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Feds discussed bailing out XL Foods to ease fallout from beef recall

Cattle in pasture beside XL Foods' Lakeside Packers plant at Brooks, Alberta on Monday, Oct. 1st, 2012, 2012.

LARRY MACDOUGAL/THE CANADIAN PRESS

Senior federal agriculture officials discussed paying an Alberta slaughterhouse millions of dollars for its tainted meat to help the struggling company and cushion the economic blow at the height of the largest meat recall in Canadian history, in which 18 people were sickened with a potentially deadly strain of E. coli.

Agriculture and Agri-Food Canada officials recognized such an offer of public funding would be unprecedented and could be seen as compensating privately owned XL Foods for serious food-safety violations, according to government memos and presentations obtained by The Globe and Mail through access-to-information legislation.

The high-level deliberations highlight the potential conflicts that existed within Agriculture, which had – until just days ago – long been responsible for promoting and regulating the food industry. Some consumer advocates and food-safety specialists questioned whether the dual role encumbered the Canadian Food Inspection Agency's independence.

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As the CFIA pored over XL Foods last October to determine whether the slaughterhouse had fixed its sanitation and E. coli detection problems and was safe to reopen, another arm of Agriculture was weighing whether to aid the plant's embattled owners. Officials were aware that 2,200 jobs were on the line at the country's second-largest meat packing plant, as well as the economic health of the cattle industry and the city of Brooks, about 200 kilometres southeast of Calgary.

"The risks of moral hazard have to be considered for any scenario that would see the Government providing financial support in response to negligent sanitary practices threatening public safety," states a memo to the deputy minister.

In the end, no federal money was offered to XL, said Agriculture spokesman Patrick Girard. A Brazilian-controlled firm, JBS USA, bought the slaughterhouse after it was cleared to reopen.

It's too soon to tell how shifting oversight of Canada's food-safety system to Health from Agriculture will affect future food recalls and safety investigations. The Conservative government quietly announced the significant and sudden change last week.

Sylvain Charlebois, an associate dean in the College of Management and Economics at the University of Guelph, hopes the move will strengthen food-safety communication and the CFIA's independence. Food inspection had been under the domain of Agriculture for nearly two decades.

"It's very difficult to actually have an agency which protects the interests of the consumer and at the same time is working very closely with industry," said Dr. Charlebois, whose research includes food safety and distribution. "It often puts the agency in a very awkward position, and with the XL Foods case that was clearly evident."

The NDP and the union representing food inspectors, however, contend the shift is largely cosmetic. Rick Holley, a food science professor at the University of Manitoba, worries hiving off some CFIA responsibilities to Health and not others (animal and plant health remains with Agriculture) could weaken collaboration on outbreaks such as bovine spongiform encephalopathy, also known as mad cow disease.

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"I think that creates some uncertainty in terms of inspection responsibility that could prove to be a new issue in terms of where the information goes," Dr. Holley said.

Information on the XL Foods meat recall was slow to trickle out in the early days. Beef trim shipped from the slaughterhouse tested positive for E. coli 0157:H7 in Calgary and at the United States border on Sept. 4, 2012, but the CFIA did not alert the public about a voluntary recall until nearly two weeks later.

The recall expanded nearly daily for a while, and reached to Mexico, Egypt and Japan. The CFIA suspended XL's licence to operate the Brooks plant in late September, after determining the firm did not have adequate food-safety controls. XL's work force was laid off.

By mid-October, concerns about the uncertain viability of XL Foods – then the largest Canadian-owned meat packing facility in the country – had surfaced in cattle country, the city of Brooks and in the federal Agriculture Department. The day before a presentation to the deputy minister of Agriculture on the economic fallout of the XL affair, the company asked the CFIA to allow the firm to dump 12 million pounds of recalled beef in landfills.

The estimated market value of that unsellable meat was $40-million, noted the Oct. 18, 2012, slide presentation released through access-to-information legislation. Any potential offer would be less than that amount, but "would allow for the company to dispose of products that no longer have a market and to generate cash flow," the presentation stated.

Other proposals for assistance included funding pilot projects, such as tests for a meat irradiation protocol to kill E. coli bacteria, and subsidizing food-safety training for employees. All were sensitive propositions.

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Agriculture and Agri-Food Canada spokesman Mr. Girard said the presentations were prepared for discussion purposes.

"In situations like this the department puts forward a wide variety of options," he noted in an e-mail. "In this case, none of the funding options were pursued."

It's too soon to tell how shifting oversight of Canada's food-safety system to Health from Agriculture will affect future food recalls and safety investigations. In a statement, Health Minister Rona Ambrose said grouping the CFIA, Health Canada and the Public Health Agency under one portfolio will improve collaboration and how the government communicates safety issues to Canadians.

A report from a government-appointed expert panel on the XL affair released in June did not consider the question of CFIA oversight. The panel, however, concluded the company and the CFIA had a weak food-safety culture at the slaughterhouse.

The panel also found the company was unprepared to handle the beef recall and its "many attempts" at the corporate level to communicate directly with senior CFIA officials and the office of Agriculture Minister Gerry Ritz "proved disruptive and hindered the process overall."

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About the Author
National news reporter

Renata joined The Globe and Mail's Toronto newsroom in March of 2011. Raised in the Greater Toronto Area, Renata spent nine years reporting in Alberta for the Calgary Herald and the Edmonton Journal, covering crime, environment and political affairs. More

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