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Current as of 23/09/16 07:39PM NZST
Business reporter for the NZ Herald

1080 threat struck Fonterra's 'heart'

A threat to contaminate milk formula with 1080 struck "at the heart" of Fonterra's business, an executive has told the High Court this morning.

"It's hard to imagine a worse threat to children and families, or to the viability of our cooperative, the dairy wider industry and our country," Fonterra's managing director of people, culture and safety, Maury Leyland said during this morning's sentencing of Jeremy Kerr.

Federated Farmers' chief executive Graham Smith said the blackmail was a "direct attack on the very fabric of society".

Kerr has been sentenced to eight and a half years in prison after admitting being behind threats to spike milk formula with 1080.

He has pleaded guilty to two charges of blackmail, which carry a maximum penalty of 14 years' jail.

Kerr, the owner of another pest-control product Feratox, mixed highly concentrated amounts of 1080 with baby milk formula and posted them to Fonterra and to Federated Farmers.

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Included in the package was a letter demanding the country stop using 1080 or he would release poisoned infant milk powder into the Chinese market and one unspecified market.

The contamination threat is estimated to have cost Fonterra, or its insurers, more than $20 million.

It cost to other members of the dairy industry was between $47,000 and $1.9 million, Crown prosecutor Christine Gordon said this morning.

It was estimated to cost Federated Farmers more than $100,000 and the combined loss to supermarket giants Foodstuffs and Progressives was $1.7 million.

It was a direct threat to our company, our farmers' income and the New Zealand economy. More importantly, it was a terrible threat to cause grievous harm to babies and children around the world, the most vulnerable members of our society.
Maury Leyland

It cost the Ministry of Primary Industries $4.2 million.

The total cost to the country, Gordon said, was in excess of $37 million - which included the amount spent on the police investigation.

WATCH: Timeline of the 1080 investigation:

Video


Leyland said the package sent by Kerr to Fonterra chief executive Theo Spierings was of "huge concern".

"It was a direct threat to our company, our farmers' income and the New Zealand economy.

"More importantly, it was a terrible threat to cause grievous harm to babies and children around the world, the most vulnerable members of our society," Leyland said.

It was serious on both a business level and a personal level because many Fonterra workers are parents.

A serious threat to contaminate milk formula product strikes at the heart of our business.
Maury Leyland

The co-op put stringent security procedures in place and locked down its supply chain as part of its response, which staff spent 9,500 hours on.

Thirty people worked full time on this while 150 others were also involved.

"A serious threat to contaminate milk formula product strikes at the heart of our business," she said.

She said a number of Fonterra contractors and employees came into contact with the 1080 package.

"This caused alarm to them and their families," Leyland said.

"This threat had a very real emotional and financial cost on Fonterra's people and our business," she told the court.

Federated Farmers' Smith said the threat could have impacted millions of people if carried out on.

"This would have had a devastating impact on families and their communities for many decades to come," he said.

"The economic and reputational cost to New Zealand would have been immense," Smith said.

It could have cost the country billions of dollars and may have caused other countries to ban New Zealand food.

"Put simply, the 1080 blackmail threat have the potential to seriously affect the economic health and well-being of all factors of New Zealand society," he said.

Threat could have cost the country $7.5 billion - MPI

Scott Gallacher, of the Ministry for Primary Industries, said the 1080 letter was a "credible threat" to food safety.

MPI informed overseas markets to ensure minimal risk to offshore consumers and the impact on trade, he said.

Had these interactions not been successful, the country faced a real risk of suspension of trade and dairy exports to these markets, he said.

It could have caused the fall of up to $4.2 billion in dairy export revenue over a year and a $7.5 billion or 3 per cent reduction in nominal GDP in 2015.

"In sum, the distribution of contaminated infant formula in the blackmail letters to the chief executives of Fonterra and Federated Farmers presented a credible threat to the lives of infants and jeopardised New Zealand's hard-earned reputation as a supplier of safe food," he said.


Read the judge's sentencing notes here:

- NZ Herald

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