Feb. 11 (Bloomberg) -- Peanut Corp. of America’s president refused to talk to U.S. lawmakers as an internal e-mail showed he looked for a way to turn raw peanuts “into money” after salmonella-tainted peanut butter was found.

The president of the closely held company, Stewart Parnell, feared losses tied to salmonella, according to e-mails released today at a House subcommittee hearing. Two executives of food testing labs told lawmakers that salmonella was found as early as 2006 at Peanut Corp.’s plant in Blakely, Georgia, and the company often asked for its products to be re-tested.

Parnell and plant manager Sammy Lightsey cited their right against self-incrimination and refused to answer lawmakers’ questions. The company is under criminal investigation after at least 600 people were sickened and nine died from salmonella traced to peanuts, peanut butter and peanut paste made at its Georgia plant. About 1,800 products using ingredients from Peanut Corp.’s plant have been recalled in the past month because of potential contamination.

“We appear to have a total systemic breakdown, with severe consequences for hundreds of victims, for which we need explanations,” said Representative Bart Stupak, a Michigan Democrat and chairman of the House Energy and Commerce Committee’s investigative subcommittee, at the hearing in Washington.

‘Virtually Unheard Of’

The FDA said last week that Peanut Corp., based in Lynchburg, Virginia, knew it was shipping tainted ingredients to hundreds of food manufacturers.

Charles Deibel, president of Deibel Laboratories Inc. in Lincolnwood, Illinois, told lawmakers today that while positive tests for salmonella aren’t uncommon, it’s “virtually unheard of” for a company to “disregard those results and place potentially contaminated products into the stream of commerce.”

Darlene Cowart, president of JLA USA, another testing company hired by Peanut Corp., told the committee that Peanut Corp. stopped sending her company work after JLA discovered evidence of salmonella in several peanut samples.

The subcommittee obtained several e-mails sent by Parnell. After some products tested positive for salmonella in one lab in August, no bacteria were found in re-testing and Parnell told Lightsey to “turn them loose.” On Jan. 19, the week after the company recalled bulk peanut butter and peanut paste made at its Georgia plant, he pleaded with an FDA official to let the company ship raw peanuts from the Georgia plant to the company’s Texas plant. A truckload had been shipped the previous week.

Peanuts ‘Into Money’

“Obviously we are not shipping any peanut butter products affected by the recall but desperately at least need to turn the Raw Peanuts on our floor into money,” according to the e-mail. “We have other raw peanuts on our floor that we would like to do the same with. … This is material that would be cooked/further processed by us in our Texas facility and tested afterwards as all our products are.”

Peanut Corp. shut its Texas factory, in Plainview, after tests of some products “indicated the possible presence of salmonella,” state health officials said yesterday. They don’t know if the bacteria match the salmonella typhimurium strain implicated in the outbreak that has spread to 44 states and Canada since mid-September, though they said they know of no tainted products from the Texas plant that reached consumers.

Blanching and Roasting

The FDA is inspecting the plant for the first time because its role in blanching and roasting peanuts didn’t make it a “high risk” target for contamination, said Michael Rogers, head of the agency’s Division of Field Investigations, in a phone interview yesterday. The facility was registered in 2006.

“FDA can and will learn from this outbreak and what we can do to better ensure the safety of our food supply moving forward,” Stephen Sundlof, director of the FDA’s Center for Food Safety and Applied Nutrition, told the subcommittee.

The agency faces mounting criticism from lawmakers over its oversight of food safety, as Americans have endured outbreaks caused by tainted spinach, lettuce, jalapenos, beef, pet food and peanut butter since 2006. Members of the House subcommittee said the recurring issues underscore the need for new FDA powers, including mandatory recalls and better access to company records.

“We must assure the public that the food on our grocery shelves is safe and what we put into our own mouths and those of our children, elderly patients and even our pets is safe,” said Representative Greg Walden, an Oregon Republican and ranking member of the subcommittee. “While Congress moves on legislation, our food safety agencies and food manufacturing firms can take immediate action to improve the production of safe food.”

Criminal Investigation

The Justice Department began a criminal investigation into Peanut Corp., and the U.S. Agriculture Department barred the company last week from doing business with the government for one year. Peanut Corp. has said it’s cooperating with regulators and “continues to be deeply concerned” about people sickened after eating products made with its peanuts, peanut butter or paste.

Ohio health authorities today confirmed the ninth death nationally tied to the salmonella outbreak from Peanut Corp.’s products. The victim, an elderly woman, was the state’s second death connected to the contamination, the Ohio Department of Health said in a statement.

To contact the reporters on this story: Catherine Larkin in Washington at clarkin4@bloomberg.net; Lorraine Woellert in Washington at lwoellert@bloomberg.net.

Last Updated: February 11, 2009 17:50 EST