, whose 
young son was made ill from eating Austin Peanut Butter 
Crackers. Those crackers were made by the Kellogg Company using 
peanut paste sold by Peanut Corporation of America. I, along 
with many others, was shocked with documents presented in the 
February hearing that showed that PCA knew that their products 
were tainted, and yet released them into the food supply 
anyway. This recklessness and negligence have caused the deaths 
of nine people.
    There are many places where the system broke down. One, the 
Peanut Corporation of America was not required to report to 
anyone, not the FDA, not the companies buying their peanuts, 
when their products tested positive for salmonella. Two, the 
private companies that audited PCA were not subject to uniform 
standards or apparently strong enough standards as the FDA 
found many violations not reported in the private company's 
earlier audits. Three, the FDA had to use its authority under 
the Bioterrorism Act just to gain access to PCA's files showing 
their product had tested positive for salmonella.
    We can and we must do better than that. And I hope today's 
hearing and testimony from companies that purchased products 
from PCA will help us identify how we can improve our food 
safety system.
    Thank you, Mr. Chairman. I yield back.
    Mr. Stupak. Thank you.
    That concludes the opening statements by all members of the 
subcommittee.
    I should point out Mr. Schauer is here from Michigan. He 
has talked to the Members individually throughout the course of 
this.
    You have Kellogg's in your district, right?
    Mr. Schauer. Yes.
    Mr. Stupak. Mr. LaTourette, who I thought would be stopping 
by, but I know he is talking to a number of people in his 
office, he has got a number of people sick in his district, and 
King Nut is in his district; and, of course, Ms. DeGette has 
Vitamin Cottage Natural Food Markets. I would not be surprised 
to see other Members coming back and forth. There are other 
hearings and other panels going on. I will recognize them as 
they come in.
    Let us call our first panel of witnesses to the table. I 
would like to welcome these witnesses and thank them for 
testifying today. I want to make one thing clear: While your 
companies are those that have been directly linked to the 
illnesses, that CDC acknowledges that their products, your 
products, do not explain all of the illnesses associated with 
the salmonella outbreak. There are many other companies that 
purchased products from PCA and have contributed to the 
salmonella outbreak. These companies have been cooperative, 
have voluntarily come forward and have worked with the CDC, FDA 
and others to try to get our hands around this salmonella 
outbreak, the largest food outbreak of food-borne illness in 
our country.
    So I would like to welcome our panel. First we have Mr. 
Martin Kanan, who is president and chief executive officer of 
the King Nut Company based in Ohio. We have Mr. David Mackay, 
who is the chief executive officer of the Kellogg Company based 
in Michigan. We have Ms. Heather Isely, who is the co-owner of 
the Vitamin Cottage Natural Food Markets, Incorporated, based 
in Colorado. I welcome you all.
    It is the policy of this subcommittee to take our testimony 
under oath. Please be advised that under the rules of the 
House, you have the right to have and be advised by counsel 
during your testimony. Do any of you wish to have counsel with 
you and wish to be advised by counsel during your testimony?
    Mr. Kanan, would you just identify who they are for the 
record?
    Mr. Kanan. I have Valoria Hoover and Anne Corrigan.
    Mr. Stupak. OK. Mr. Mackay.
    Mr. Mackay. I have Charles Sklarsky.
    Mr. Stupak. Ms. Isely.
    Ms. Isely. I have with me Mr. Barnette from Steptoe & 
Johnson.
    Mr. Stupak. During testimony if you want to consult with 
them or be advised by them, that is great, but you would be the 
one who would answer questions.
    I will ask you to rise and please raise your right hand to 
take the oath.
    [Witnesses sworn.]
    Mr. Stupak. OK. Let the record reflect the witnesses have 
replied in the affirmative. They are now under oath.
    We will hear a 5-minute opening statement. We have your 
longer statements you have submitted for the record. I and 
others, I am sure, of the committee have read your opening 
statements. So if you want to give us 5 minutes, please, we 
would appreciate it.
    Mr. Kanan, let us start with you.

   TESTIMONY OF MARTIN KANAN, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, KING NUT COMPANY; DAVID MACKAY, CHIEF EXECUTIVE 
OFFICER, KELLOGG COMPANY; AND HEATHER ISELY, CO-OWNER, VITAMIN 
               COTTAGE NATURAL FOOD MARKETS, INC.

                   TESTIMONY OF MARTIN KANAN

    Mr. Kanan. Good morning, Mr. Chairman and members of the 
subcommittee. My name is Martin Kanan, and I am the president 
and CEO of Kanan Enterprises, better known as King Nut. We are 
a family-owned and -operated business and are a leading 
national supplier of snack nuts and other snack foods.
    Let me begin by saying something you have heard many times: 
The health and safety of those who consume our products is our 
first priority. Kanan has always reviewed its processes to 
identify lessons learned. Such continuous improvement is how we 
grew from 25 employees in 1989 to almost 200 today. Our union-
run facilities by the Teamsters produce nearly 500 million bags 
of products per year, none of which is associated with this 
outbreak.
    We began selling peanut butter because our customers asked 
us for it; however, we are not a peanut butter manufacturer. In 
early 2004, PCA started as King Nut's private labeler of peanut 
butter. This means they supplied us finished product in a 
sealed container, packed by them, with our label put on it by 
them, in a closed and finished case. Throughout the 5 years of 
doing business with PCA, we received spec sheets for their 
products, highlighting that no salmonella be present. We also 
received several continuing pure food guarantees that stated 
any product shipped to us would be unadulterated, safe and free 
from any substance which would harm the consumer. They also 
gave us certificates of assurance; a total quality systems 
audit summary report; a letter from Stewart Parnell, PCA's 
president, extolling a superior rating from AIB; and assurances 
that PCA had a HACCP plan in place. Late in the relationship we 
received COAs that showed negative results for salmonella.
    By the end of 2008, we distributed the PCA peanut butter to 
seven food service distributors. We did not suspect any health 
issues existed with the PCA product until we were contacted by 
the Minnesota Department of Agriculture. We were the very first 
in the United States to do the voluntary recall for any product 
associated with this salmonella outbreak.
    On Wednesday, January 7, we received a call from the MDA 
informing us they were investigating the salmonella incidents. 
They wanted to know who manufactured the King Nut peanut 
butter. We told them it was PCA. When we contacted PCA, Stewart 
Parnell, their president, informed us he had no knowledge of a 
salmonella issue.
    On the next day, FDA investigators came to our facilities. 
We produced bills of lading and COAs from PCA. We asked the FDA 
to take samples of the peanut butter to test, but they 
declined. Therefore, on the same day we sent samples ourselves 
of the lots of peanut butter we had in house to be tested. Also 
on the same day we received a second call from the MDA 
informing us that the peanut butter was a possible suspect, and 
that samples from an open container had been sent out for 
testing.
    The next day, Friday, January 9, the FDA investigators 
again returned to our facility. We informed them we did not use 
any peanut butter in any of the products we manufactured. 
Several hours later the FDA investigators then took samples of 
the peanut butter we had for testing. At 4:30 that Friday 
afternoon, we received news from the MDA that sampling from the 
open container of peanut butter had a presumptive positive for 
salmonella, and that the subtype would not be confirmed until 
the following week.
    Now, even though it was a single container, and even though 
it was only a presumptive positive, we decided to do the 
recall. We did not want to wait for PCA. Our biggest concern 
was for the health and safety of our customers. So prior to 
noon that Saturday, January 10, over the weekend, we initiated 
the first product recall associated with the salmonella 
outbreak. We recalled all of the PCA peanut butter that King 
Nut distributed in 2008. All of our seven food service 
distributors were aware of the recall that same afternoon. That 
day we also issued a nationwide press release as we did not 
know who might the ultimate customer or consumer be.
    On Monday, January 12, the FDA investigators again came to 
gather more information. We were also called and informed that 
4 of the 13 samples from that opened container had tested 
positive for salmonella typhimurium. That confirmed that our 
quick reaction to the presumptive positive was the right thing 
to do.
    Three days after we initiated the recall, PCA did it. As 
this subcommittee is aware, PCA's recall has been expanded many 
times. We, along with those in our industry and the consumers, 
were shocked and dismayed at findings that PCA knowingly 
released product with potential salmonella contamination into 
the food supply.
    The test results from our January 8 in-house samples were 
negative. To this day FDA has not told us the results of those 
January 9 samples they took from our warehouse.
    Now, while I believe that the American food supply is one 
of the safest in the world, Kanan Enterprises continues to be 
committed to working at rebuilding public confidence in the 
American food safety system. I want to be a part of making 
things better for our country's food supply.
    In this specific case of PCA, I must reiterate that we did 
not have control over the production nor the processing of this 
product. While most food manufacturers practice safe 
production, storage and handling of food ingredients, it is 
apparent that if someone lacks the integrity and honesty, they 
will always be able to find ways to bypass any quality 
assurance or food safety program.
    We need to let the American public know that we have better 
systems in place to react quickly to correct our problems and 
punish the wrongdoer. This is a tragedy for all of those 
involved, the victims, the families, our industry.
    I thank you for this opportunity to discuss these issues 
with you, and I am happy to answer any questions you have.
    Mr. Stupak. Thank you.
    [The statement of Mr. Kanan follows:]

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    Mr. Stupak. Mr. Mackay, your opening statement, please.

                   STATEMENT OF DAVID MACKAY

    Mr. Mackay. Good morning, Mr. Chairman and members of the 
subcommittee. I am David Mackay, president and CEO of the 
Kellogg Company. We sell our products here and in more than 180 
countries and employ more than 32,000 people.
    First and foremost, we deeply regret that the recent 
salmonella recall situation occurred and that it involved 
Kellogg products. We apologize to our customers and consumers, 
especially those who have become ill from one of our products.
    We, just like members of this subcommittee, Federal and 
State regulators, medical professionals, and the general 
public, are deeply disturbed by the events we have learned of 
over the past few months with respect to Peanut Corporation of 
America.
    We thank the subcommittee for the opportunity to discuss 
these important issues, in particular, how we can work together 
to strengthen the safety of the U.S. food supply.
    PCA has essentially poisoned the well for an industry in 
which most companies are honest and trustworthy and pride 
themselves on delivering safe, wholesome products that 
consumers expect and deserve. The PCA situation has shown that, 
if a company chooses to ignore even basic food safety 
principles, food safety systems and protections can be 
compromised.
    One of our governing values is to have the humility and 
hunger to learn. With that focus, our food safety program 
operates on the principle that food safety is a process of 
continuous improvement. And, in that spirit and as a result of 
what we have learned from this unfortunate situation, we have 
taken several immediate actions to enhance our food safety 
efforts.
    We have established new Kellogg cross-functional teams, 
including quality, food safety, and engineering groups, to 
audit supplies of high-risk ingredients, and have completed 
these on-site audits of our peanut and peanut paste ingredient 
suppliers. We are also requiring these suppliers to conduct 
environmental testing and monitoring in their plants, which we 
believe from our own practices is pivotal in identifying, 
assessing, and correcting potential contamination before it 
becomes a major food safety problem. And we are strengthening 
our internal food safety training and education across our 
supply chain.
    In the U.S. food safety system, we believe the key to 
enhancement is a renewed focus on prevention so that potential 
sources of contamination are identified and properly addressed 
before they become actual food safety problems. My written 
statement outlines our recommendations. However, I would like 
to provide highlights of our proposals.
    We support the following nine industry and government 
enhancements: one, establish a single food safety authority 
under Health and Human Services, supported by a food safety 
advisory council, to strengthen and maximize the efficiency of 
regulatory oversight; two, establish an international food 
protection training institute to train government and industry 
inspectors; three, improve current good manufacturing 
practices, or GMPs, which have not been updated for over 22 
years; four, develop food safety plans for every food facility 
that are based on a thorough risk assessment and contain 
verification systems and preventative controls; five, require 
annual FDA inspections of facilities that produce high-risk 
foods; six, require test results and corrective actions to be 
disclosed to FDA at their annual inspection; seven, develop 
consistent food manufacturing audit standards and accredit 
auditors and the audit firms; eight, provide FDA with mandatory 
recall authority to expedite necessary recalls; and finally, 
nine, review possibilities for enhancing traceability 
standards.
