America: Trust, Never Verify

We’ve sunk into a horrific financial sinkhole blackhole caused by horrible incentives — massive bonuses for generating short-term “profits,” even on “profits” that are actually gambling winnings — and the complete absence of regulatory supervision or audits.

We failed even to stop Bernie Madoff’s $50 billion Ponzi scheme, even though Madoff used a strip-mall-based, three-person (one a secretary; one a 78-year-old living in Florida) auditing firm (“Madoff’s auditor, Friehling & Horowitz, operated from a 13-by-18-foot office”) and used no independent broker.

Well, The New York Times demonstrates that our nation’s food supply is protected with the same great system we use to protect our financial assets. The peanut factory with holes in its roof that knowingly shipped — for many months — salmonella-infected peanut butter that killed nine and poisoned tens of thousands was given a “superior” grade by its inspector. The system is obviously broken, but companies and government seem eager to pretend private companies can regulate one another. It’s an exact parallel to Moody’s and Standard & Poors taking billions of dollars from Wall Street to slap “AAA” ratings on their toxic assets, except people are dying:

When food industry giants like Kellogg want to ensure that American consumers are being protected from contaminated products, they rely on private inspectors like Eugene A. Hatfield. So last spring Mr. Hatfield headed to the Peanut Corporation of America plant in southwest Georgia to make sure its chopped nuts, paste and peanut butter were safe to use in everything from granola bars to ice cream.

The peanut company, though, knew in advance that Mr. Hatfield was coming. He had less than a day to check the entire plant, which processed several million pounds of peanuts a month.

Mr. Hatfield, 66, an expert in fresh produce, was not aware that peanuts were readily susceptible to salmonella poisoning — which he was not required to test for anyway. And while Mr. Hatfield was inspecting the plant on behalf of Kellogg and other food companies, the Peanut Corporation was paying him for his efforts.

“The overall food safety level of this facility was considered to be: SUPERIOR,” he concluded in his March 27, 2008, report for his employer, the American Institute of Baking, which performs audits for major food companies.

Posted by James on Thursday, March 05, 2009