OPERATOR: Good afternoon, and thank you all parties for standing by. Your lines will be on a listen only until the question and answer session of today's call. The conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Ms. Corry Schiermeyer. Thank you. You may begin.

MODERATOR: Thank you. And thank you everyone for calling in on a Sunday afternoon. I'm sorry we had to get you guys late notice and rush you on to this call. I'll turn it over to Dr. Dick Raymond just momentarily. He's our under secretary for Food Safety. I'm hoping you all did get our media advisory. It will list who will be on this call, and I will ask everyone before they speak to let you know who is speaking so that you have the right quotes. And at this time I will turn it over to Dr. Raymond.

DR. RICHARD RAYMOND: Thanks, Corry. And thank you all for joining us this Sunday afternoon in the middle of a three-day holiday weekend. But we wanted to bring you all together to explain some new developments at the Hallmark/Westland Meat Packing Company and explain those to you and try to answer any questions that you may have. I'm joined here today by Under Secretary Bruce Knight and Under Secretary Nancy Johner from MRP and FNS, and their staff folks to help answer any questions about the School Lunch Program, etcetera.

First of all, I do want to remind everyone that this is still an ongoing investigation and therefore we may not be able to answer all of your questions today. As a result of the USDA's ongoing investigation, the FSIS, the Food Safety and Inspection Service, just recently obtained evidence that the establishment had a practice that allowed them to occasionally slaughter cattle that had already passed ante mortem inspection but had become nonambulatory prior to entering the slaughter operation without notifying our public health veterinarian. This practice is not compliant with FSIS regulations.

Therefore, FSIS determined that their products were unfit for human food because the cattle did not receive complete and proper inspection.

In July of 2007 the Food Safety and Inspection Service did issue a final rule called Prohibition of the Use of Specified Risk Materials for Human Food and Requirements for the Disposition of Nonambulatory Disabled Cattle.

This rule states very clearly that nonambulatory disabled cattle are not allowed in the food supply and would not pass ante mortem inspection. The only exception to this rule is if an ambulatory animal passes ante mortem inspection and then goes down. At that time, the FSIS public health veterinarian must be immediately notified and he or she could then make a case-by-case determination that the animal is unable to walk due to an acute injury such as due to a broken leg and would therefore be eligible to move on to slaughter operations. Animals that do go down or suffer an acute injury are slaughtered separately and receive careful examination and inspection by the FSIS veterinarian. They are tagged and labeled and then slaughtered as U.S. Suspects.

If the public health veterinarian at the plant could not determine that the animal was down because of an acute injury, then he would condemn the animal. And if he determines the animal was down because of chronic illnesses, he would also condemn the animal. In these cases the public health veterinarian did not have that option to make those decisions.

So based on this noncompliance with FSIS regulations and also based on the results of the ongoing investigation, Hallmark/Westland Meat Packing Company is voluntarily recalling 143 million pounds of raw and frozen beef products produced since February 1, 2006. The date February 1, 2006, has been chosen because that's what the evidence indicates that this practice was going on back to that date. We have no evidence preceding that date.

This recall is designated as a Class II because there is a remote probability that the recalled beef products could cause adverse health effects if consumed. We made this determination to designate this as a Class II based on a number of very important factors. These animals all passed ante mortem inspection, were observed at rest and in motion. The incidence of BSE in our domestic herd is extremely rare, and our interlocking BSE safety measures mitigate the risk of exposure. In addition, these animals were most likely born after the feed ban went into effect in 1997, as the plant tells us the average age of these animals is 5 to 7 years of age. And also all specified risk materials are removed so that they do not enter the food supply.

Our FSIS inspectors are present, not only daily in this plant, but continuously, as they are at all beef slaughter facilities, to assure among other things that SRMs or specified risk materials are removed in compliance with our regulations. That is a key point to make as we have seen some media reports that the inspectors were just there for an hour or two. But we have inspectors continuously at all slaughter facilities.

I do want to reinforce Secretary Ed Schafer's statement that we are very confident in the safety of the food supply, the interlocking mechanisms that we have in place do make the United States food supply the safest in the world. In this situation, this specific situation, I'll tell you again that all of these cattle did pass ante mortem inspection before going to slaughter. The federal government has this interlocking system of controls to protect the food supply and to prevent animals with signs of central nervous system disorders from ever entering the food chain.