    Kellogg is firmly committed to working together with 
Congress, industry, and other stakeholders to evaluate and 
advance these recommendations. I look forward to discussing 
them with you today, and I want to thank you on behalf of the 
company and our employees for this opportunity to discuss these 
important issues. I am happy to answer any questions you may 
have.
    [The prepared statement of Mr. Mackay follows:]

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    Mr. Stupak. Thank you, Mr. Mackay.
    Ms. Isely, your opening statement, please.

                   STATEMENT OF HEATHER ISELY

    Ms. Isely. Good morning, Chairman Stupak, Ranking Member 
Walden, and members of the subcommittee. My name is Heather C. 
Isely, and I am executive vice president and part-owner of 
Vitamin Cottage Natural Food Markets, Inc.
    We very much appreciate the opportunity to provide our 
input to the subcommittee on our involvement with the Peanut 
Corporation of America and to provide insight on how outbreaks 
like this one are dealt with by small-chain retailers.
    Vitamin Cottage was established in 1955 by my parents. They 
started the business by going door to door in Golden, Colorado, 
selling whole grain bread and sharing nutrition information 
with people they met. I started working for my parents at the 
store when I was 9 years old.
    Our goals have always been the same: providing exceptional 
customer service, extensive nutrition education, and the 
highest quality products at affordable prices.
    For over 30 years, Natural Grocers has offered fresh-ground 
peanut butter. Our employees make peanut butter in the store by 
running dry-roasted peanuts through a small grinder. For the 
past few years, the dry-roasted peanuts for this product have 
been purchased from PCA from its Plainview, Texas, facility. 
Until the PCA outbreak, Natural Grocers has never had any 
adverse health issues associated with its peanut butter.
    The timeline with respect to developments related to PCA-
supplied products is well-known. For our part, despite 
continuing quality assurances from personnel at the PCA Texas 
plant, Natural Grocers quarantined its inventory of PCA peanut 
products on January 28th. On January 30th, Natural Grocers 
preemptively and voluntarily recalled all related products and 
began notifying customers to return all previously purchased 
fresh-ground peanut butter. We have detailed how we 
subsequently worked with the government authorities in our 
written testimony.
    As a family-owned retailer, we are deeply concerned about 
the obvious breakdown in the regulatory system that brought 
about the PCA-based outbreak. We need effective laws and 
regulations that ensure we and our customers can buy food with 
confidence in its safety.
    Again, I appreciate the opportunity to testify before the 
subcommittee and welcome any questions you may have.
    [The prepared statement of Ms. Isely follows:]

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    Mr. Stupak. Thank you.
    And thank you all for being here today and assisting us 
with this investigation.
    We are giving you a document book there because I am going 
to ask about document number 48 and 49 in my first question.
    You know, we have seen the photos and I think the chairman 
and Mr. Walden and others, we have all had the photos of the 
dead rodents and other filthy conditions at PCA. And you have 
heard what government investigators found when they went in to 
shut down these facilities: roaches, salmonella, contamination, 
and so much rodent excrement that they couldn't really quantify 
how much there was.
    And I have read your statements, and I have listened to you 
here closely this morning. Essentially what you all are saying 
is that you didn't know about these problems at PCA. But my 
question is, why didn't you know?
    I mean, I understand there was the audit firm AIB that 
inspected PCA and gave it very high ratings of ``Excellent'' or 
``Superior,'' but yet, in our investigation, we find AIB gives 
98 percent of everyone they inspect ``Superior'' or 
``Excellent'' ratings. But the companies--you didn't do your 
own inspections, like Nestle did, and therefore, you didn't 
find the problem.
    So, in the audits there, if you look at number 48 and 49, 
if you would like, there in the document binder, the first one, 
48, is, 2002, Nestle USA sent auditors to the PCA facility in 
Georgia where they found, quote, ``the potential for 
microbiological cross-contamination'' because of raw peanuts 
being handled in the peanut-roasting area. They found rodent 
droppings in the breakroom cabinets, live flower beetle 
activity, and dead insects.
    Ultimately, they concluded in 2002, Nestle did, PCA was not 
in compliance with critical standards for housekeeping, 
sanitation, pest control, and they found PCA had no plan to 
address salmonella.
    Nestle USA then went, in 2006, at the invite to go to PCA 
in Texas, in 2006, and found a failure to comply with pathogen 
monitoring and pest control standards. According to tab 49, the 
2006 report, the auditors counted over 50 mouse or rat 
carcasses, concluding that the facility had, quote, ``a serious 
ongoing problem with rodents.''
    As a result of these deficiencies, Nestle said no in 2002. 
In 2006, again they said no, and rejected PCA as a supplier, 
that they wouldn't buy peanut products from them.
    The difference, it seems that Nestle didn't rely solely on 
an auditor that was selected by PCA and paid by PCA, which is 
an obvious conflict of interest. They conducted its own audits 
with its own experienced staff.
    So I am going to ask each of you today, why didn't you do 
the same? You all talked about safety is the number-one 
concern, family-owned companies, you are doing everything you 
can to assure the safety, but it seems like you passed that 
responsibility to somebody else. So why wouldn't you have done 
the same thing? If this is your supplier of a critical 
ingredient, why wouldn't you go check it?
    Mr. Kanan, do you want to start?
    Mr. Kanan. Thank you, Congressman.
    First, when we start out with a relationship, we require 
spec sheets from them. We rely on the FDA, that is supposed to 
be doing that. They certainly come visit us. We run a very 
clean shop and organization. They are very well-known in the 
industry. We had a continuing pure food guarantee from them. 
Throughout the relationship, we continued to ask for more 
things, like HACCP plans. We believed they had a HACCP plan in 
place. And we had COA showing negative results for salmonella 
by the end.
    We were outraged----
    Mr. Stupak. No, I know, but why didn't you guys go check? 
If this is your main supplier to provide your peanut butter, 
you are putting your name on this, what, 5-pound pail and then 
up to 35 pounds, and goes to, like, nursing homes and that, why 
didn't you go check?
    Mr. Kanan. We were distributor of this. I understand our 
name was on it, but we bought a closed container. And that is 
what we have to look at today. We have to start with the 
manufacturers. The distributors, the retailers down the line--
--
    Mr. Stupak. I will follow that up with a question.
    Kellogg, you are a big company like Nestle. I am surprised 
you guys didn't at least have someone there with internal 
audits.
    Mr. Mackay. Yes, I think as we said in our written, but I 
will go through it, we use a multistep process. The----
    Mr. Stupak. Can you pull your mike up a little bit.
    Mr. Mackay. --third-party audit is one step in that. We 
also do risk analysis of ingredients. We bring the product into 
our labs to run it through our facilities, make sure it works, 
so we get firsthand experience with that. And we do get 
certificates of analysis.
    Mr. Stupak. Yes, but do you send people out to these 
plants?
    Mr. Mackay. Some we do, some we don't. The practicalities, 
when you look at--Kellogg is a big company.
    Mr. Stupak. Sure.
    Mr. Mackay. We have 3,000 ingredients, 1,000 suppliers. I 
think it is common industry practice to use a third party.
    If you look at the situation here, AIB is the most commonly 
used auditor in the U.S. The AIB, as one of the many factors we 
use, is meaningful. The AIB audit confirmed several important 
food safety measures were in place at PCA. They had an 
environmental testing program. They did all microbiological----
    Mr. Stupak. Sure, but you didn't send anyone down like 
Nestle, like, to check PCA? You didn't send anyone down from 
Kellogg then?
    Mr. Mackay. We didn't at that point. But we have since, as 
of learning coming after, changed that----
    Mr. Stupak. After, yes.
    OK, I am going to follow that up with a question, because 
you all have different standards here now on what you are 
doing. That is my next question.
    Ms. Isely, any comment on that? You guys didn't send 
anyone? You are the family-owned one, that health is your 
concern. Did you guys send anyone to PCA in Texas or----
    Ms. Isely. We did not send anyone--sorry, Chairman.
    Mr. Stupak. That is all right.
    Ms. Isely. I am not used to this. I am from a small, 
family-run business. Sorry. I am a little bit nervous today.
    Mr. Chairman, we did not send anyone to PCA. One of the 
things that, as a small, family-run business of a chain of 
retail stores, we have 1,300 suppliers of products to our 
stores for the 25,000 products that we sell in our stores.
    Mr. Stupak. Sure, but some of your products, like how 
animals are being treated and that, you said in your testimony 
you guys go send inspectors out. So I thought maybe you would 
go to PCA.
    Ms. Isely. Yes, we do, and I can comment on that now to 
explain the difference for us, is that we rely upon the 
government system and the good manufacturing practices----
    Mr. Stupak. Well, did you ever check with the government on 
Texas? Because you were getting it from Plainview, Texas, and 
Texas wasn't even registered. So did you check with Texas or 
the FDA to see if the place was even on anyone's radar screen, 
registered with anyone to produce food?
    Ms. Isely. No, we did not. We tried to rely upon the system 
in the United States. We purposely source our products from 
companies that manufacture in the United States because of the 
gold standard of manufacturing practices that do exist in this 
country.
    What I was trying to say about the inspections for humane 
treatment of animals is, when there is not a government system 
in place, we do go out of our way to make sure that we inspect 
that what is on those labels is accurate and true.
    Mr. Stupak. Sure, but, with all due respect, in this case, 
because you got yours from Plainview, Texas, you didn't even 
check to see if it was even registered, the operation. So even 
if the government was doing its job, if you would have checked, 
you would have found that this Plainview, Texas place, which 
has all the dead rodents in it, wasn't even registered, was 
never registered or inspected by Texas or the FDA.
    Let me ask this question. This is a June 2000 audit report 
from the Inspector General to Health and Human Services. And I 
have been on this committee now 15 years. I am sure Mr. Dingell 
and Mr. Waxman have been on longer than this. You know, how 
many years we have been trying to get standards.
    You all have talked about all the things you are going to 
do now, and I compliment you on trying to do some things. But 
we can't have Kellogg doing one thing, Mr. Kanan doing 
something else, Ms. Isely, your company doing something else. 
Don't you think it is about time we have some standards as to 
what we look for when we go to these plants.
    We were baffled last time that the State inspectors didn't 
pick up some things in the Georgia plant that were structurally 
wrong that encouraged, not discouraged, cross-contamination. 
Don't you think it is about time we had either Federal 
standards, international standards, since a lot of our food 
comes overseas, or at least CDC, NIH, some kind of standards 
that we all have to play by for inspections, testing of food 
and food processing places? Because you are all doing something 
different, and they are not going to mesh.
    Mr. Mackay. Congressman, I think one of the recommendations 
we made was that we actually developed consistent food 
manufacturing audit standards.
    Mr. Stupak. Yes, number seven, that was sort of like your 
standard number seven. But who should be in charge of that?
    Mr. Mackay. You know, I think if you start with the first 
recommendation we made, which was forming a single food safety 
authority within HHS and then having an advisory group that 
actually works for them on a scientific base, the reason for 
that is there are so many moving parts here that we need to 
bring the science to bear. Industry can work with that group to 
ensure that we are looking at the right standards for varying 
food facilities.
    Mr. Stupak. Sure. And it claims they have been doing that 
for years, since way back to June of 2002, and it never gets 
done. Either in industry or someone doesn't want to cooperate--
--
    Mr. Mackay. I think we are all here to try and work with 
you to encourage that we do move forward and make that change 
and we establish those standards. And I think there are a 
number of things we need to do consistent with that.
    The other recommendation we have in here is that on high-
risk foods that the FDA actually does an annual audit. And, 
within the context of that annual audit, all of the testing 
done by that facility is shared with the FDA when they go in 
and do that annual audit. It doesn't fix this unfortunate 
situation, but it certainly should enhance the food safety in 
the U.S. going forward.
    Mr. Stupak. Sure, I mean, on high-risk, we did the same 
thing in 1997; now here we are again in 2007. We had one in 
Georgia, and here we are 2 years later, same thing.
    Mr. Walden, for questions, please.
    Mr. Walden. Thank you very much, Mr. Chairman.
    And I am glad you raised that issue of the IG report. Mr. 
Barton and I sent a letter to the FDA last week requesting 
documents and information on whether FDA has implemented the 
Inspector General's recommendations and how the FDA is 
implementing them. And, again, this goes back to June of 2000.
