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Current as of 28/11/14 07:40PM NZST

Fran O'Sullivan: Fonterra still has questions to answer

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Sanlu chairwoman Tian Wenhua is at first blush a convenient scapegoat for the Chinese tainted milk scandal which has claimed the lives of at least six babies and crippled another 300,000 with kidney disease.

A life sentence has been handed out to Tian who chaired the now bankrupt Sanlu joint-venture in which New Zealand dairy co-operative Fonterra proudly held a 43 per cent stake.

It would be seen as just by many of the affected Chinese parents if criminal charges had also been laid against the raft of local government and Communist Party officials who tried to effect a cover-up after they were alerted that Sanlu's infant formula was contaminated with industrial melamine.

So far, no charges have been laid against any of the officials that the Chinese State Council itself quickly and publicly fingered as complicit in the breakdown in China's food safety system, and in the length of time it took to get a public recall of the tainted infant formula.

At the heart of the Chinese Government's reticence are two unpalatable factors. First, controversial suggestions would no doubt surface that the Shijiazhuang officials, who were informed about the contamination in early August, sat on the matter until September 9 so as not to embarrass the Chinese Government during the Olympic Games.

Second, focus would also be attached to the State's portrayal of Sanlu as a model company by exempting it from in-depth food safety inspections. Yet this model company was ultimately found to have made dairy products with melamine levels well in excess of those produced by the 21 other Chinese companies also affected by the scam.

By turning attention on either itself, or party officials, the Chinese Government would also be laying itself firmly in the sights of the many parents who want a much better compensation deal for their children than is currently on offer.

So Tian's arraignment was convenient. But that does not mean the charges were trumped up.

Therein lies Fonterra's problem.

Late last year Fonterra chief executive Andrew Ferrier had said he would be "saddened if Tian were convicted, let alone executed. She seemed to live and breathe Sanlu ... She only wanted the best for Sanlu and it would be very sad if she's found guilty of any crimes".

The dairy giant will not issue a public comment on Tian's life sentence or the death penalties handed down against two Chinese middle-men who spiked Sanlu product with the poisonous compound until it has studied the written verdict.

All along Fonterra has promoted the line that it did everything in its power to ensure contaminated products were pulled from Chinese shelves once its representatives on the Sanlu board were alerted to the contamination.

But contrary to Fonterra's protestations, Sanlu was not an innocent player. A Beijing-ordered investigation found that Sanlu had continued to produce and sell melamine contaminated infant formula even after the company learned its products were flawed.

That is the reason why Tian was in the dock - not over Sanlu's initial tardiness in getting to grips with the source of the contamination after it received complaints from parents that babies who had been fed the formula were getting sick.

It is why Tian pleaded guilty to charges of selling counterfeit and low quality products instead of the more serious charge of producing poisonous goods which earned the two middlemen their execution orders.

Still at issue is whether anyone in Fonterra knew its joint venture was still pumping contaminated products on to the market during last August. And if not, why not?

This is the issue that Kiwi politicians like Green MP Keith Locke should be focusing on, rather than an empty call to our Government, or Fonterra, to condemn the death penalties handed down against the two middlemen.

Locke argues the death penalties showed the "harshness of the regime towards anyone who embarrasses it, whether they are real criminals, whistleblowers or dissenters. Many Chinese knew the milk was being contaminated but said nothing for fear of repercussions from those in authority".

But these two criminals knew the harsh penalties that awaited them if they were caught, yet they took their chances.

The New Zealand Government went to considerable diplomatic lengths to bring the Sanlu scandal to light. Some further explanations on Fonterra's behalf are warranted over its governance lapses.

The problems with China's supply chains should have been obvious when the European Union prohibited the import of Chinese milk products in 2002. But Fonterra - and New Zealand - have been blinded to real problems in China's food system by the "white gold rush".

There are real issues in front of the New Zealand dairy industry. Farmers will next week learn their payout has been cut again, the EU has slapped export subsidies on its dairy products again and Federated Farmers lacks confidence in Fonterra's auction system.

This will prompt the Fonterra board to "move on" when it meets next week. But it also needs to show it has learned the lessons from this affair.

- NZ Herald

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