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Year after uproar, Dakota Dunes-based BPI still struggles

Year after uproar, Dakota Dunes-based BPI still struggles

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DAKOTA DUNES | A year ago, more than 700 Beef Products Inc. workers collected their final paychecks.

In the aftermath of a fast-spreading controversy that ignited a consumer backlash against its Lean Finely Textured Beef, BPI was forced to shutter three of its four plants and eliminate more than half of its work force.

"It was unfortunate what happened," said one of the former employees, Oscar Gomez, who lost his corporate job as a trainer. "it was a whole media-driven thing."

The Dakota Dunes-based company is still limping along, with 80 percent of its business gone. The lost jobs aren't coming back any time soon. And the company's once ballyhooed plans for a multimillion-dollar expansion in South Sioux City are a fading memory.

The family-owned and operated business continues its fight to undo the damage to its finances and reputation, which the owners blame on a vicious media campaign by ABC News.

The $1.2 billion defamation lawsuit BPI filed last September against the network, its parent company and six individuals, including "World News" anchor Diane Sawyer and national correspondent Jim Aviles, is proceeding at a snail's pace. The plaintiffs and defendants have been waiting for months for a federal judge to issue rulings that will decide where the high-profile case should be heard and whether it should move forward at all.

In a monthlong period, BPI claims a series of defamatory ABC broadcasts and online stories in March 2012 caused consumers to mistakenly believe that Lean Finely Textured Beef was "not beef at all, but rather an unhealthy 'pink slime' hidden in ground beef as part of an "economic fraud' masterminded" by the company.

BPI claims the reports, in which the phrase "pink slime" was uttered 137 times, scared consumers and destroyed business relationships, forcing scores of supermarkets, fast food chains, wholesalers and school districts to stop buying LFTB. Soon after, BPI's revenues cratered, from about $650 million to $130 million per year.

With demand falling from 5 million pounds per week to about 2 million pounds, the company was forced to close plants in Waterloo, Iowa, Garden City, Kan., and Amarillo, Texas., effective May 25, 2012.

More than 700 workers lost their jobs, including about 85 at BPI's corporate offices in Dakota Dunes and machine shop in South Sioux City.

BPI's lone remaining plant in South Sioux continues to operate at reduced capacity, BPI spokesman Rich Jochum said in an email last week.


The outcome of the high-stakes defamation suit, which has attracted widespread national attention, could hinge on whether the case stays in Union County Circuit Court, where BPI filed it.

South Dakota is one of 13 states with food disparagement laws designed to protect farming interests. The law requires plaintiffs to prove that defendants publicly spread information they knew to be false and stated or implied that an ag product is not safe for public consumption.

If BPI would prevail on the merits, the law could triple the damages the company is seeking, from $400 million in its projected lost profits to more than $1.2 billion.

Lawyers for ABC and the other defendants filed a motion last fall to transfer the case to federal court, claiming the parties involved are from different states. In the near future, U.S. District Court Judge Karen Schreier in Sioux Falls is expected to rule on the jurisdiction. If the case stays in federal court, Schreier would then consider ABC's motion to dismiss the case.

While a South Dakota jury could be more sympathetic to BPI, legal experts say First Amendment protections and the high burden of proof in the law present a difficult challenge for the company.

"I think BPI probably has a pretty steep uphill climb to win the case," said Erika Eckley, a staff attorney at the Center for Agricultural Law and Taxation at Iowa State University.

In its motion to dismiss, ABC emphasized that its reports never said LFTB was unsafe to eat, and argued the use of "pink slime" is protected speech.

"Pink slime is exactly the sort of 'loose, figurative, or hyperbolic language' that courts recognize demands protection under the First Amendment," ABC lawyers said in the motion filed on Oct. 31.

BPI officials remain undeterred. In an interview with Reuters news service last year, co-founders Eldon and Regina Roth said they plan to pursue the legal fight even if it takes years and tens of millions of dollars in legal fees.

"We have to do this," Eldon Roth told Reuters. "We have no other choice."

The Roths turned down the Journal's repeated requests for an interview for this story. Due to the litigation, the company now communicates almost exclusively by email and through its attorneys.


Before the recent controversy, Eldon Roth was celebrated as an industry visionary who devoted his life's work to harvesting more beef from each animal and making the meat leaner and safer. More than 30 years ago, he invented machinery that separated lean beef from fatty trimmings from slaughterhouses after the carcasses are cut into steaks or roasts.

In BPI's process, the bits of lean meat are heated and separated from the fat with a centrifuge before being treated with small amounts of ammonium hydroxide gas to kill E. coli and other potentially deadly pathogens. The meat is quick frozen in large rolls and packaged and shipped to customers, who mix it with conventional ground beef to create a product up to 95 percent lean.

At its peak, LFTB was found in as much as 80 percent of the nation's ground beef, from burgers to tacos to pizza toppings. Since last year's controversy, use has plummeted to an estimated 5 percent of all beef.

The massive reduction comes at a bad time for the cattle industry, said H. Russell Cross, who heads the animal sciences department at Texas A&M University. It takes an additional 1.5 million head of cattle to replace the beef that BPI and other companies annually extracted from the trimmings, he said.

"Our herd numbers are the lowest since 1948 because of the drought. We can't afford to lose the technology," said Cross, who as head of the U.S. Department of Food Safety Inspection service approved the use of LFTB in ground beef in 1993.

In the wake of the most recent controversy, LFTB has been largely removed from school lunch menus. Responding to public pressure, the USDA started giving districts a choice of ground beef with or with the product. For the 2012-13 year, only 1.2 million pounds of beef with LFTB was ordered, almost entirely in BPI's home territory of Iowa, Nebraska and South Dakota. That compares with 7 million pounds the previous school year.

The collapsing orders shattered BPI's once-ambitious plans to grow its school lunch business, as well as venture into other markets. The company, which announced a $400 million expansion of its South Sioux City complex in 2006, halted construction on a series of large manufacturing structures after last year's controversy erupted.

Some of the empty, unfinished space is being completed "to facilitate material storage to support existing operations, but will not be used for the new business purposes for which they were originally intended," Jochum said in last week's email.

Company officials continue to work to educate consumers and restore confidence in its product, through the website -- -- and forums, such as appearances at various events around the country.  

BPI also now supports mandatory labeling of ground beef with LFTB.

The company has had little luck winning back customers, though. In the email, Jochum said the company's "current revenues and production figures are still consistent with those outlined" in the lawsuit.

He said BPI has "no plans to make any further adjustments to personnel."

While some moved away for other employment, many of the BPI employees laid off a year ago stayed in the metro area. Gomez, who had a background in banking, landed a job at a local credit union.

"It worked out for me," said Gomez, who serves on the South Sioux City Council. "I'm sure other people didn't have those options."


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