© AP Photo/The Press Democrat, Conner Jay
In this January 13, 2014 photo, cows wait to be butchered at Rancho Veal Slaughterhouse in Petaluma, Calif. Rancho Feeding Corp. has voluntarily halted operations, as it tries to track down all of its beef shipments over the past year, the Santa Rosa Press Democrat reported Monday, Feb. 10, 2014.
Rancho Feeding Corp., the Petaluma slaughterhouse that recently recalled 8.7 million pounds of beef, is under criminal investigation by the federal government for killing and selling meat from dairy cows with cancer, according to sources who would speak only on the condition of anonymity.

Rancho was allegedly buying up cows with eye cancer, chopping off their heads so inspectors couldn't detect the disease and illegally selling the meat, the sources said.

Although it's against federal law, experts say eating the meat isn't likely to make people sick. So far, no one has reported becoming ill from eating the meat.

The huge recall and criminal investigation hasn't just affected Rancho. Private cattle producers, who used the facility for custom slaughtering, have also been swept up, leaving the shelves with a dearth of local, natural and high-end beef.

Bill Niman, arguably one of the more respected cattlemen in the gourmet meat business and the former owner of Niman Ranch company, said he used Rancho to slaughter 427 head of cattle and is complying with the recall. He said it's causing him to hold back about 100,000 pounds of beef from the market and that he stands to lose as much as $400,000. He said his beef has nothing to do with the alleged tainted meat.

Voluntarily shut down

But, in an abundance of caution, the U.S. Department of Agriculture wants to make sure none of the cancerous meat commingled with healthful beef.

Rancho officials could not be reached for comment; the plant has voluntarily shut down and is in escrow with new buyers.

Both Reps. Jared Huffman, D-San Rafael, and Mike Thompson, D-St. Helena, met with Agriculture Secretary Tom Vilsack this week to discuss the criminal investigation, but they weren't given details.

"I'm disappointed we did not come away with any better sense of what happened," Huffman said. "However, a couple of good things did happen."

One of them, he said, was the secretary's commitment to have his team meet with local beef producers to share whatever information they can share. The other was a promise to talk to beef producers who did segregate their beef and can demonstrate that it could not have commingled with improperly processed meat.

That would give the producers a chance to "perhaps get some relief from the recall," Huffman said.

USDA officials said they could not discuss the case as long as Rancho is under criminal investigation. But at least one source said Rancho bought animals with a specific type of cancer found in the optical area of a cow. By eliminating the animal's head, the rest of the carcass appeared healthy.

'Carcass looked good'

"Rancho, we're told, was slaughtering them, somehow after hours or in other ways where the inspector didn't know about it," the source said. "Because the carcass looked good, (Rancho) mixed it back in with other beef that it sold under its label."

James Cullor, professor of population health and reproduction at the School of Veterinary Medicine at UC Davis, said cows suffering from eye cancer aren't necessarily dangerous to eat, but he doesn't recommend it. It would be possible that the cancer had spread to other parts of the animal's body, Cullor said.

"If I'm out on top of Mount Everest and have a cow (with eye cancer) and I'm hungry, I'm going to cook her well and deal with getting down the mountain," he said. "But if I'm here in this country, I will choose to not consume the animal. I wouldn't feed the animal to my grandchildren."

Niman, who now owns BN Ranch, said he showed the USDA how commingling would have been impossible. In a letter to the agency's local Food Safety and Inspection Service, he has described his cattle's chain of custody from slaughter to delivery, all under USDA inspection, in painstaking detail.

Mixing up his grass-fed beef with Rancho's milk cow meat would have been impossible to miss because the differences between the carcasses are too obvious, he said.

"It's the difference between a motorcycle and a car," he said, adding that the recall is having a profound effect on his business.

Last year was his biggest yield since he started his grass-fed beef business. "We felt like we were just dialing in," he said. Now, because of the recall, he is experiencing a setback.

Nationwide effect

The recall started Feb. 8 and affected food processors nationwide, including Nestle's Hot Pockets food line. This latest recall was Rancho's second in 2014. In January, the company recalled more than 40,000 pounds of meat products that the USDA said the plant processed without the full benefit of federal inspection.

It was at that time that investigators began getting an inkling of an alleged breach in protocol when they found two cattle heads infected with cancer.