    So we have some work to do on our end to make sure that the 
FDA is looking at these State controls on inspections and what 
is happening out there when they do delegate it out. So I hope 
you will help us in trying to get answers out of the FDA, Mr. 
Chairman, because I concur with your analysis on its lack of 
implementation.
    I have a couple of just, sort of, ``yes'' and ``no'' 
questions for you initially and then a couple that will go into 
a little more depth.
    Do you support uniform standards for third-party auditors, 
including standardized questions and formats, and government 
accreditation of these third-party audit firms?
    Mr. Kanan. Yes.
    Mr. Mackay. Yes.
    Ms. Isely. Yes.
    Mr. Walden. Thank you.
    One of the things that has concerned me is--and it came out 
in some of the testimony today--when I was in the broadcast 
business, I was regulated by the Federal Communications 
Commission. The inspector chose when he or she was going to 
show up to look at my public file, go out and look at my tower, 
review my equipment, have my operator show they could do an 
emergency alert test. They didn't call ahead of time to say, 
``A week from Thursday, I am going to come out.''
    Do you support third-party audits being announced or 
unannounced?
    Mr. Kanan. I support them being unannounced.
    Mr. Walden. Mr. Mackay?
    Mr. Mackay. I think as long as the logistics can work for 
unannounced, because there are so many audits that are going to 
be conducted, at some point maybe you have to give at least a 
day's notice or some notice, but if it helps the system by just 
going in unannounced, then we would support that.
    Mr. Walden. Ms. Isely?
    Ms. Isely. We support unannounced.
    Mr. Walden. OK. Thank you. I appreciate your answers to 
those questions. They are helpful.
    Did your company receive a certificate of analysis or some 
representation from PCA that the peanut products sold by Peanut 
Corporation of America to your company were safe?
    Mr. Kanan. We have in the past, yes.
    Mr. Mackay. Yes. In every batch we got in, we had a 
certificate of analysis, and all of them were negative.
    Ms. Isely. No, we did not.
    Mr. Walden. You did not. OK. And did you seek those 
certificates or----
    Ms. Isely. Not--we did not seek those certificates. As a 
retailer----
    Mr. Walden. You are more of a retailer. You are buying 
product to resell.
    Ms. Isely. We are buying product to resell, and so we don't 
seek those certificates of analysis on the food side. We really 
try to work with the system that exists.
    Mr. Walden. Mr. Mackay, I have before me in--do you know 
what tab that is in? I guess it is not in the document book.
    Mr. Chairman, without objection, I would ask that this 
document be put in the record, as well.
    Mr. Stupak. That is the certificate of analysis? No 
objection.
    [The information was unavailable at the time of printing.]
    Mr. Walden. And this is the one dated July 12th of 2007 
from Peanut Corporation of America to Kellogg regarding coarse 
natural peanut paste, lot number 7192CNPB, as in ``boy.'' And 
under the microbiological data, it shows results as negative 
for salmonella.
    My understanding is that this certificate says negative, 
and yet this is one of the lots that showed positive on 
salmonella.
    Mr. Mackay. I am unconfirmed on the lot, but I know that 
every--we went back and checked every certificate of analysis 
we had received from PCA. Every certificate of analysis was 
negative.
    And I think that just highlights how extremely difficult it 
is when you have an unethical and dishonest supplier to 
actually manage for this.
    Mr. Walden. And do you think that the records from these 
independent labs that do the analysis to see if there is a 
problem with the product, do you think those records, A, should 
be available upon inspection by the FDA?
    Mr. Mackay. I think any finished food records that show a 
positive, it could be helpful to actually present those to the 
FDA.
    Mr. Walden. Ms. Isely?
    Ms. Isely. We would agree with that.
    Mr. Kanan. Yes.
    Mr. Walden. Because in one of our hearings it came out that 
I guess they have to go through the Bioterrorism Act in order 
to get access to these records. And that just seems 
preposterous to me. I don't understand it.
    Do you think these ought to be electronically reported to 
the FDA when there is a positive hit?
    Mr. Kanan. That would be very helpful.
    Mr. Mackay. Yes, I think that would be the best course.
    Ms. Isely. Yes, it would help us, as well.
    Mr. Walden. And do you think there ought to be a 
requirement for this kind of testing to occur and for audits to 
occur?
    Mr. Kanan. Let me understand your question again, 
Congressman. You are asking, do you think that mandatory 
testing should be required? On what kind of testing, 
salmonella?
    Mr. Walden. You know, I am not an expert in the field. I 
would seek your counsel.
    Mr. Kanan. Yes, absolutely--I agree with you, I think that 
would be very helpful to have mandatory testing on requirements 
that somebody says should be, you know, peanut butter, 
salmonella, for example.
    Mr. Mackay. I would clearly support, if a lab finds a 
positive test on finished food, they give that to the FDA.
    One of the things that I think is critical when you 
understand the system is that prevention is really the key----
    Mr. Walden. Right.
    Mr. Mackay [continuing]. To very strong food safety. And to 
prevent, environmental testing becomes one of the key steps in 
that, which is done much further upstream. Most companies that 
do environmental testing, as we do in all of our facilities, if 
we were to find any issue, we would take preventable action to 
prevent it actually leaking into the food stream.
    So the only reason I worry is that, Congressman, the 
complexity, if you ask for every test, environmental as well as 
finished food, you potentially could overwhelm the safety and 
the FDA, and it may be impractical. I am not trying to be 
defensive, but it is----
    Mr. Walden. No, no, that is fair. I am seeking your input, 
because we don't want to shut down the food chain; we want it 
to be safe.
    Which you really lead into my next point, these very 
dramatic and disgusting photos that we have came about not from 
the third-party auditors, it is my understanding. And this is 
out of the Texas plant for PCA that show the dead rodents and 
the feathers and God only knows what else. This came about 
because of an inspection and--excuse me, an investigation.
    My understanding is that, in your industry, when there is 
an audit, it is maybe a day long. And the company picks the 
auditor, and they can preannounce that they are coming. So they 
don't get, potentially, into the detail level that an 
investigation that can go 3 or 4 days might actually get into. 
And it was the result of an investigation that found this.
    So should audits be longer? Should they be more on the 
investigative side?
    Mr. Kanan. With third-party audits, Congressman, they are 
at least a day or more at our facilities. FDA is a couple 
hours, 2 or 3 hours.
    Mr. Walden. And that is FDA inspection, but what about 
investigation? Have you ever had one of those?
    Mr. Kanan. An actual investigation?
    Mr. Walden. Right.
    Mr. Kanan. Not that I am aware of.
    Mr. Walden. All right.
    Mr. Mackay?
    Mr. Mackay. I think it is, rather than--one of the 
differentials here is our inspections, I think--if you have a 
high-risk facility or food ingredient, our recommendation--and 
we have already made this change internally--is to have a 
multifunctional team. Typically, they would take longer than a 
day, but even if it is a day, you have three, four people 
versus one person, and you have experts in a variety of 
different areas so they are actually doing as good a scan as 
possible.
    We have said in one of the recommendations we have made 
that we believe that food safety plans should be developed for 
all facilities in the U.S.
    Mr. Walden. And I have one more question. And I appreciate 
the chairman's indulgence.
    Ms. Isely here is a retailer; could be any store in 
America. If she came to your company, Mr. Mackay, and said, ``I 
need to see tests, I need to see all these things before I will 
sell your product,'' how would that work? Is that even--do 
retailers come to you and demand that?
    Mr. Mackay. Yes, they do. And sometimes retailers will 
demand a specific type of audit.
    Mr. Walden. And how do you respond if it is Walmart or a 
big chain--I am not picking on Walmart--but a pretty big buyer 
with a lot of horsepower versus a small, independent?
    Mr. Mackay. For us, it wouldn't matter. Within the context 
of our facilities, we have standardized audits that comply with 
almost every criteria that retailers would ask for.
    Mr. Walden. Is that the same, Mr. Kanan, for you?
    Mr. Kanan. Yes. I mean, if a retailer came to us to ask us 
for our audits, it is all standardized. We would be able to 
give them----
    Mr. Walden. And you do that? Your retailers come to you and 
ask that on a regular basis?
    Mr. Kanan. Some do.
    Mr. Walden. OK.
    Mr. Kanan. Many don't.
    Mr. Walden. So, regardless of size, they could ask you for 
that?
    Mr. Kanan. Yes.
    Mr. Walden. All right. Thank you.
    Thank you, Mr. Chairman.
    Mr. Stupak. Chairman Waxman, for questions, please.
    Mr. Waxman. Thank you, Mr. Chairman.
    Mr. Mackay, you indicated you had a certificate of analysis 
showing that there was no salmonella in the batch that you were 
buying from Peanut Corporation of America. As I understand, the 
certificate of analysis is no guarantee that there is no 
salmonella; it is they have tested but it doesn't--and where 
they tested there was no salmonella, but there could be in the 
tub, some other place where there might be salmonella. And it 
turned out, to your misfortune, that it was an unscrupulous 
supplier that was providing this batch of peanuts to you.
    But you indicated in your written statement that--you say 
that, ``There is an audit finding that reported no concern that 
the facility may have had any pathogen-related issues or any 
potential contamination.'' And I am quoting from your written 
statement.
    I want to direct your attention to a March 2008 AIB audit 
report for PCA's Georgia facility. And, in this audit report--
we know AIB is the group that did the audit for PCA. In this 
audit report, it says the following: ``This facility had 
evaluated the processes and procedures and determined that no 
critical control points were present in the operation.'' No 
critical control points.
    Now, that, to me, is--when we talk about a HACCP, there has 
to be a plan. There has to be a plan for preventing salmonella. 
And they are saying there were no critical control points. Now, 
an obvious critical control point would be the roaster, because 
the roaster can kill the salmonella.
    So, most manufacturers would very much see the peanut-
roasting stage as a critical control point. But this audit said 
to you there are no critical control points. This means PCA 
looked at its peanut manufacturing process and looked at all of 
its procedures, and it determined they didn't have any critical 
control points, not even for killing salmonella.
    Did you have a reaction when you saw that in the audit? Or 
did you even notice it? Don't you think that PCA should have 
designated killing salmonella at the roasting stage as a 
critical control point?
    Mr. Mackay. Firstly, I didn't see that particular audit. I 
think the audit I referenced, they--when we had gone through as 
part of our multistep process and looked at the third-party 
audit and looked at what AIB had given us in that audit, that 
they had quantified that they did have a food safety plan in 
place.
    And my belief is, and one of the recommendations here is, 
that we should codify that all plants should have a food safety 
plan in place, because, really, that is the key to prevention.
    Mr. Waxman. Well, we need to do that. You are absolutely 
right, we need to do that for the future.
    But, in this case, you were relying on PCA to have this 
third-party audit. They had a third-party auditor who, in my 
view, clearly had a conflict of interest. They wanted to give 
PCA an audit that PCA would like. In fact, they even gave PCA 
an award that they knew PCA would like, saying they were 
superior in their quality, even though we know that is not the 
case.
    So, if the audit was sent to you and said PCA didn't even 
have critical control points, that audit was telling you at 
Kellogg that PCA did not have a plan to effectively kill 
salmonella. Peanuts are a high-risk product for salmonella. So 
I am sure you are aware and all of you are aware that there 
needs to be a clear plan to make sure that salmonella is 
stopped.
    And I think that PCA was a bad company. They did bad 
things. And they were clearly ignorant because they wanted to 
be ignorant. But this indicates to me that Kellogg was pretty 
sloppy. You were just taking things for granted that PCA was 
going to do the right thing.
    They gave you a report of their inspector. They hired the 
cheapest inspector they could possibly get. I think they paid 
this inspector maybe $1,500. There are more thorough 
inspections that would have cost more money. The gold standard 
is a $20,000 inspection. Well, I guess everyone should realize 
they would have been better off spending $20,000 than going on 
the cheap, because it is $70 million, I believe, is the loss 
for all of this as a result of their going on the faith that 
everything was going to be OK, without making sure they could 
stop salmonella and stop this sort of thing from happening.
    Do you think that you were sloppy?
    Mr. Mackay. Congressman, I think we did everything we could 
do. When we looked at our multistep process, the third-party 
audit was a key part of it, but we did a risk-analysis 
assessment. We did actually take the product in and check it 
through our labs, and then we relied on a certificate of 
analysis.
