The settlement, announced by the Humane Society, is the largest-ever penalty for an animal abuse case.
Four years ago, undercover video showed "downer" cows at a Chino slaughterhouse being mistreated. It was an animal abuse case that shocked and horrified many who viewed the video, shot by the Humane Society of the United States.
"It's a ground-breaking settlement," said Dale Bartlett of the Humane Society. "It's the first time that this federal false claims act has ever been used in an animal cruelty case."
At the time, the now-defunct Westland/Hallmark Meat Co. was a major supplier of beef to the national school lunch program. The Humane Society says the company violated terms of the federal contract.
"In order to sell meat to the school lunch program, they signed contracts saying they would treat their animals humanely. They didn't do that," Bartlett said.
Concerns of possibly tainted meat led to the recall of 143 million pounds of beef and forced the slaughterhouse into bankruptcy. In 2009, the company's president Steven Mendell testified before Congress, admitting sick cows did make it into the food supply.
"Our company is ruined. We cannot continue. Approximately 220 employees have lost their jobs. The conduct appearing in the video that I saw is sickening. That is not the company I know," Mendell said during his testimony.
Part of the judgment includes $316,000 to be paid by the owners, Donald Hallmark, Sr., and Donald Hallmark, Jr. But the rest of the settlement will never be paid. It is largely symbolic because the company is bankrupt.
"It's a deterrence judgment," said Jonathan R. Lovvorn, chief counsel for animal protection litigation for the Humane Society. "It informs other federal government contractors that when your contract says you provide humane handling, if you don't do that you're likely to end up bankrupt as well."
The Associated Press contributed to this report.