Former USDA inspector Wendy Alguard was appalled when workers at a food processing plant regularly scraped mold off old applesauce and mixed it with fresh product.

“It was blatant,” she said.

Alguard said she grew even more alarmed when she told her supervisor about the problem at the Snokist Growers facility in Yakima, Wash., in 2010.

“My boss had told me, basically, to mind my own business,” she said.

According to Alguard and other critics, USDA’s lax oversight of that facility is emblematic of a deeper problem within the agency: Its officials are often beholden to the companies they’re supposed to regulate.

Critics refer to the phenomenon as “regulatory capture” — when government inspectors become overly influenced by the industry they regulate.

While the accusation is lobbed at many federal agencies, some say USDA is especially vulnerable because it’s charged with enforcing the law at facilities that also pay for its services.

“It’s a risk USDA would be more prone to that sort of capture,” said Sebastien Pouliet, an Iowa State University economics professor who specializes in food safety.

Unlike the U.S. Food and Drug Administration, the USDA provides grading, certification and verification services intended to improve agricultural companies’ marketing of a variety of farm products, he said.

In effect, these processors are the USDA’s customers, Pouliet said. “There’s sort of a conflict of interest.”

USDA’s Office of Communications did not respond to several requests for comment.

More than 2,000 employees of the USDA’s Agricultural Marketing Service grade, audit, certify and inspect $150 billion worth of food a year. USDA’s Food Safety Inspection Service employs more than 8,000 people who inspect about 150 million livestock carcasses and 9 billion poultry carcasses a year.

In the case of Snokist Growers, the company hired the Agricultural Marketing Service to grade its canned applesauce so the product could be used in school lunches and USDA food programs.

Alguard said she and other inspectors were told to prevent the old applesauce from being sold to USDA, but to disregard the problem in Snokist’s products intended for the public.

“My boss wanted to keep them happy,” she said. “He’s there to keep the income flowing into his office so he can stay employed.”

The applesauce policy contravened an agreement the agency had with FDA to report food safety issues, she said.

In 2011, some school children were sickened by Snokist Growers’ applesauce, which prompted an investigation by FDA.

The illness turned out to be caused by defective cans that allowed pathogens to survive, but Alguard said she told FDA inspectors that moldy bins of applesauce were regularly being reprocessed when they showed up at the plant.

“I just knew it was my chance because my boss wasn’t going to do anything about it,” she said. “They were stunned, to say the least.”

The FDA’s investigation concluded that the mold released toxins into the applesauce that could cause health problems even if the product was heated during canning.

“Even though the generating organisms may not survive the heat treatment, the preformed toxin may still be present,” the FDA said in a warning letter to Snokist Growers.

The problem prompted USDA to cancel its school food contract with Snokist Growers, eliminating an important source of revenue for the company. It eventually liquidated its assets in bankruptcy proceedings and is now registered with the state as an inactive corporation, which means the company exists as a legal entity but is no longer operational.

Alguard is now pursuing a lawsuit claiming that USDA saw the plant’s closure as an opportunity to retaliate against her for blowing the whistle on the agency’s disregard for safety.

She alleges her supervisor reassigned her to a facility in Kingsburg, Calif., while inspectors with less seniority were able to stay in Yakima.

Due to her family ties and roots in the community, Alguard refused the reassignment and was fired by USDA.

The agency argues in court papers that her whistleblower claim is invalid because her supervisor was aware of Alguard’s decision to alert FDA about the moldy applesauce problem.

Regardless of the lawsuit’s outcome, the situation raises questions about the conflicting motivations that USDA inspectors may face in deciding whether to report food safety problems, critics say.

“If they close the plant, then they lose their jobs,” said Bill Marler, a Seattle attorney specializing in litigation over food illness outbreaks.

Adding to the pressure is simple human nature: USDA inspectors work within food processing and slaughter facilities and live among their employees, Marler said.

Disrupting the plant’s operations can be viewed as a personal affront, he said. “That person might get shunned in the lunchroom.”

This phenomenon is more likely to occur in rural towns rather than large metropolitan areas where people are more anonymous, said Wayne Warner, owner of Northwest Food Consultants, which advises processors on safety.

Supervisors are also wary of strict enforcement against companies that have an outsized infuence on the local economy, he said.

“There is some protection of the employer and the jobs in the area,” Warner said. “They tend to look the other way a lot more.”

For these reasons, it’s imperative for USDA not to tolerate retaliation against inspectors who do come forward, said Marler.

“If you’re going to have that situation and you want food to be safe, you’ve got to back up your employees,” he said.

Unions that represent inspectors say this isn’t currently the policy.

Inconvenient relocations are used by the USDA’s Food Safety and Inspection Service to punish slaughterhouse inspectors who report too many inhumane animal handling violations, said Paul Carney, president of the Western Council of Food Inspection Locals.

Inspectors’ complaints are also routinely overruled by FSIS public health veterinarians who are above them in the agency’s hierarchy and insulated from criticism from underlings, he said.

“USDA has some great flaws in their thinking,” Carney said. “Punishing people for doing the right thing is not appropriate.”

Food safety inspections suffer when supervisors allow dirty equipment to be used rather than disrupt slaughter and processing, said Stan Painter, chair of the national joint council of food inspection locals.

It’s simply easier for the USDA to rein in an inspector rather than take on a politically connected corporation, he said.

“The agency will often throw the inspector under the bus,” Painter said. “They don’t want to regulate, in my opinion.”

The solution is hard to come by, since the problem is caused by administrative inaction that would be hard for Congress to correct, said Carney.

“We’ve got laws on top of laws,” he said. “It’s funny. They don’t work.”

The situation hasn’t improved despite recurrent public health crises, such as the recent salmonella outbreak linked to Foster Farms chicken that sickened more than 600 people in 29 states, said Painter. “We have a short attention span as Americans.”

For the problem to receive the scrutiny it deserves, it would have to affect someone prominent enough to compel change, he said. “The right person is going to have to get sick and/or die.”

Some of the union’s concerns have been echoed by the U.S. Government Accountability Office and the USDA’s Office of Inspector General, which have released reports that criticize USDA for sloppy enforcement of federal humane slaughter laws.

Meat companies see the situation differently: Inspectors can be inconsistent and capricious in their enforcement across different plants, according to the North American Meat Association.

“If anything, we hear the inspectors have too much power,” said Jeremy Russell, communications director for the group.

For the most part, relations between slaughterhouses and inspectors are amicable, with NAMA devoting roughly half of its staff to helping companies comply with federal regulations, he said.

However, it is possible for an inspector with a personal grievance against the slaughterhouse or one of its managers to abuse his authority, Russell said. “They can retaliate against the company.”

Inspectors may be critical of the USDA due to tension over jobs and duties, he said.

New rules aimed at modernizing and improving the inspection process can be seen as disruptive by the inspectors’ union, Russell said.

“There’s an ongoing labor negotiation related to the regulations that affect the labor force,” he said.

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