Federal prosecutors are close to concluding a criminal investigation into last fall鈥檚 deadly listeria outbreak linked to cantaloupes grown at Jensen Farms, the I-暗黑爆料 Network has learned.

Interviews and newly obtained documents also show:

• Conflicts of interest in food safety audits of the farm near Holly are deeper and more widespread than previously reported.
• Private inspection company Bio Food Safety has joined Jensen Farms in filing for bankruptcy, while a settlement fund established for victims of the outbreak is millions of dollars short.
• A memo obtained by I-暗黑爆料 shows how private auditing firms might escape liability in food borne illness cases.
• The latest food safety law, characterized as a 鈥渟weeping reform鈥� by the Food and Drug Administration, leaves untouched the problems that allowed Jensen Farms to distribute its tainted melons. Meanwhile, new efforts by members of Congress to fix the problems have gone nowhere, leaving potentially deadly gaps in the food safety inspection system.

Dozens of civil lawsuits have been filed, but await bankruptcy proceedings before they can move forward. I-暗黑爆料 has also learned that prosecutors initiated a grand jury investigation last fall, just weeks after the melons were recalled.

Federal investigators could file criminal charges against the farm in Southeast Colorado within the next few weeks, said a source close to the investigation.

Jaime Pena of the U.S. Attorney鈥檚 Office in Denver would neither confirm nor deny the investigation, but said the case was 鈥渁n important public health鈥� issue. However, multiple sources confirmed the criminal investigation to I-暗黑爆料.

One of those sources was Bill Marler, an attorney who represents 42 separate victims in lawsuits against Jensen Farms. Marler said in his experience with similar outbreaks, it took years before federal investigations came to fruition.

鈥淪o this...is far more prompt than other investigations we鈥檝e seen,鈥� Marler said. 鈥淚 certainly got the impression they were moving forward relatively quickly.鈥�

Despite the pace of the investigation, criminal charges could lead to only a small fine.

Sources said charges might be brought under the Food, Drug, and Cosmetics Act for the adulteration of food. Under the Act, knowingly selling adulterated food is a felony. But doing so without knowledge or intent to defraud consumers is a misdemeanor, penalized by up to a year in prison or a $1,000 fine.

Last year, Jensen Farms cantaloupe were found to be tainted with the pathogen listeria monocytogenes, sickening 147 people . Another 37 deaths are believed to be associated with the outbreak, making it the deadliest in nearly a century.

On July 18, an investigator from the Office of Criminal Investigations branch of the FDA collected medical releases and health department records for victims of the outbreak.

, a Texas distributor of Jensen Farms cantaloupes, also confirmed through spokesman Jim Mulhern that they were aware of a criminal investigation and were contacted about the investigation earlier this year.

I-暗黑爆料 obtained a memo prepared after the outbreak by a law firm that advises private food safety auditing companies. The memo outlined how companies could avoid liability for sickness and death because consumers never review their auditing reports.

And even if consumers did see the reports, the memo argued, they need to take steps to protect themselves. Either way, inspectors should be able to 鈥渆scape with no liability.鈥�

No food safety auditing company has ever been found liable in litigation brought by consumers,  Marler said.

Two private food safety auditing companies were involved in the Jensen Farms case. Jensen Farms hired , a California-based company, to audit the farm. PrimusLabs in turn subcontracted the work to Texas-based .

If either company is found partially responsible for the outbreak, the case could set a new legal precedent for an industry that critics say lacks accountability.

On July 27, Bio Food Safety filed for Chapter 11 bankruptcy. The company then filed a motion to consolidate its case with Jensen Farms鈥�, which filed for bankruptcy in May.

The two companies, along with Pepper Equipment, have agreed to a settlement, Marler said. Together, they have placed roughly $4.5 million in a settlement pool.

Victims must  for a portion of that money  鈥� exactly one year after the FDA  of cantaloupe grown at the farm in southeastern Colorado.

As of July 23, medical bills amounted to more than $6.5 million for Marler鈥檚 clients alone, not counting the half dozen victims represented by other attorneys. This means that if everyone who鈥檚 eligible submits a claim, they will receive only a percentage of their total medical costs. Marler said he is considering suing retailers for the remainder.

Outside attorney Al Maxwell is overseeing the process as special claims administrator. Maxwell served a similar role in litigation involving the Peanut Corporation of America, which received a  by private inspection company AIB International shortly before a widespread salmonella outbreak in 2008.

Given the number of potential claimants, Maxwell said, 鈥淚 think it鈥檚 fair to say that if there鈥檚 $4.5 million they could exceed that amount. Perhaps significantly.鈥�

鈥楯ust how the industry works鈥�

Although the conflicts of interest inherent in private food inspections have been widely reported, the conflicts found at Jensen Farms go deeper. The company that inspected the operation had previously acted as a consultant to the farm.

Bio Food Safety founder Jerry Walzel , but afterward recommended as a consultant that brothers Ryan and Eric Jensen purchase different washing equipment. A used potato washing machine was shipped to the farm on July 20,  鈥� five days before Walzel sent one of his inspectors to audit the farm.

It was that very piece of equipment that federal investigators believe . When one of Walzel鈥檚 inspectors visited the farm again last July, he did not note any issues with the potato washer, and under federal guidelines is not required to notify the FDA of equipment changes.

Several auditors and industry experts said that to audit a food producer after consulting and recommending food safety changes is a serious conflict of interest, especially if the auditing and consulting both happen within a two year window. In that scenario, they said, to audit is to examine and grade your own work as a consultant.

It鈥檚 unclear if PrimusLabs knew of Walzel鈥檚 dual roles.