    And, as I mentioned, you know, managing for an unethical, 
dishonest supplier who is prepared to actually put people's 
lives at risk is something, as we have stepped back and learned 
from this, means that we have already changed our process. And 
that is why we are here trying to work with you to say there 
are a number of things we believe that we need to do.
    Mr. Waxman. Well, let me tell you, there were some red 
flags that you should have noticed. I think you should have 
noticed that statement in the audit that said they didn't have 
the critical points. You didn't do what Nestle did; you didn't 
send your own people to the plant and inspect it. You relied on 
what ordinarily, I guess, would have been OK, but you didn't do 
that extra step that I hope you will now require to make sure 
that there is a process to prevent salmonella.
    And, in that regard, I must differ with you. I think 
Kellogg was sloppy. I think PCA was bad. And I think the whole 
thing has resulted in a tragedy that could have been prevented.
    Thank you, Mr. Chairman.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Dingell for questions, please. We are just starting 
votes, but let's get some questions in.
    Mr. Dingell. Ladies and gentlemen of the panel, I am going 
to ask a series of questions that will require only a ``yes'' 
or a ``no'' answer. We will start with you, Mr. Kanan, and go 
across to Mr. Mackay and then Ms. Isely.
    First, do your companies have best practices in place to 
ensure the safety of the products you receive from suppliers? 
Yes or no?
    Mr. Kanan. Yes.
    Mr. Dingell. Do you, Mr. Mackay?
    Mr. Mackay. Yes.
    Mr. Dingell. Ms. Isely?
    Ms. Isely. Yes.
    Mr. Dingell. All right. Do these best practices include on-
site audits of sanitary conditions and processing techniques of 
suppliers prior to and during your contractual relationship 
with them? Yes or no?
    Mr. Kanan. No.
    Mr. Mackay. Sometimes.
    Mr. Dingell. Sometimes.
    Ms. Isely?
    Ms. Isely. Sometimes.
    Mr. Kanan. Do I get to say ``sometimes,'' Mr. Dingell? That 
was a ``yes'' or a ``no.''
    Mr. Dingell. Yes, I have to do it that way because we have 
a very short amount of time.
    Ladies and gentlemen, again, did representatives from your 
companies inspect sanitary conditions and processing practices 
of Peanut Company of America prior to your company contracting 
with that company as a supplier? Yes or no?
    Mr. Kanan. I am sorry, I have to hear your question again.
    Mr. Dingell. Did representatives from your companies 
inspect sanitary conditions and processing techniques of Peanut 
Company of America prior to contracting with PCA as a supplier? 
Yes or no?
    Mr. Kanan. No.
    Mr. Mackay. We relied on industry practice.
    Mr. Dingell. I am sorry?
    Mr. Mackay. We relied on industry practice. No.
    Mr. Dingell. OK.
    Ms. Isely?
    Ms. Isely. No.
    Mr. Dingell. Did representatives from your companies 
inspect sanitary conditions and processing techniques of PCA 
while it was contracted as a supplier of peanut products to 
your companies?
    Mr. Kanan. I am just having a hard time hearing you.
    Mr. Dingell. I am doing my best. Did representatives from 
your companies inspect sanitary conditions and processing 
techniques from PCA while it was contracted as a supplier of 
peanut products to your companies?
    Mr. Kanan. We rely on industry standards, as well. So, no.
    Mr. Mackay. Likewise, we relied on industry standards and 
certificate of analysis.
    Mr. Dingell. Ms. Isely?
    Ms. Isely. We also relied upon industry standards. And, no, 
we did not inspect.
    Mr. Dingell. Now, prior to the outbreak of salmonella 
caused by PCA's products, were your companies aware of the 
unsanitary conditions present in PCA's processing facilities?
    Mr. Kanan. No.
    Mr. Mackay. No, we were not.
    Ms. Isely. No, we were not informed.
    Mr. Dingell. So what, in effect, you did was to rely on 
Food and Drug Administration's inspections and on industry 
practices to see to it, essentially, that you got safe 
products, and you were taken advantage of. Is that not so?
    Mr. Kanan. That is not so. We required specification 
sheets. We believe the FDA was inspecting it and they were 
doing their jobs. We required continuing pure food guarantees. 
So I would have to disagree with you on that.
    Mr. Dingell. Mr. Mackay?
    Mr. Mackay. No. I think as we have talked, third-party 
audits, certificates of analysis--we had an unethical and 
dishonest supplier. I am perfectly unclear as to how you manage 
for someone who is prepared to put consumers at risk.
    Mr. Dingell. All right.
    Ms. Isely?
    Ms. Isely. Mr. Dingell, was the question, did we feel that 
we were taken advantage of?
    Mr. Dingell. You were taken advantage of by a bunch of 
sharpshooters who didn't do a decent job.
    Ms. Isely. Yes.
    Mr. Dingell. And you relied on Food and Drug, and you 
relied on industry practices to see to it that you were safe. I 
don't find fault in you in that. I think you are entitled to do 
it. But I think you have found yourself in a bad position 
because the law did not provide you and the rest of industry 
and consumers the protections they needed.
    Now, would an up-to-date registry of all food facilities 
operating in the U.S. or importing food in the United States 
have helped FDA to identify and respond more quickly to a 
salmonella outbreak caused by PCA's products? Yes or no?
    Mr. Kanan. Sir, every time you speak, I seem to get 
interference. Was your question the required registration of 
facilities?
    Mr. Dingell. Up-to-date registration of all facilities.
    Mr. Kanan. Yes, absolutely.
    Mr. Dingell. Mr. Mackay?
    Mr. Mackay. All facilities should be registered.
    Mr. Dingell. Ms. Isely?
    Ms. Isely. Yes.
    Mr. Dingell. Now, I believe food processors should have to 
notify the FDA when they begin producing products that they 
have not previously registered. Do you agree? In other words, 
that is a part of having an up-to-date registry of processors 
and the state of the processing that comes into your plants.
    Mr. Kanan. The way I understand your question is I believe 
that every food facility should be registered in the country--
--
    Mr. Dingell. And it ought to be registered for all of the 
products that they ship?
    Mr. Kanan. That is correct.
    Mr. Dingell. Mr. Mackay?
    Mr. Mackay. Well, I am not sure the system actually exists, 
so I am not sure you can rely----
    Mr. Dingell. It doesn't exist, but I am asking whether you 
think that that would be a protection to you.
    Mr. Mackay. Well, at the moment we wouldn't know whether a 
plant was registered or not, because I don't think it is 
mandatory.
    Mr. Dingell. Ms. Isely?
    Ms. Isely. Yes, we would support it, because we believe it 
would help protect small businesses like ours, particularly if 
there was a way to communicate whether or not people were in 
compliance.
    Mr. Dingell. Do you believe that Food and Drug has the 
resources and the ability to carry out its responsibilities in 
ensuring that products reaching your places of business and 
arriving ultimately at the consumers' doorstep are safe? Yes or 
no?
    Mr. Kanan. Do I believe they have the resources, is the 
question?
    Mr. Dingell. Yes.
    Mr. Kanan. I think they have the resources. They just need 
to refocus.
    Mr. Dingell. The question is, do they have them? Yes or no?
    Mr. Kanan. I believe I answered your question.
    Mr. Dingell. I am sorry?
    Mr. Kanan. I believe I answered your question.
    Mr. Dingell. I would just like you to tell me yes or no; do 
they have the resources to do the job or not? Yes or no?
    Mr. Kanan. Yes.
    Mr. Dingell. You think they do?
    Mr. Mackay. No, I don't believe they do.
    Mr. Dingell. I am sorry?
    Mr. Mackay. No, I do not believe they do. I think that is 
one of the reasons why we are here today.
    Mr. Dingell. Ms. Isely?
    Ms. Isely. We do not believe that they have the resources 
necessary.
    Mr. Dingell. Now, would better trace-back capabilities have 
helped FDA to mitigate or to prevent this salmonella outbreak?
    Mr. Kanan. Yes.
    Mr. Dingell. Mr. Mackay?
    Mr. Mackay. It is a difficult one. I believe they could 
have.
    Mr. Dingell. OK.
    Ms. Isely?
    Ms. Isely. Yes.
    Mr. Dingell. Now, should testing on food products and 
examination and visits and investigation of plants that are 
shipping products in interstate commerce be subject to safety 
requirements and be performed only by a laboratory accredited 
by FDA? Yes or no?
    Mr. Kanan. Yes.
    Mr. Dingell. Yes or no?
    Mr. Mackay. Yes, I believe labs should be accredited by the 
FDA.
    Mr. Dingell. Ms. Isely?
    Ms. Isely. Yes.
    Mr. Dingell. Could this crisis have been mitigated if 
testing laboratories had been required to send their testing 
results to FDA?
    Mr. Kanan. No.
    Mr. Dingell. Mr. Mackay?
    Mr. Mackay. No. I think it is impossible to manage for an 
unethical and dishonest supplier.
    Mr. Dingell. Ms. Isely?
    Ms. Isely. It is difficult to answer the question. I don't 
believe that it would unless there was some form of 
communication to businesses that may be in receipt of products 
that had tested positive.
    Mr. Dingell. So you all three are of the view that the FDA 
does not need to receive the results of the investigation of 
the testing laboratories. Is that correct?
    Mr. Kanan. No, that is not true, because that was not your 
question.
    Mr. Dingell. OK. Should FDA have the authority to issue 
mandatory recalls of tainted foods?
    Mr. Kanan. Yes, but I have a comment on that, if I may.
    Mr. Dingell. I don't have time.
    Mr. Mackay?
    Mr. Mackay. Yes, we would fully support that.
    Mr. Dingell. Ms. Isely?
    Ms. Isely. Yes, we support that.
    Mr. Dingell. Now, we have agreed that the Food and Drug 
does not have the resources to do the job. Do your companies 
support or oppose mandating registration fees with which to 
fund increased inspections by FDA? Starting with you, Mr. 
Kanan.
    Mr. Kanan. You are calling me here to ask my opinions, and 
I don't feel like I am able to--am I here for an opinion or for 
a yes-or-no answer?
    Mr. Dingell. I just want to hear, do you agree that they 
should have or they should not have?
    Mr. Kanan. I will have you ask me that question again.
    Mr. Dingell. I am sorry?
    Mr. Kanan. I need to have that question again.
    Mr. Dingell. Do your companies support or oppose mandating 
registration fees with which to fund increased inspections by 
FDA?
    Mr. Kanan. We would not be opposed.
    Mr. Dingell. Mr. Mackay?
    Mr. Mackay. We would support coming up with the appropriate 
way to improve the U.S. food safety system and finding a way to 
fund it, and I think industry would support that. But a lot 
more discussion would need to take place as to exactly what 
that might mean.
    Mr. Dingell. Thank you.
    Ms. Isely?
    Ms. Isely. I think that we would be in support of it. And I 
agree with Mr. Mackay's comments, that we have to investigate 
it, particularly to look at its impact on small businesses.
    Mr. Dingell. Thank you, ladies and gentlemen.
    Thanks, Mr. Chairman.
    Mr. Stupak. Thank you, Mr. Dingell.
    Ms. DeGette, for questions. We have 4 minutes, if others 
want to go vote.
    Ms. DeGette. I just have a couple of questions because I 
can't come back, and I appreciate your indulgence.
    I would like to ask you, Mr. Kanan, do you support the nine 
principles that Mr. Mackay said that we should adopt to improve 
our food safety system in this country?
    Mr. Kanan. From what I heard, Ms. DeGette, I do support it 
very much.
    Ms. DeGette. Thank you.
    Ms. Isely?
    Ms. Isely. Yes, we support that.
    Ms. DeGette. And I want to ask both of you--I want to start 
with Mr. Kanan. Have the sales of your company suffered as a 
result of being tied to PCA?
    Mr. Kanan. We haven't fully had a chance to analyze it yet.
    Ms. DeGette. What about you, Ms. Isely?
    Ms. Isely. I would say that we have not. The second that 
there was any possible association or problem, we immediately 
pulled the product because we were concerned for the health and 
welfare of our customers.
    Ms. DeGette. Do you think the confidence of your customers 
would be increased if we improved all of these food safety 
standards that we have been talking about?
    Ms. Isely. Oh, absolutely.
    Ms. DeGette. What about you, Mr. Kanan?
