Yes, we have caught many flatheads with crushed bait in their mouth. These were not baits hit earlier and picked up later, they are crushed baits from the flathead caught. I am 110% certain. I have had this happen with live AND cut bait.
It never happens on the *runners*, it often happens on the fish that smack it and devour it on the spot. Why they do it, I have no idea, but they do it. I have had bullheads completely crushed and popped(skull crushed, fins broke, and belly contents everywhere). Maybe they had bad experience with that type of forage, maybe they just cant decide if they like it or not, maybe they are just hitting the bait for something to do(playing with it).. I dont know, but flatheads do crush baits. The bite is similar to a light channel cat bite, but at the same time its all togther different with less frequent pulses on the rod, but more distinct.. It might in fact be from a flathead hitting the bait and feeling the hook and doing everything it can to expel(sp?) the hook. Often these are some of the bites hardest to get a hook into the fish.
so we put it in the net. I might have to suck it up and spend the cash on a net because a flat much bigger will leave me with a 
net handle I think. 
Did it come out of P3 or P2?? 