鈥淚f Jerry was doing some consulting for them and didn鈥檛 tell us, that would make us pretty angry,鈥� said a source familiar with PrimusLabs. 鈥淢ost auditors will tell us if they鈥檝e done work for a client in the past and will say that they cannot audit in this case.鈥�

Reached at his Texas home earlier this year, Walzel would not comment on either his 2010 audit or his company鈥檚 audit last July, citing advice from his attorney Milton Colia. None of the four employees listed on Bio Food Safety鈥檚 website returned calls for comment.

Ryan and Eric Jensen declined to comment through their attorney.

Several contract auditors told I-暗黑爆料 that employers rarely monitor or investigate conflicts of interest. If an auditor first recommends food safety measures as a consultant to a farm and later audits their own work, they are expected to disclose the relationship upfront.

Craig Bovee, a Texas farmer previously audited by Walzel, said that when it comes to consulting and auditing simultaneously, 鈥渋t鈥檚 just how the industry works.鈥�

Before becoming an auditor, Walzel worked for 18 years as a Texas game warden, . He eventually became vice president of government affairs for the  in 1987, and worked as a .

On May 30, 2002, Walzel registered his auditing company, Bio Food Safety Inc., with the Texas Secretary of State, incorporation records show. Since 2009, Walzel has conducted numerous audits for the California-based PrimusLabs, including three  and an .

While Walzel would not comment on his work for Jensen Farms, he estimated he had done 1,000 audits in his career, and added that he 鈥渉ad nothing to hide,鈥� before declining to answer further questions.

鈥淣obody is going to be brought back from the grave,鈥� if I talk to you, Walzel said.

No Regulation

Little comprehensive data exists on the scope of the private auditing industry, which isn鈥檛 regulated by the FDA.

The agency doesn鈥檛 track which among its at last count 1,800 staff investigators (tasked with both foreign and domestic inspections, among other things) are responsible solely for food safety. With an estimated 186,000 farms across the country inspecting each one is impossible, said FDA investigator Jim Gorny, who visited Jensen Farms last September.

The agency had never been to Jensen Farms prior to the outbreak.

鈥淲e can鈥檛 be everywhere all the time. It鈥檚 just not possible,鈥� said Gorny, a private auditor before joining the FDA and a key investigator in the Jensen Farms outbreak. 鈥淥ur job is not to make food safe. Our job is to set the standards and make sure that people are complying with them.鈥�

The private auditing industry in the United States remained largely untouched by the Food Safety Modernization Act signed into law last year. While the Act develops a model to approve and certify foreign food safety auditors, it does not give the FDA authority to regulate domestic auditors.

The agency doesn鈥檛 track the size of the industry, does not keep a directory of individual firms, and does not investigate private auditing firms with dubious track records, an FDA spokesman confirmed.

鈥淯nfortunately, we鈥檙e going to see more of this,鈥� said microbiologist Mansour Samadpour, president of IEH food testing lab. He compared a third party audit to a person who claims to be a physician, but only takes your pulse.

鈥淓ven if they do the work properly, these are not food safety audits. They are being sold as them, but they are not.鈥�

Finding Solutions

In January, U.S. Rep. Diana DeGette of Denver and three other Democratic members of the House Energy and Commerce Committee called for the FDA to reconsider its approach to third party auditing in an . The letter emphasized that auditors often don鈥檛 require food safety flaws to be corrected, don鈥檛 conduct thorough and unannounced audits, and face serious conflicts of interest.

The lawmakers requested that the FDA reform its industry regulation and guidance in light of Jensen Farms, suggesting that the agency develop a model for U.S. auditors that could act as a standard.

Since then, the committee has done no follow up work on the issue of conflicts of interest among auditing companies, said Karen Lightfoot, spokeswoman for ranking member Rep. Henry Waxman (D-Calif.). DeGette did not respond to several requests for comment.

But one model for fixing food safety auditing may already exist. It鈥檚 called the Global Food Safety Initiative, or GFSI.

Under GFSI guidelines, auditors must be uniformly trained and qualified. Problems found during GFSI audits must be fixed before a farmer, grower, or shipper can pass. Provisions safeguard against conflicts of interest like those in the Jensen Farms case.

In 2008, Walmart began requiring produce suppliers to undergo GFSI approved audits. But ensuring GFSI audits takes time, Walmart learned. As the company became more involved in implementing the new requirements, it realized the need to extend the deadline for suppliers to meet the higher standards, a spokesman said.

A in 2010 shows the retailer extended the deadline for GFSI certification to December 2011, a move that allowed Jensen Farms鈥� contaminated cantaloupes to reach Walmart鈥檚 shelves last year.

GFSI audits can cost thousands of dollars more than proprietary ones. In many cases smaller companies are more likely to seek out a non-GFSI audit, said Bill Schwartz, a former manager at an auditing firm who now teaches an online training course for auditors.

Like other auditing companies, PrimusLabs offers both GFSI-approved audits and proprietary audits subject to their own internal standards. The latter is what Jensen Farms chose last year.

Private inspections like the one conducted at Jensen Farms are the 鈥渟ubprime mortgages鈥� of food safety audits, said Brian Marchant, vice president of business development for private auditing firm NCS International, which conducts GFSI equivalent audits.

Roughly half of the audits conducted in the U.S. this year will be proprietary, Marchant said.

鈥淭hey鈥檙e just accidents waiting to happen,鈥� Marchant said. 鈥淓veryone knows that. There鈥檚 just no rules around them and there鈥檚 no consequences. There鈥檚 no one with any teeth or the ability to say, 鈥楴o, that鈥檚 not right.鈥欌€�

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Additional reporting contributed by Jeff Green, Nathaniel Herz, Benjamin Sales and Sean Easter. All six reporters are recent graduates of Columbia University鈥檚 .

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