    Mr. Kanan. Yes, absolutely.
    Ms. DeGette. What about you, Mr. Mackay?
    Mr. Mackay. Yes, absolutely. I think anything we can do to 
strengthen confidence in the food safety system in the U.S. is 
going to be worth doing.
    Ms. DeGette. And let me start with you, Mr. Kanan. Now, we 
are hoping and we are intending to pass comprehensive food 
safety legislation this year. But, barring that, you have a 
financial interest in your company in improving the safety of 
the food that you receive. Are you doing that?
    Mr. Kanan. Are we----
    Ms. DeGette. Are you instituting practices that will 
improve the oversight of the----
    Mr. Kanan. Yes, we are.
    Ms. DeGette. And what about you, Ms. Isely?
    Ms. Isely. Yes, we are.
    Ms. DeGette. Can you delineate for me some of the specific 
things that you are doing?
    Ms. Isely. On the food side of our business, we have 
started a quality questionnaire that is in accordance with some 
of the Grocery Manufacturers Association's food manufacturing 
practices to do audits and make sure that any of our vendors 
are following those good manufacturing practices.
    We are also, particularly in respect to the peanut 
products, roasted peanuts that we receive, we are testing for 
salmonella and requiring a certificate of analysis that is free 
of salmonella.
    Ms. DeGette. And do you think you might expand that for 
other types of at-risk products?
    Ms. Isely. Yes.
    Ms. DeGette. Now, you said you have how many suppliers?
    Ms. Isely. We have 1,300 suppliers.
    Ms. DeGette. 1,300 suppliers. And what were your gross 
revenues last year?
    Ms. Isely. Our gross revenues last year were close to $200 
million.
    Ms. DeGette. $200 million. Now, do you have the financial 
ability to go out and inspect all of those 1,300 suppliers?
    Ms. Isely. No, we do not.
    Ms. DeGette. And so what percentage of those do you think 
you can inspect?
    Ms. Isely. What percentage of those?
    Ms. DeGette. Yes, because you said you are inspecting some 
meat suppliers and others.
    Ms. Isely. Yes, we do. We inspect our meat suppliers that 
make our animal supplies for humane treatment of animals, cage-
free, range, grass-fed, access to pasture----
    Ms. DeGette. Right, I understand that. Do you think it 
would be worthwhile, for business reasons and obviously your 
consumers' health, to expand that to inspections in some of the 
more at-risk areas like peanuts?
    Ms. Isely. We would like to see that in the food supply 
arena that the government systems that you are discussing 
putting in place, that they work. If you are asking in the 
interim period what is our intent, yes, we intend to be more 
vigilant. I don't know what percentage we will be able to 
visit.
    Ms. DeGette. OK. Thank you.
    Thank you, Mr. Chairman.
    Mr. Stupak. Thanks, Ms. DeGette.
    Our time is up and for votes, too. So I guess we better 
hustle to the floor. We are going to recess till about 12:15. 
We have three votes on the floor. If we get back here at 12:15 
promptly, we can finish up this panel and finish up this 
hearing before the next series of votes.
    So we will stand in recess until 12:15.
    [Recess.]
    Mr. Stupak. I am going to call the committee back to order.
    Before questions from Ms. Sutton, let me just say that Mr. 
Walden asked that we put this March 11, 2009, letter to Frank 
Torti, Acting Commissioner, concerning the salmonella outbreak, 
by Mr. Barton, and Mr. Walden had signed it. Without objection, 
it will be made a part of the record.
    [The information was unavailable at the time of printing.]
    Mr. Stupak. Next, turn to Ms. Sutton for questions, please. 
Ms. Sutton for 5 minutes.
    Ms. Sutton. Thank you, Mr. Chairman.
    I have several questions, but I would like to begin with 
Mr. Kanan. I know that when you answered the question about 
supporting mandatory recall authority for the FDA that you 
wanted to say something in addition to the fact that you all 
support that. So I am going to give you this opportunity.
    Mr. Kanan. Thank you, Congresswoman Sutton.
    And, you know, I have a special feeling for you because a 
lot of my employees live in your district. So you can imagine 
how much this has affected all of us. So thank you for that 
question.
    I do support a mandatory recall, but I wanted to express 
my, at least, concern or opinion that, if there was a mandatory 
recall by the FDA, would it have prevented another manufacturer 
or owner of a company like myself from doing what I did, in 
getting out 3 days in front of doing a recall on a presumptive 
positive on an open container of peanut butter? Would there 
have been another business owner like me that perhaps may have 
said, ``You know what, let's just wait for the FDA to do it, 
they will get their results on Monday, it is their 
responsibility,'' and will everybody do that? Now, I don't 
think I would. I still would have done it. But I am wondering--
and I just want to ask this to you all--would that prevent 
anybody from doing an earlier recall?
    Ms. Sutton. Thank you, Mr. Kanan. And I appreciate that you 
answered that it would not have affected your decision to do 
it, because that is what? The responsible thing to do.
    Mr. Kanan. Right.
    Ms. Sutton. So I appreciate you bringing up that point 
because it may mean that we have to do additional action to 
make sure that those who fail to do it, just because the FDA 
has that authority, you know, maybe there is some more 
punishment that needs to be put in place. Would you agree with 
that?
    Mr. Kanan. Correct, I would.
    Ms. Sutton. I often hear in this committee and in related 
hearings that one of the reasons that the people are concerned 
about requiring test results to be reported to the FDA--first 
of all, do you all agree that positive test results should have 
to be reported mandatorily to the FDA?
    Mr. Kanan?
    Mr. Kanan. It sounds like that would be a very good idea, 
depending on the specifics.
    Ms. Sutton. OK.
    Mr. Mackay?
    Mr. Mackay. Positive finished food testing should be 
reported to the FDA.
    Ms. Sutton. And it should be mandatory that it is done? It 
is not just ``should be'' as in a voluntary nature, but it 
should be mandatory that they have to report positive results, 
correct?
    Mr. Mackay. However it is done, I believe that finished 
food testing positives should be reported to the FDA. It is 
also true today that it is law that, if it is in commerce, you 
have to report it, in any event. But I do support that.
    Ms. Sutton. Well, I disagree with the assessment of what 
the status of the law is today, based on some other testimony 
here.
    Ms. Isely, do you also agree that positive results need to 
be reported to the FDA and that we need to mandate that that is 
done?
    Ms. Isely. We absolutely agree with that. Our desire is 
that small businesses like ours can make decisions based on 
those tests and can have information that they need to make the 
decisions on what vendors they buy from.
    Ms. Sutton. OK. And the reason why I even bring up that 
subject--it is actually related to my first point with Mr. 
Kanan--is that I often hear from people in these hearings that 
we can't require the reporting of testing to the FDA, for fear 
that people then won't test. And I guess my response to that, 
sort of similar to the whole mandatory recall authority, is, 
then we need to take further action to make sure that they are 
required to test and provide some sort of accountability for 
the failure to do so. So, you know, this is a big conundrum.
    And, Mr. Mackay, if I could just shift a little bit over to 
you, because I am struck by some of the testimony you have 
given here. You talked about that high-risk food, that it is 
your belief that the FDA should do an annual audit. Is that 
correct?
    Mr. Mackay. That is correct, yes.
    Ms. Sutton. OK. And you also testified that sometimes you 
do your own independent audits at Kellogg and sometimes you do 
not, because you have so many products. Is that correct? Was 
that your testimony?
    Mr. Mackay. Within the context of our own facilities, we do 
environmental tests, and we have a food safety plan across all 
of them. I was referring to, when we talk about the ingredients 
or suppliers, given that there are 3,000 of those, we have 
relied on industry practice, the third parties and a multistep 
process.
    Ms. Sutton. OK. But I am just asking you the question 
then--so you said that sometimes you do a third-party, 
independent audit. Sometimes, though, you send out someone from 
Kellogg, correct, to do the audit?
    Mr. Mackay. That is correct, yes.
    Ms. Sutton. OK. And you think that the FDA should be 
responsible for doing the high-risk audits, but why don't you 
think that it would be a good practice for Kellogg--because 
peanuts, obviously high-risk product--for Kellogg to also make 
that their standard, that if you are dealing with a high-risk 
ingredient, that you wouldn't do your own audit?
    Mr. Mackay. Congresswoman, it is really a practicality 
difference. For example, we have undertaken audits of all of 
the peanut and peanut paste suppliers going forward, and so has 
almost every other company that uses peanut-based products.
    The implication has been that those companies are running 
so many audits for companies, they actually can't produce the 
product we all want. So, if we could get great standards, if we 
could have an FDA system where on high-risk plants they are 
actually doing an inspection that we can all rely on, it would 
be better for everyone. Because then they can actually--these 
audits, the comprehensive ones, can take a fair amount of time, 
and rather than duplicate those by hundreds of thousands of 
companies, if there is a set standard and an FDA audit of high-
risk facilities, we should, I believe, be able to rely on that.
    Ms. Sutton. OK.
    I would also just like to talk a little bit about that 
third-party audit. And you made a reference to the entity that 
conducted that third-party audit. And is that an entity that 
you use a lot?
    Mr. Mackay. If you are referring to AIB----
    Ms. Sutton. Yes.
    Mr. Mackay. I think AIB--and third-party audits, in 
general, are broad across the industry. I think AIB is probably 
the largest auditor in the U.S.
    Ms. Sutton. My question is, do you use them a lot?
    Mr. Mackay. I can't tell you exactly how many audits we use 
from them, but we would use them on a number of our raw 
material supplies, yes.
    Ms. Sutton. Would you please provide that information to me 
after the hearing?
    Mr. Mackay. Yes, I am sure we can get that.
    Ms. Sutton. OK. And, in light of all the things that have 
happened, are you still relying on AIB audits? After all of the 
information that has been presented here today and in the past 
few months that has come out, are you still relying on AIB 
audits?
    Mr. Mackay. You know, if you look at the AIB audit, they 
actually did find the problems. The issue wasn't with the AIB 
audit. It was with the fact that PCA actually acted in a 
dishonest and unethical way. The audit by AIB identified the 
problems, and PCA did not act upon them.
    Ms. Sutton. Well, Mr. Mackay, I would suggest that some of 
the evidence or the information that has been presented here 
today creates great concern about the coziness of these third-
party, so-called ``independent'' audits and the results.
    And so, part of my question, again, was just whether or not 
you continue to rely on the audits by AIB.
    Mr. Mackay. Well, subsequent to this unfortunate event, we 
have undertaken with high-risk suppliers to conduct our own 
audits.
    Ms. Sutton. Thank you.
    Thank you, and I yield back.
    Mr. Stupak. Thank you.
    Mr. Braley, for questions, please.
    Mr. Braley. Mr. Chairman, I want to focus on the costs of 
inadequate food safety inspections.
    And I will start with you, Mr. Mackay. There are press 
reports that the peanut industry could lose as much as a 
billion dollars as a result of this salmonella outbreak. And 
that is a lot of money, but what strikes me is how little money 
it would have taken to prevent all this from happening.
    We know that the inspections didn't work when they were 
conducted by AIB, the third-party auditor that PCA hired. And 
when committee staff interviewed AIB officials, they told us 
that those audits were standard good manufacturing practices 
audits, which are the firm's most basic audits that cost about 
$1,000. But AIB also told the committee staff that they offer 
more rigorous audits, which they call the gold standard audit, 
that is much more intensive and costs in the range of $20,000 
to $30,000.
    So, Mr. Kanan, let me start with you. Did your firm ever 
consider acquiring a gold standard audit from AIB?
    Mr. Kanan. We, every year, have done AIB with the good 
manufacturing practices one. And we have not--nor did I 
actually know about this gold standard $20,000 audit.
    Mr. Braley. Mr. Mackay, has Kellogg ever used a gold 
standard audit from AIB?
    Mr. Mackay. I can't--I don't know whether we have. I can 
tell you that, within the context of our own facilities, we are 
doing what you would term ``gold standard'' audits.
    Mr. Braley. Ms. Isely, has your firm ever used a gold 
standard audit from AIB?
    Ms. Isely. Mr. Braley, I appreciate the question. We are a 
very small retail business----
    Mr. Braley. Can you just answer the question, please? I 
don't have much time.
    Ms. Isely. No, we did not.
    Mr. Braley. All right.
