U.S. Food Supplier Weighs Appeal After China Court Jails Workers

  • Two Chinese OSI units found guilty of selling out-of-date meat
  • Company says verdict follows `smear campaign' by state media

OSI Group LLC, the U.S. food company run by banker-turned-burger tycoon Sheldon Lavin, said it’s considering an appeal after a Shanghai court found two of its Chinese units guilty of selling out-of-date products and jailed 10 workers.

There was “ample evidence” that Shanghai Husi Foods Ltd., Hebei Husi Foods Ltd. and the 10 employees intentionally passed off disqualified products as being acceptable, the Jiading district court said in a statement on its official microblog. Each unit was fined 1.2 million yuan ($182,000).

The court concluded the trial on Dec. 30, more than a year after Chinese television channel Dragon TV reported workers were repackaging and selling expired chicken and beef. The ensuing outcry prompted fast-food chains in China and Japan, including McDonald’s Corp. and Yum Brands Inc.-owned KFC, to halt supplies from OSI’s Chinese units. It’s one of several widely publicized food safety scares in recent years in China, where consumers have become increasingly concerned about standards.

The conclusion of the trial came after a “harmful smear campaign” by Dragon TV, controlled by state-owned Shanghai Media Group, closely held OSI said Monday in an e-mailed statement. The outcome is “unjust” and conflicts with facts presented in court, and OSI is weighing an appeal to seek “a just, evidence-based verdict," it said.

‘Sensationalized Reports’

“We have made every effort to follow firm instructions to silently co-operate on the advice it would lead to a fair conclusion,” the Aurora, Illinois-based company said. “However, we can no longer accept injustices against our people and our reputation.”

Yang Liqun, an Australian citizen who was a general manager for OSI in China, was given the heaviest sentence of three years in jail, a 100,000-yuan fine, and will be deported, according to the statement from the court. The other nine were sentenced to jail terms of 19 to 32 months, of whom four were given reprieves.

Lawyers at MWE China Law Offices, representing OSI, couldn’t be immediately reached for comment. In a statement, Australia’s Department of Foreign Affairs and Trade said it’s providing consular assistant to an Australian arrested in Shanghai and declined to give further comment.

OSI said “sensationalized media reports” from Dragon TV spurred a raid by Chinese authorities on the Shanghai Husi plant in July 2014. The accusations Dragon TV made were false and incomplete, OSI said. The company will consider pursuing a lawsuit against Dragon TV for hurting its reputation and business operations, OSI said.

Repackaged Meat

Shanghai Media Group’s spokesman couldn’t be reached immediately at his office number.

The Shanghai court said that in 2013 and 2014, the two OSI units found themselves with a surplus of meat because customers were returning and canceling orders that weren’t up to standard. Yang and the others decided to repackage the product and sell it to other customers to avoid losses, the court said.

The court cited several examples of the companies’ transgressions, including an instance in March 2013 where Hubei Husi workers repackaged beef steaks that were previously defrosted and treated, adding new 180-day “best before” dates before they were resold, the court said.

Workers were also directed to reprocess expired beef steaks into mini beef steaks and package them with new sell-by dates, according to the court. Other products similarly repackaged included meat pies, and chicken breasts, the court said.

“OSI has been doing business in China for more than 25 years and maintains the highest standard of food safety in the industry,” OSI said. “We will continue to do so in our current operations, as well as seek a reexamination of the facts in the Shanghai and Hebei Husi Foods case.”

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