BSE security measures do include the feed ban of 1997 that prohibits feeding ruminant protein to other ruminants, and there is an ongoing BSE surveillance program that began before we experienced our first BSE positive cow in the U.S. in December of 2003.

While the government has multiple regulations regarding BSE in place, the prevalence of the disease in the United States is extremely low. Since June 1, 2004, USDA's Animal and Plant Health Inspection Service has sampled more than 769,000 high risk animals, and to date only two animals have tested positive for BSE under our surveillance program, and both of those animals that were positive were born prior to the initiation of the FDA feed ban.

As another measure to reduce the risk of potential exposure to consumers, the Food Safety Inspection Service requires the removal of specified risk materials to prevent them from ever entering the food supply. This is far and away the most critical step to eliminating the risk of BSE exposure. Our FSIS line inspectors are stationed at designated points along the production line where they are able to directly observe SRM or specified risk material removal activities. Other offline inspection personnel verify the plant SRM removal, segregation of these SRMs, and then proper disposition practices.

We will continue working with our partners in the Food and Nutrition Service and the Agricultural Marketing Service during the recall process as we have throughout the ongoing investigation. As a last reminder, the Office of the Inspector General's investigation and ours is still ongoing, and we continue to support this very important effort. But again, we may not be able to answer all your questions at this time because of this ongoing investigation.

So lastly, to remind you, these cattle that did enter the slaughter facility were nonambulatory, and that is why the recall has been done. But they had all passed ante mortem inspection earlier in that day, and they all had SRM removals under the supervision of our FSIS employees.

And with that, we'll open it up to questions and answers.

MODERATOR: Before we go to questions, let me just note that on the USDA.gov website that we have posted a statement by the Secretary that I encourage you all to look at, as well as on the Food Safety and Inspection website. They have released a recall release regarding this issue. So please make note to take a look at both of those releases that we have released in the past 15 to 20 minutes. With that, we'll go to questions.

OPERATOR: Thank you. At this time if you would like to ask a question, please press *1. Please unmute your phone and record your name clearly. And our first question is from Alan Bjerga. Your line is open.

REPORTER: Yes. Alan Bjerga from Bloomberg News. Just checking. Is this the largest beef recall in U.S. history? And was there any meat that was not recalled from this company since February 1, 2006?

DR. RAYMOND: This is the largest beef recall in the history of the United States unfortunately, and all beef products – raw, fresh, frozen – were all recalled. It's just beef products from this plant.

REPORTER: Thank you.

OPERATOR: And Chuck Abbott, your line is open.

REPORTER: Thank you. I'm hoping for some idea of how much of this 143 million pounds went to School Lunch or other public feeding programs.

RON VOGEL: This is Ron Vogel with the Food Nutrition Service. We have about 37 million pounds of this product that have gone to the School Lunch Program and other domestic nutrition programs. Let me just say that that is the amount of meat from Westland going back to October of 2006. We have since the recall extends back to February 2006, we have yet to identify additional product that went to the School Lunch Program and other domestic assistance programs from February 2006 to October 2006. But right now we know 37 million pounds of the 143 that's been recalled went to domestic nutrition assistance programs.

DR. RAYMOND: This is Dr. Raymond. I need to back up to the first questioner. It's been pointed out to me that there was one label that had ground pork on it that was recalled. I don't know the details of that particular product.

OPERATOR: We have a question from David Brown. Your line is open.

REPORTER: Yes. Hi. This is David Brown from the Washington Post. Can someone estimate how much of this food is likely to be unconsumed at this point?

MR. VOGEL: This is Ron Vogel from the Food Nutrition Service. Are you referring to the 143 million pounds that we're recalling?

REPORTER: Right.

MR. VOGEL: The consensus here is that almost all this product is likely to have been consumed. That product which was not consumed that has gone to domestic nutrition assistance programs is already on hold.

DR. RAYMOND: It is very difficult to guess. I'm guessing that most of it is on hold in these facilities that FNS runs because they buy in large quantities and it's frozen. But a lot of this is fresh, raw product, with ground beef, etcetera. That has a very shelf life and refrigerator life, so the great majority has probably been consumed.

DR. KEN PETERSEN: This is Dr. Petersen with FSIS. During the recall we do a recall trace-back, and as we do that we'll go location by location to figure out how much if any of the product is still available. Most of the product that would still be available obviously would be fresh product. That would have a very short shelf life, and so as folks have indicated I would not expect we would get a high return rate because I don't think a lot of products are still out there.