    Another option that was available to all of you--and I 
think you alluded to this, Mr. Mackay--is paying your own audit 
staff to conduct an audit. And earlier in the hearing, we 
learned that another company, Nestle USA, did its own audit of 
PCA rather than using a third-party auditor hired by PCA. 
Nestle's audits uncovered serious deficiencies, such as rodent 
infestation and inadequate pathogen monitoring. And, as a 
result, they refused to do business with PCA.
    Do any of you know how much Nestle paid to conduct its own 
audit of PCA? Just answer ``yes'' or ``no.''
    Mr. Kanan. No.
    Mr. Mackay. No, but I would reflect that that audit was 
done in 2002. And audits, by default, are at-a-point-in-time 
inspections.
    Mr. Braley. Well, we all know that things go up over time 
because of inflation. But we are talking about a billion-dollar 
impact on one segment of the food industry. And the numbers we 
are talking about, in the thousand-dollar range, seem fairly 
small by comparison.
    Well, we asked Nestle, and here is what they said. They 
told us that they pay cost to their audits that they conduct. 
And counting the employees' salaries, travel expenses, and 
other costs, they estimated that their audits of PCA cost 
$1,800, which seems like nothing compared to the alternative. 
And both of those audits took 1 day to conduct.
    Mr. Mackay, can you tell us, based on current figures, how 
much Kellogg calculates that this problem has cost it?
    Mr. Mackay. Currently, our estimation is between $65 
million and $70 million.
    Mr. Braley. Mr. Kanan, do you have any estimate of what 
this has cost your company?
    Mr. Kanan. It is around a half a million dollars.
    Mr. Braley. Ms. Isely?
    Ms. Isely. We do not have an estimate.
    Mr. Braley. So for approximately $1,800, each of your 
businesses might have discovered the disastrous conditions at 
PCA and avoided the million of dollars in recall costs and lost 
sales that you are incurring today, which seems like a very 
small investment in food safety up front and part of smart 
business practices.
    So let me ask you this. Mr. Mackay, does your company have 
plans to change its auditing practices going forward?
    Mr. Mackay. We have already changed, as a learning from 
this, with high-risk ingredients. We are now conducting our own 
audits.
    Mr. Braley. Mr. Kanan, what about your company?
    Mr. Kanan. Yes, we have already changed, as well. We want 
to do more audits because of this situation that happened with 
our high-risk suppliers, which we have determined.
    Mr. Braley. Ms. Isely?
    Ms. Isely. Yes, we have plans in place to change. Once 
again, we are a small retail chain. Where you say $1,800 is a 
small amount of money, it is not for a business of our size.
    Mr. Braley. Well, you also realize that one of the costs--
--
    Ms. Isely. And I agree that one of the primary issues for 
us is to ensure the health and safety of the people who buy 
food from us, and that is our primary concern.
    But I also want to give input into the committee that is 
realistic when you are talking about small chain retailers and 
what they can and cannot do. Because it would be a disservice 
to the committee to say that we will go to the point where we 
would be out of business in order to inspect the 1,300 vendors.
    Mr. Braley. Well, let's talk about that.
    Your company has $200 million in gross revenues, operates 
30 stores in three States and employs approximately 1,000 
people. Do you think it's worthwhile to risk the employment of 
those 1,000 employees by failing to take adequate safeguards up 
front and having the long-term costs risk bankruptcy for the 
company?
    Ms. Isely. No, we do not. But at the same time----
    Mr. Braley. I'm going to reclaim my time because I don't 
have any time left. I just want to close, Mr. Chairman, by 
pointing out that one of the reasons that I founded the 
Populist Caucus was to emphasize consumer protection and 
corporate responsibility. And I think it's important at this 
hearing to acknowledge that we need to reward companies like 
Nestle USA, who do the right thing and to set best corporate 
practices. They operate a facility in my district in Waverly, 
Iowa, and I would like the record to reflect that they are a 
good example of what you do when you do things right.
    And I yield back.
    Mr. Stupak. Thank you, Mr. Braley.
    Ms. Schakowsky for questions, please.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    First, I want to acknowledge that I think we're at the base 
of this problem. We're talking about a company that, as far as 
I am concerned, was headed by a murderer, somebody who knew 
that there was a problem and quite deliberately made a decision 
to send that product out.
    I don't know, Mr. Mackay, if you've been here before. I 
know the other two, for sure, haven't. But we have. We've been 
here before with food that has, if not killed, definitely made 
a lot of people ill--spinach and peppers--and every so often 
we're here again. And so I just want to acknowledge the 
responsibility that I feel as a Member of Congress, and our 
responsibility to act.
    But I also do want to take you up on what I have heard of 
your offer. None of us is absolved of some responsibility, and 
certainly, going forward, we have to be. And I did want to--
because we had a private conversation, Mr. Kanan, and I do want 
you to tell me about that conversation with Mr. Parnell at PCA.
    Mr. Kanan. Yes. I just wanted to clarify that.
    And, Mr. Stupak, you had in your opening statement that--I 
had said in my opening statement that I personally talked to 
Mr. Parnell and I had asked him, We're hearing rumors of 
salmonella--when the Minnesota Department of Agriculture called 
me--we're hearing rumors, they're testing it, and I want to 
know from you, have you had any other problems with salmonella, 
have you had any other complaints, have you had any problems in 
the past? And he personally told me on the phone, No.
    The e-mail you showed is actually 4 or 5 hours after that; 
that's when we started talking to him. And we said--that's when 
you hear about, Well, we're going to have to do the recall. And 
that's when he said, I think I'm going to go to church and 
pray.
    So we were very up on top of this with him. But when you 
have someone that's going to act illegal and criminal, I still 
am just so surprised, and I don't know, bewildered on how to 
handle somebody like that.
    Ms. Schakowsky. Well, let me just say, that's why I think 
we absolutely have to have the systems in place both at the 
FDA--but I wanted to talk to you about systems as well.
    Do you think that, as part of your own company's reporting 
to you, you ask for any positive test results from your 
suppliers? Let me just ask each of you if that is a feasible 
thing to do going forward.
    Mr. Kanan.
    Mr. Kanan. Yes, that's feasible to do.
    Ms. Schakowsky. Well, let me just get that, Mr. Mackay.
    Mr. Mackay. Anyone who provides us with raw materials, they 
would--normally, if they're being honest and ethical, give us a 
response by the third-party lab of the positive.
    Ms. Schakowsky. Do you request that? Is that routine?
    Mr. Mackay. We request that as part of the certificate of 
analysis, yes.
    Ms. Schakowsky. You do?
    Ms. Isely. Yes, it would be feasible to request it. Without 
the weight of the law behind it and in a company that is bent 
on malfeasance, those can be not given or they can also be 
fabricated.
    Ms. Schakowsky. If they're not given, would you not feel 
that maybe this is not a company to do business with?
    Ms. Isely. I think what I was referring to is--I believe 
the question you asked, should they be sending you--if they 
were positive.
    Ms. Schakowsky. Actually I'm asking, should you be asking 
for that?
    Ms. Isely. Yes. We can--we did ask for their test results 
from the Plainview, Texas, plant. And yes, we do request that.
    My point was that our requesting it does not mean that they 
will necessarily provide us with the information if they have 
it, because there's no weight of law behind it. And 
additionally, if a company is bent on malfeasance, they can 
fabricate the test results and show you a negative result.
    Mr. Stupak. If I may, I don't mean to interrupt here, but, 
Ms. Isely, you are under oath. And you testified earlier that 
you never even asked for a certificate of analysis. How can you 
say you asked those questions at----
    Ms. Isely. Mr. Chairman, we asked it after--when we were 
talking to the Plainview, Texas, plant.
    Mr. Stupak. After the recall?
    Ms. Isely. After the recall, yes, sir.
    Mr. Stupak. Oh, not before. She was asking about before.
    Ms. Schakowsky. I was. That it be part of your routine 
inquiry as business owners to ask for the test results in a 
certificate of analysis.
    Mr. Mackay. And can I just be clear? Because we get that on 
the certificate of analysis.
    We have not, I don't believe, currently requested, if a 
supplier we're dealing with had any positives, that they inform 
us with those--even whether they're for us or someone else.
    And I think earlier there was a question, should that be 
mandated to be given to the FDA? And I would support that.
    Ms. Schakowsky. I'm not talking about the FDA now.
    Mr. Mackay. I'm with you. I just think I may have not 
answered the question appropriately.
    Ms. Schakowsky. So--let me understand then. You did ask for 
that information or you did not?
    Mr. Mackay. We ask for the information on anything that is 
sent to us. We--I don't believe we've asked for it more broadly 
to say if any supplier that we deal with had a positive for 
anyone else. I would have to check that information.
    So, in other words, anything we get that's coming to a 
Kellogg facility, we have a certificate of analysis, and we get 
that information.
    In the case of PCA, it appears that they may have 
manipulated that information. But I would have to check whether 
or not we asked for it, if it's for someone else and just 
happens to be a positive.
    Ms. Schakowsky. Did you ask for PCA to disclose positive 
results before the outbreak? Had you ever asked them previous 
positives?
    Mr. Mackay. As part of the independent third-party audit 
and the risk analysis that we go through with a supplier----
    Ms. Schakowsky. Yes.
    Mr. Mackay [continuing]. That's all part of the 
questioning. And typically the third-party auditor will 
actually do that sort of evaluation; and in fact, I think AIB 
did identify some issues. And I think the issue really at the 
end of the day was, PCA did not take the corrective actions.
    Ms. Schakowsky. And you didn't make sure that they did?
    Mr. Mackay. I believe we did everything we could. But, you 
know, I may be getting into an area where I don't have actually 
the clarity of data here.
    Ms. Schakowsky. OK.
    I know I'm over time. I thank you, Mr. Chairman for 
indulging me.
    Mr. Stupak. Mr. Sullivan for questions, please.
    Mr. Sullivan. Thank you, Mr. Chairman. I want to thank the 
panel for being here. This question is for Mr. Kanan and Mr. 
Mackay and, I guess, all panelists.
    Have you heard of the Global Food Safety Initiative and the 
audits required to be GFSI certified? GFSI audits do analyze 
HACCP plants in greater depth, require a greater length of time 
to complete, are more expansive and give a more accurate 
evaluation of a company's food safety controls.
    Would you be willing to, one, be subject to a GFSI audit? 
And two, require them for suppliers of high-risk ingredients? 
And I guess we will just go----
    Mr. Kanan. Congressman Sullivan, I've heard of it. I don't 
know the details much about it.
    I would most willingly want to look at it and be a part of 
it. And as long as it's something that we could--that would be 
feasible for us, we absolutely would be a part of it. And if it 
was something feasible for our suppliers, we absolutely would 
like to be able to request that of our suppliers as well. That 
would be great.
    Mr. Mackay. Congressman, absolutely. It started in 2000, 
and we have been using that in all of our plants, manufacturing 
facilities, for about 3 years.
    As you look at--there are three reasons why we think GFSI 
is a great standard; and whether we adopt that for the U.S. 
food safety system, or something equivalent, we think it's a 
great benchmark. The standards are accredited, the audit firms 
are accredited, the auditors are certified. And it's just a 
much more rigorous process.
    And I think there is a lot of discussion now with industry, 
even talking about how we take GFSI and potentially use it in 
areas like APEC. So I think that would be an excellent place 
for this committee to look because it actually does address 
many of the recommendations I've said, and they're already in 
place and formalized.
    Ms. Isely. We are unfamiliar with the document that you are 
referring to. We would be happy to take a look at it. As a 
retailer and not a manufacturer, I'm not sure if we would have 
the expertise to understand exactly all the requirements in it.
    Mr. Sullivan. OK. All right, I've got one more.
    The food production chain is very complicated and there are 
many players, including suppliers, processors, distributors and 
retailers. Should they have different responsibilities and 
controls for ensuring food safety?
    Mr. Kanan. Yes, I believe they all should have different 
responsibilities and different levels of it. But my personal 
belief is, it should start with the manufacturer or the one who 
is actually making the product, sealing it, boxing it, casing 
it. That is where I think the emphasis needs to be, is on that 
portion of it.
    I think there are things distributors can do and retailers 
can do in the supply chain to help. But the greatest emphasis 
has got to come on--with the manufacturer of the product.
