Jan 28 - Dairy co-operative Fonterra has denied it allowed the continued production of infant milk in China by partner Sanlu that it knew to be contaminated with melamine.
The New Zealand dairy giant issued the denial after being accused by former chairwoman of the Sanlu Group, Tian Wenhua, that she was acting on information from Fonterra – which owned a 43% stake in Chinese company at the time.
Last week, Tian was sentenced to life imprisonment after pleading guilty to manufacturing and selling fake and substandard products – which contributed to the death of six children and sickened almost 300,000.
Chinese state media said Sanlu had decided to continue adding the industrial chemical to its milk products even after the problem became known after 1 August 2008. The Sanlu boss said it made a decision to limit the levels of melamine to 10mg per kilogramme of milk after receiving a document from Fonterra that European Union regulations permitted up to 20mg/kg in food products.
But Fonterra Chief Executive Andrew Ferrier has angrily dismissed the allegations, saying he was “outraged”.
“We had no knowledge that they made the decision to continuing selling these products”, he said.
He added that Sanlu Board Meeting minutes would demonstrate his company had clearly advised that there should be a zero tolerance for melamine content in milk products.
Mr Ferrier said that documents had been supplied to its Chinese partner which included draft EU proposals suggesting limited amounts of the industrial chemical would be permissible – but added that at no point was Sanlu advised it was acceptable to continue to produce milk powder containing melamine.
"I'm outraged that (Sanlu) managers made that decision to sell products above the zero level," he said.
Henry van der Heyden, Fonterra chairman, said he was confident that Fonterra executives, including Ferrier, had acted properly since the scandal broke – adding that the chief executive had the board’s full backing. Fonterra has faced criticism for the two week-plus delay between when it was told of the problem and ordering a product recall.
Mr Van der Heyden said the board had conducted an independent review of the management of Fonterra's operations involving Sanlu.
Mr Ferrier said Fonterra remained interested in re-entering China, but would be "extra, extra careful," and would in the future be certain to control its supply chain. The New Zealand group has had to write off its NZ$200 million investment in the company.
All Sanlu's remaining assets were in the hands of the receivers and any compensation to be paid by Fonterra would come from those, explained Ferrier.