The plant is still suspended, and so there is not any ongoing production and there's not any ongoing distribution of product from that facility.

REPORTER: Okay. Well, then what's the significance of your action today then?

DR. PETERSEN: Well, two-fold. One, to of course make folks well-aware of the action and then it enables the Food Nutrition Service and others to execute some of their authorities, and then sitting here today we don't know exactly where all the product went. And so it initiates a trace-forward ability for us, and we'll cast a wide net to make sure that we can find all the product that we can find.

REPORTER: Okay. So there is a fair amount of frozen product, do you think, still in storage in places?

DR. PETERSEN: There could be. That's part of the ongoing trace-forward that we need to find out, and the plant is working cooperatively with us to notify the retailers who purchased the product from them and the School Lunch Program, etcetera. They were notified a long time ago to put the product on hold, but we just don't have a total poundage at this point in time. The reason for doing this is because the plant was not in compliance with FSIS regulations, and therefore it makes it a unfit product.

REPORTER: Well, okay. Well, I'm just subbing for someone who's been covering this story. I guess I'm wondering, is ground beef stored for months and years in various nutrition programs, or is this – in other words, is this likely to have a practical effect in terms of stopping the consumption of meat that is of questionable safety?

DR. RAYMOND: Some manufacturers of ground beef that make frozen products put a "use by/sell by" date on it of one year. Generally speaking, most products that have been frozen over a year are considered to have a quality issue, not a safety issue. But this is not to say there's not some consumers out there that bought a product with this label on it a year and a half ago, put it in their freezer, bought a lot on sale whatever. We do not know that, and that's why the recall is broader.

MR. BILL SESSIONS: This is Bill Sessions with Ag Marketing Service. Relative to the federal Food and Nutrition programs, we do have a fairly large and extended pipeline of products going into that to make sure that the local food service operators have available to them about 60 percent of the AMS purchases from Westland was coarse ground beef product that goes into further processors who make end items such as cooked hamburger patties, chili meat, taco meat, that type of thing, that then goes into a distributor and then is distributed to a local school system. So there is a huge pipeline. It takes time for this product to get through there. But outside of that, I wouldn't want to hazard a guess of how much product we have in that pipeline at this point. But it moves fairly rapidly through this chain, from the manufacturer to the ultimate user.

REPORTER: I don't recognize these voices. Can the last person identify himself and the person before him identify himself, please?

MODERATOR: The last person was Bill Sessions. He's our associate deputy administrator for Livestock and Seed Programs with USDA's Agriculture Marketing Service.

REPORTER: Okay.

DR. RICHARD RAYMOND: The one before him was me, Dr. Richard Raymond, under secretary for the Office of Food Safety and while I have the mike I just want to point out again, we do not know how much of this product is out there at this time. We do not feel this product presents a health risk of any significance, but the product was produced in noncompliance with our regulations and therefore we do have to take this action.

REPORTER: Okay.

OPERATOR: (pause) We have a question from Stewart Doan. Your line is open.

REPORTER: Yes. I have a question for Dr. Raymond. I want to make sure I understood something you said, that the company, you had evidence that the company had a policy of violating USDA regulations in slaughtering downed animals after ante mortem without notifying USDA. Did I understand that correctly?

DR. RAYMOND: Yes, sir. To make sure everybody understands, I'll go through this again because it's critical. It was produced in noncompliance with our regulations. It's a part of our ongoing investigation. We're not going to go into a lot of detail. But what we do know is there were some cattle who passed ante mortem inspection at some point in the day. They were observed at rest and in motion by our public health veterinarian. When it came time for these animals to enter the slaughter facility, they became, some of them became nonambulatory. And at that point in time, the public health veterinarian is to be immediately notified and come out and do an inspection of that animal and determine whether it can go into the slaughter facility because it went down as an acute injury, or whether it should be condemned because it went down because of chronic illness or undisclosed injury. They did not call the public health veterinarian to do that procedure, and therefore they were noncompliant.

OPERATOR: The next question comes from Chuck Abbott. Your line is open.

REPORTER: Since you've said this is the largest recall, I'm wondering, what's the largest preceding recall? I seem to remember that in the past there's only about 40 million pounds or something.