    Mr. Mackay. I think the standards for manufacturers and 
suppliers should be uniform and consistent. And that's the only 
way we're going to ensure the safety of the food supply.
    When you talk to retailers and distributors, I think that's 
a different situation there. I think the focus, from their 
perspective, is more on traceability and how quickly they can 
react if there is a problem in the food system.
    But I think with the standards, good manufacturing 
practices, HACCP, et cetera, that really comes back to 
suppliers and manufacturers.
    Ms. Isely. We would agree with all the statements that have 
been made.
    Mr. Sullivan. Well, thank you very much.
    I yield back.
    Mr. Stupak. We will go a second round for those members who 
are here, because there are a couple questions I want to follow 
up on.
    Mr. Kanan, you mentioned the e-mail that I had in my 
opening statement. And when Mr. Parnell wrote back and said, 
I'm sure it is something we did, haven't heard anything yet, 
but we will let you know; did they get back with you?
    Mr. Kanan. Well, that's--I mean, after that, that's when we 
said, We're doing the recall. And then we had to talk to them 
the next day and over the weekend; and it was a constant----
    Mr. Stupak. Right. I recall you are the first company that 
started the recall on the peanut butter. Did you notify the FDA 
when you got this e-mail?
    Mr. Kanan. The FDA had already been a part of this whole 
process for the day. I can't remember the day of that e-mail, 
if that is the Friday----
    Mr. Stupak. January 7. Wednesday, January 7.
    Mr. Kanan. Wednesday. Yes, that was upon the first----
    Mr. Stupak. Right. Did you ever give them the e-mail?
    Mr. Kanan. I don't know if we did or not, to be honest with 
you, sir.
    Mr. Stupak. OK. You said to do independent testing now for 
food safety? You do food testing now of your peanut butter?
    Mr. Kanan. Yes. We are doing--with the new peanut butter 
suppliers, we are requiring a whole new set of standards for 
that as well.
    Mr. Stupak. But do you do testing over and above what your 
new suppliers give you?
    Mr. Kanan. I do not know if we have tested the peanut 
butter for salmonella again or not. But we're----
    Mr. Stupak. So you could be basically in the same position 
you are in right now?
    Mr. Kanan. No.
    Mr. Stupak. Hopefully, not a few years from now, like we 
have been. But why weren't you? If you are not doing 
independent testing, why wouldn't you just end up in the same 
situation if you are relying on third parties?
    Mr. Kanan. Well, no. I mean, we are--I want to make sure 
I'm answering you correctly.
    Mr. Stupak. Sure.
    Mr. Kanan. So you have to bear with me just for a moment.
    Mr. Stupak. A little bit. I can't give you a lot of time 
because we have 5 minutes.
    Mr. Kanan. We are doing our own testing, and we're 
reevaluating the suppliers. We're looking at their AIB audits.
    Mr. Stupak. You are doing your own testing. So you are 
dealing with peanut butter. The problem is salmonella. Do you 
test independently from your supplier for salmonella?
    Mr. Kanan. I don't know if we have yet or not.
    Mr. Stupak. OK. So technically we could be back to where we 
were 2 years from now. Hopefully not, but we could be 
underneath this scenario.
    If your company comes across--in your independent testing, 
if you come across a positive for salmonella, you've indicated 
PCA should have notified the FDA. How about your company? 
Should you then be responsible for notifying the FDA?
    Mr. Kanan. Oh, yes, absolutely. We absolutely would.
    Mr. Stupak. How about you Mr. Mackay? You do independent 
testing now. If you found positive tests for salmonella or E. 
coli on spinach or whatever it might be, do you think your 
company has a responsibility to notify the FDA?
    Mr. Mackay. Yes, I believe so. We have started as a 
learning on this from all high-risk ingredients, doing our own 
multitask audits.
    But, yes, I would agree that if you find in the finished 
food a positive test, the FDA should be notified.
    Mr. Stupak. How about you, Ms. Isely?
    Mr. Mackay. I beg your pardon?
    Mr. Stupak. I asked Ms. Isely the same question.
    Ms. Isely. Yes. We have started our own testing on the 
roasted peanuts. And we believe if there is a positive test, we 
should notify the FDA.
    Mr. Stupak. OK. In this PCA thing, it's my understanding--
and we read in your testimony that none of you hired PCA--or I 
am sorry, you hired PCA, but you didn't hire AIB. Is that 
correct, Mr. Kanan?
    Mr. Kanan. Well, we hire AIB for our own facilities.
    Mr. Stupak. OK. So how about for Georgia?
    Mr. Kanan. As far as requiring our supplier to have 
somebody?
    Mr. Stupak. Right.
    Mr. Kanan. I mean, we ask for their third-party audits.
    Mr. Stupak. So you use AIB or----
    Mr. Kanan. We don't specify currently who to use.
    Mr. Stupak. Mr. Mackay, how about you?
    Mr. Mackay. I think there are three or four auditors that 
we would be comfortable with companies and suppliers using, and 
AIB was one of them. Probably----
    Mr. Stupak. PCA picked them then?
    Mr. Mackay. PCA picked them, yes. They worked for PCA. They 
don't work for us.
    Mr. Stupak. Are you still comfortable using AIB?
    Mr. Mackay. You know, as I think we have looked at AIB, 
they actually identified the problems. The issue here is an 
unethical and dishonest company that actually ignored many of 
the findings that AIB highlighted to them.
    Mr. Stupak. But also, here, my understanding from listening 
to your testimony was, there were different things--like you 
asked AIB to do a GMP, good manufacturing practices. But you 
could have asked them to dig deeper, as I think Mr. Braley and 
others pointed out.
    It would have cost more money, right? It would have cost a 
higher test, like $20,000 to do a salmonella testing as opposed 
to just good manufacturing practices, correct?
    Mr. Mackay. Yes. Well, one of the learnings I think from 
this from our perspective is that with high-risk ingredients--
and we are now doing our own internal and more significant 
tests, which are more consistent with GFSI.
    Mr. Stupak. But before the salmonella outbreak, you could 
have asked PCA to--or AIB to do a more extensive testing for 
salmonella.
    Mr. Mackay. We could have. And I think you know I would say 
that what--we thought at the time we were using industry best 
practice. We have a multistep process including a third-party 
audit and the CofA and the risk analysis.
    Mr. Stupak. Sure. But Georgia plants----
    Mr. Mackay. Yes.
    Mr. Stupak. In 2007, Conagra--was it Peter Pan or Skippy 
peanut butter? Whatever it was, we had the same thing 2 years 
ago. Wouldn't that have put you on an alert to ask for more 
robust testing, not just of what's going on in the line, but 
actually the test results and do testing for salmonella?
    I mean, this is all in the same spot. Basically 18 months 
later we have the same thing.
    Mr. Mackay. Yes. It was our understanding, through the AIB 
audit, that they were doing environmental testing. And when you 
look at Conagra, environmental testing was really the key 
there, because the issue was----
    Mr. Stupak. Testing is different than food safety testing; 
is it not?
    Mr. Mackay. There are a combination. Environmental testing 
is something you do at the start of the process to try to 
mitigate against anything actually making it into the food. The 
final check is, you have a certificate of analysis on the final 
food to make sure there is no pathogen in the food before it's 
shipped to us.
    So it's a combination of both of those things that if they 
had been followed appropriately, we believe would have 
potentially mitigated against this.
    Mr. Stupak. I guess the part that bothers me--Kellogg's, 
you are a big, big corporation, many products. It unfortunately 
cost you a lot of money because of this recall. But yet you put 
PCA in the driver's seat. You tell them, Oh, use any one of 
these people; we rely on you.
    You don't do independent testing. But without you, there is 
no PCA. I mean, you are the guy who--you are the company that 
is the monetary giant here. You could control the suppliers 
better if you wanted to because if you are not buying their 
product, it's going to be harder for them to stay in business.
    I would think that a large corporation like yourself--you 
are all big corporations, actually--you would have more--you 
could have used your financial leverage to make sure some of 
these things we see now, in hindsight, could have been done to 
prevent the salmonella, especially since we had peanut butter 
salmonella as an item 2 years earlier.
    I'm baffled by that.
    Mr. Mackay. I think, in hindsight, you are right. We have 
changed our process and we are doing our own testing.
    I mentioned earlier a potential practicality issue here. 
When you look at the size of the supplier in the context of 
Kellogg, we bought, I think, $5 million to $10 million annually 
of product from this company. We probably spend in excess of, I 
think, $3 billion or $4 billion on raw materials. So it was a 
very small supplier.
    And the industry best practice is to use third-party 
audits. We did supplement that with a risk analysis, and we did 
mandate certificates of analysis. And unfortunately a company 
that is not honest and ethical can mitigate against even the 
best systems.
    Mr. Stupak. Yes. But my question was industry standard.
    When Nestle goes through and finds the problems--even Mrs. 
Field's cookies, we have documents in our binder there that 
they found it, and they're an even smaller company, with the 
PCA, and just said, Man, these are bad practices; we're not 
going to use them.
    I hope that's not the industry standard.
    Mr. Mackay. I'm not trying to be defensive.
    There are hundreds of companies involved here, so all of 
us, if you like, are partially at fault for potentially relying 
on a system that I'm hoping that Congress will work with 
industry to actually enhance and improve, because that's the 
way we're going to actually make our food system stronger.
    Mr. Stupak. Well, President Obama has put more money, or 
proposed more money for the Food and Drug Administration, about 
$1 billion more, about $200 million new money for food safety. 
But everyone tells us it's still not enough; they need at least 
$350 million per year for the next 3 years plus about an 18 
percent increase every year after that for another 5 years to 
get up to par for food and drug safety. That's why we have the 
global food safety bill that Mr. Dingell, Mr. Pallone and 
myself have written.
    Would you be in favor then of those registration fees? Not 
only do you have to register a plant like PCA, whether you are 
in Plainview, Texas, or in Georgia, but a registration fee to 
be put on these companies so we can finance this rigorous 
inspection system we're all hoping for and wishing for so we 
stop the food-borne illnesses?
    Mr. Mackay. Yes. I think what I would say is, Kellogg--food 
safety is paramount to Kellogg.
    And--I think they are all reputable food companies, and I 
think the industry would embrace, how do we play an active role 
in ensuring that we can help, whatever the funding dynamics 
are, to ensure we do enhance the food safety system. I don't 
know exactly what that might mean. But I know that the industry 
would, and Kellogg would, certainly, be prepared to step up.
    Mr. Stupak. Including registration or inspection fees?
    Mr. Mackay. Whatever the final determination might be, 
whatever makes the most sense.
    Mr. Stupak. Thank you, Mr. Mackay.
    Mr. Walden for questions.
    Mr. Waxman. Thank you, Mr. Chairman.
    Mr. Mackay, let me go to you. How many suppliers does 
Kellogg's have?
    Mr. Mackay. We have 3,000 ingredients, about 1,000 
suppliers.
    Mr. Walden. One thousand suppliers, 3,000 ingredients. And 
you require inspections, audits, from all of those suppliers?
    Mr. Mackay. Yes. We have a multistep process that we use in 
actually accrediting every supplier, including a third-party 
audit, including an analysis of risk, including certificates of 
analysis.
    Mr. Walden. And have you worked with AIB? They're one of 
them, I think you said, that is one of the gold standards, 
right?
    Mr. Mackay. Well, they are one of three or four, as I 
understand it, accredited auditing firms in the U.S. that we 
have on our list as being acceptable to use by our suppliers to 
do the independent third-party audits.
    Mr. Walden. All right.
    Chairman Waxman stated that Kellogg's relied on procedures 
that are normally OK and did not, in this instance, take extra 
steps that he felt were necessary to catch or personally 
inspect PCA.
    Is it practical or cost effective to take these extra 
steps? I think that's one of the things I am struggling with 
is, where in the food chain, literally, is it most effective to 
step in? And I'm trying to figure out--I have a little 
company--or I have a number of them in my district and State 
that have been affected. They're food producers. They have had 
to do the recalls.
    I think the one out in Union, Oregon, Rock Creek Nut, that, 
you know, used some nuts and put them both in trail mix and 
chocolate clusters. I cannot imagine a company in that tiny 
little town to have the resources to go order inspections at 
PCA.
    How do we get to the point where, if you are the one 
producing the next step in the product development, you can 
count on what you get to be safe?
    Mr. Mackay. Yes. I think I'd refer--as I'm looking at the 
nine recommendations we made, each one of them actually builds 
on the other, so it's not like you can draw on one.
    But I think if I pulled it to the development of food 
safety plans for every food facility as being mandatory; we're 
hoping consistent manufacturer audit standards as being 
another--actually having the FDA inspect what they would 
determine through the council as high-risk foods and/or 
ingredients, mandating that when they do those annual 
inspections, that if there are any test results within that 
facility, they're turned over to the FDA--I'm talking 
environmental now more than finished food. I think, in 
combination, all of those things, plus mandatory recall and 
traceability, are going to be required to actually improve the 
food safety system in the U.S.
    Mr. Walden. Because--I'm a little sympathetic toward Ms. 
Isely here because, as a retailer, I think it would be almost 
impossible--it's hard enough running your retail outlet, then 
to think that every product you get in you have to test or 
something like that.
    Somewhere upstream of that she should be able to know that 
when it comes to her store from your company or your company 
that it's safe. Otherwise you go next, what? To the parents, 
You have to test it before you eat it? I mean, at some point 
here it gets ridiculous.
    Mr. Mackay. Congressman, I agree. I think that's why we 
have a comprehensive overhaul of the current system. And I 
think the steps we've put forward--and I know a number of these 
have already been in what Congress is trying to pass--I think 
will make a significant difference in food safety in the U.S.
    Mr. Walden. So what stage in the production process would 
you say is most important? Which one has the greatest 
likelihood of detecting a problem? I mean, if we had to focus 
on here are the top two places you need to go, what's the 
order?
    Mr. Mackay. Well, I think you've got to break it down. The 
first one is, if we're buying ingredients, then you need a 
comprehensive system that ensures that those ingredients when 
they come into our plant are actually safe. Now to include the 
last step on that is the certificate of analysis. In this case, 
we had----
    Mr. Walden. You had one----
    Mr. Mackay. We had those. But it's very hard to manage for 
an unethical company.
    Once we have the raw material and assuming that it is safe, 
then within the manufacturing process, environmental testing at 
the very beginning of that and all the way through food safety 
plans, whether it's HACCP or an equivalent, is absolutely 
essential because if you detect something early on, you can 
avoid its getting into the finished food.
    Mr. Walden. Right.
    Mr. Mackay. That's absolutely critical. That's why 
companies do--and GFSI, these are audits that are so important.
    Once you have the plant running, checking for environmental 
is really critical to make sure you can rectify any issues that 
might happen.
    Mr. Walden. And I have a question for both you and Mr. 
Kanan.
    You tested your products that you got from--the ingredients 
which came from PCA at some point after this was known, right?
    Mr. Mackay. We relied----
    Mr. Walden. The recalled product.
    Mr. Mackay. Oh, on the recalled products?
    Mr. Walden. Right.
    Mr. Mackay. I think the FDA has done all sorts of tests.
    In the facility where the sandwich crackers were made--for 
example, we did over--last year, over 300-plus environmental 
tests, all negative. The FDA has come and done massive amounts 
of tests, all negative.
    Mr. Kanan. All the tests we did on that, Congressman 
Walden, all turned up negative.
    But the interesting thing I'd like to talk about real 
quick: When that open container was tested, they took 13 scoops 
of peanut butter and tested each one differently, only 4 of the 
13 turned up positive.
    All of the products we tested were negative. I never heard 
what FDA found out about----
    Mr. Walden. Did you ask?
    Mr. Kanan. Yes.
    Mr. Walden. And they won't reveal it or what?
    Mr. Kanan. They just haven't gotten back with us.
    Mr. Walden. You don't know the answer to that?
    The other question that I wanted to get to, and then I will 
let you finish up, because I will forget it otherwise. You said 
in your testimony, when you first got wind that there was a 
problem, that you asked FDA to test the product and they 
didn't. Why, did they tell you?
    Mr. Kanan. I was baffled at that, honestly. I don't know 
what their procedures or policies are. I was asking them, 
please take it and test it because I want to know.
    Mr. Walden. Sure.
    Mr. Kanan. If not, I'm going to do it anyway.
    Mr. Walden. Did they say that's your responsibility and not 
ours? Or did they have an answer?
    Mr. Kanan. They didn't have an answer.
    Mr. Walden. But then they came back?
    Mr. Kanan. They came back the next day. Maybe they didn't 
have--weren't instructed by their superiors at that point. I 
don't know. It didn't make sense to me, but I wasn't going to, 
you know, be questioning them at that point.
    Mr. Walden. Mr. Chairman, it would be a good follow-up I 
think some time with the FDA as to why they didn't do that. I 
mean, I would think that if you are a distributor or a 
producer, and you think you have a problem----
    Mr. Kanan. As a distributor, we obviously had the product 
right there.
    Mr. Stupak. The next day, didn't they come back?
    Mr. Kanan. The next day they came back.
    Mr. Walden. Only after they discovered it in another 
container, right? Or something like that?
    Mr. Kanan. I don't know why they didn't--why they didn't 
take it the first day versus the second day.
    Mr. Stupak. Did it the second day but not the first day; I 
know it was in your testimony.
    Did you ever find out the results of those?
    Mr. Kanan. Never did.
    Mr. Walden. That's the other issue. He hasn't been able to 
get the results back from the FDA, which seems odd.
    Mr. Kanan. But it's going to be interesting because most of 
that was negative. And I think it's--that's the thing about 
salmonella, finding that in peanut butter. It lives in pockets, 
and----
    Mr. Walden. That's what we've learned. And that's why I 
think so many of us were so offended when PCA got a positive, 
then they sent another sample out and got a negative and then 
said, Cut them loose.
    Mr. Kanan. Somebody earlier had said that PCA was ignorant. 
I think they were very smart and they knew exactly what they 
were doing to try to get around that system. They knew that 
they could probably reblend the peanut butter and retest it 
because, look, 4 out of 13 came back. Odds are you are going to 
get a negative.
    Mr. Walden. That's one of the great things on this 
committee, you learn a lot about things you never thought you 
would learn about. And that's one of them, that it's almost 
random in peanut butter whether you get a positive or a 
negative sample. That's why the law says, if you get a positive 
sample, you are done.
    You can go sample again and try to figure out what went 
wrong and where it is in the system, but you do not ship that.
    And we have the e-mail that indicated they--at least from 
my reading of it--knew pretty clearly what they were doing, and 
shipped out peanut butter once they got a negative after they 
had gotten a positive. And that's absolutely wrong.
    Mr. Kanan. To Mr. Mackay's point, how do you stop somebody 
from being crooked?
    Mr. Walden. And I guess--and then I will quit here because 
I have gone over my time. But that's what I'm struggling with.
    I don't want to overreact and regulate to the point where 
you can't produce food and then what do we do? Have it all 
imported, and we will have no idea what's in it; we know about 
that from our other hearings.
    So I want to get a balance here that works, that gives us 
as much security as we can in our food chain, but doesn't blow 
up our whole system because it has been working pretty well, 
frankly.
    I realize there are these issues we've dealt with, and 
that's where we're trying--I think we ought to home in, be 
careful.
    Your recommendations, Mr. Mackay, are most helpful and all 
of your input has been most helpful for me. We've got a 
separate bill that's bipartisan that would address this, I 
think, in a constructive way, too; and hopefully we can get 
together on a common strategy here.
    So thank you, Mr. Chairman. And thank you to our witnesses.
    Mr. Stupak. Well, thanks. I guess one thing--how to get to 
it--I think there's a responsibility of food processors to ask 
the question. It's my understanding from the testimony we've 
gone through here for the last 3, 4 hours, and no one asked the 
question, did you ever have a positive? No one asked the 
question of PCA.
    Mr. Mackay, that one document you showed us, the 
certificate of analysis which says no salmonella, in fact that 
lot did have a positive salmonella. I'm not saying to question 
every COA, but I would think someone would ask the question.
    And the reason why you are here, and I don't want to 
confuse the record, like Ms. Isely and you, Mr. Kanan, you are 
processors; you are not just strictly retailers. So who has the 
ultimate or the final responsibility?
    Mr. Kanan. We're the distributor with this product. That's 
why I kept saying, it's got to be the manufacturer.
    Mr. Stupak. You get the peanut butter from PCA. You slap 
your name----
    Mr. Kanan. No. We didn't touch it. They put the label on. 
They sealed the case. We just bring it in.
    Mr. Stupak. It has your name on it. Don't you have some 
responsibility to make sure----
    Mr. Kanan. I didn't say we don't have any responsibility. 
In this case, I'm the distributor. And I really think the 
biggest point in common with the manufacturer, we've got to 
help the manufacturers make better products so retailers, like 
Ms. Isely, and distributors like myself and the thousands of--
--
    Mr. Stupak. I believe Ms. Isely still processes the peanut 
butter. The only problem that you had was in the peanut butter 
that you are grinding in your stores, right? Wasn't that it?
    Ms. Isely. That's not the only problem we had.
    Mr. Kanan. Retailers and the distributors in general, the 
biggest responsibility has got to come with the manufacturer.
    Mr. Stupak. Really.
    Mr. Kanan. It starts there and ends there. It's sealed and 
closed.
    Mr. Stupak. Don't you have some responsibility since you 
put your name on it, and you are the one who puts it in the----
    Mr. Kanan. I'm not saying I don't have that responsibility. 
But--yes, absolutely, but to help fix the system, Congressman, 
to help fix it, we've got to focus mainly on the manufacturer.
    Mr. Stupak. OK.
    Let me ask this question, Mr. Mackay, if I may. Has Kellogg 
ever told suppliers they do not need to do finished product 
testing and, instead, just need to do environmental testing at 
facilities? Have you told your suppliers, you don't have to do 
the finished product testing, just do your environmental 
testing?
    Mr. Mackay. I don't believe so, but I would think not. We 
can get you an absolute answer, because I don't want to put it 
on record and find that I'm wrong.
    But my belief would be that that would not be the case.
    Mr. Stupak. OK. We read it or we saw it in some document, 
and we're just trying to recall. We've gone through thousands 
of documents. We thought some directive in there, a comment 
made that you would just--don't worry about the final product; 
just do the environmental testing.
    Mr. Mackay. I don't believe so. But we can check.
    I would say, though, that if you have exhaustive 
environmental testing, and you have a food safety plan in place 
and you are following good manufacturing processes, that the 
probability of your having a problem in the final food is 
mitigated significantly.
    But--I would have to check that, Congressman, but I don't 
believe that would be the case.
    Mr. Stupak. If you would get back, I would like to see 
that. Because it bothers us if that is the situation because I 
think we've got all responsibility through the whole chain, 
from the grower all the way down to the person who puts it on 
the shelves, to make sure that food is safe.
    Mr. Mackay. Just to add to your comment, to your question, 
I think everyone has a responsibility in the chain. And I think 
the more comprehensive that we can make the food safety system 
in the U.S. through the supplier, through the manufacturer 
principally, the more likely we are to really improve the food 
safety in the U.S., which I believe is already very good. But 
it clearly can be improved.
    Mr. Stupak. Well, from where we sit, this is what, our 
fifteenth hearing in about 18 months or so, just on food safety 
alone. That's not even counting the drug hearings we've had on 
drug safety. And I guess we're just bothered by no standards 
and everyone's doing it a little differently.
    We have three witnesses here who are all trying to do the 
right thing. They have three different systems going. We need 
to have some uniformity so we know what to look for.
    And these audits, on tab 23 there, where Sam Lightsey gets 
notice in December there is going to be an audit. It will take 
place on March 23-24. I have got time to clean up the dead 
rodents; I have time to clean up the flies, the beetles, rodent 
droppings, the feathers, whatever it may be. And that must come 
to an end.
    I guess we're looking forward. I know you all gave us 
suggestions on what to do. We appreciate it. We appreciate you 
all trying to help out in this matter and for your testimony 
today. And I want to thank you for being here and thanks for 
putting up with our questions and answering the questions under 
oath to the best of your ability.
    And we look forward to some further answers. All members 
will have 10 days to submit additional questions for the 
record, so don't be surprised if we contact you and ask for 
additional information.
    And with that, I--that concludes our hearing. I want to 
thank once again all the witnesses, the members for their 
active participation. Thank you.
    Mr. Kanan. Thank you.
    [Whereupon, at 1:13 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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