DR. RAYMOND: I'm sorry. I didn't hear that question.

REPORTER: You said today's recall is the largest on record. What was the previous record?

DR. RAYMOND: In 1999 there was a recall of 35 million pounds of various ready-to-eat products that were, the product tested positive for listeria monocytogenes.

REPORTER: Okay. What plant was that?

DR. RAYMOND: That was Thorn Apple Valley.

REPORTER: Okay. Thank you.

OPERATOR: And David Brown, your line is open.

REPORTER: Yes. Actually that was my question, but I want to just confirm, you said it was 39 million pounds in 1999?

DR. RAYMOND: Thirty-five, three, five.

REPORTER: Okay. And it was various kinds of meat contaminated with listeria?

DR. RAYMOND: They were various ready-to-eat meats, yes. There's a big difference here. That was a Class I recall. That was when the public's health was at risk with a reasonable probability that if that product was consumed they would suffer serious adverse health effects or even death.

REPORTER: Okay. Do you want to say something about what consumers who may read these stories should conclude?

DR. RAYMOND: Because of the interlocking system that is in place, starting with the feed ban since 1997 and the fact that the average age of these cattle is 5 to 7 years of age, and the fact that with our surveillance of 175,000 (corrected below to 750,000) cattle that were at risk, either downers or displaying central nervous system effects, 175,000 (corrected below to 750,000) cattle were tested and only 2 tested positive, makes this extremely rare that on these rare circumstances where one of these cows was allowed to go to slaughter that they would be contaminated with BSE.

Secondly, they all have SRMs removed under the surveillance of FSIS inspectors that are there on a continuous basis, science tells us SRM removal reduces the risk of exposure to BSE by more than 99 percent.

REPORTER: Okay. And is that Secretary Raymond speaking?

DR. RAYMOND: Yes, Secretary Raymond. Now I thought I said 750,000 tested. Someone said I said 100,000. So I want to make sure that if I made an error in that statement I want to correct it. It was 750,000 cows that have been tested and 2 tested positive.

REPORTER: Okay. And SRMs are the brain, spinal cord?

DR. RAYMOND: That, and a few other things, yes. Brain and spinal cord are the two specified risk materials that carry the greatest risk of having prions present.

REPORTER: Okay. Thanks.

MODERATOR: It's Corry Schiermeyer again. I want to have Dr. Raymond explain the difference between Class I recall and what we've done today which is a Class II recall.

DR. RAYMOND: Thanks, Corry. A Class I recall is a health hazard situation where there is a reasonable probability that the use of the product would cause serious adverse health consequences or death. A Class II recall is a health hazard situation where there is a remote probability of adverse health consequences from the use of the product. All of the larger recalls done in the past were all Class I. In this one we feel there is a very, very remote possibility of anyone suffering health consequences from the consumption of this product.

OPERATOR: For any further questions, please press *1. There are no further questions. I apologize. We have a question from Chuck Abbott. You line is open.

REPORTER: Thank you. This question concerns what happens next. Is this a matter, at this point does the information, the material advanced so far get referred to the Justice Department? What sort of – if not, what sort, what steps would follow at this point in the USDA and OIG investigations?

DR. RAYMOND: Chuck, at this point because it is an ongoing investigation that does involve the OIG, we're not prepared or able to respond to that particular question. And I apologize for that, but that's just the way it is.

REPORTER: At the close of the week, California prosecutor brought charges against two former employees of Hallmark. Are federal charges a possibility?

DR. RAYMOND: We can't comment on that, Chuck.

REPORTER: Okay. Thank you.

OPERATOR: And David Brown, your line is open.

REPORTER: Yes. Sorry. Is this the largest recall of either class? In other words, there's no larger Class I or a larger Class II recall?

DR. RAYMOND: The largest Class I was 35 million as we talked about earlier. This is far and away the largest recall of either class.

REPORTER: Right. Okay.

OPERATOR: And I show no further questions.

MODERATOR: If we don't have any further questions, we'll go ahead and wrap this up. Again, I want to lead you all to the USDA website where we have posted a statement by the Secretary. There is also the recall release that will give you more details as well as if you go to www.USDA.GOV/ACTIONS there's somewhat of a collection page; as things take place in this investigation and as we have information available we are posting things on our website as well as letting you all know.

Thank you. Thanks again for calling in on a Sunday, and have a great day.