Sanlu victims' compensation under threat

PUBLISHED : Friday, 26 December, 2008, 12:00am
UPDATED : Friday, 26 December, 2008, 12:00am

Firm's bankruptcy may mean no cash for melamine sufferers

The families of the nearly 300,000 babies made ill by melamine- tainted milk face a new hurdle in seeking compensation: the bankruptcy of Sanlu Group.

Lawsuits against the company - whose melamine-laced infant milk powder triggered the industry-wide scandal in September - were already mired in a legal limbo because many mainland courts have neither accepted nor rejected the cases.

Other courts have refused the cases, saying the scandal is still under investigation.

The announcement on Wednesday of Sanlu's bankruptcy has now plunged the families of the victims into new uncertainty: who will pay compensation?

The government of Sanlu's home city, Shijiazhuang , in Hebei province , said yesterday at a press conference that the firm had a negative net worth of 1.1 billion yuan (HK$1.25 billion) and was insolvent.

Meanwhile, former Sanlu chairwoman Tian Wenhua will go on trial on Wednesday for 'the manufacture and sale of shoddy products', Caijing magazine reported.

The anxious parents of affected children are puzzled about what to do next. 'I felt helpless after reading the news of Sanlu's bankruptcy,' said Ms Chang, the mother of a three-year-old girl who developed kidney stones after drinking Sanlu infant formula for most of her life.

'I also felt angry and disappointed that the Shijiazhuang city government didn't mention help for victims at the press conference at all.'

Ms Chang was one of the plaintiffs in the first collective compensation lawsuit brought against Sanlu, a case that was not accepted by Hebei Higher People's Court.

The health ministry said this month that dairy companies would probably have to pay for a compensation plan that the government was preparing.

Wang Jianguo , a spokesman for the Shijiazhuang government, said Sanlu borrowed 902 million yuan this month for the treatment of sick babies and for compensation. He did not elaborate.

Li Fangping, a Beijing lawyer seeking compensation for ill children, said: 'Nobody knows what kind of compensation the company is referring to ... Since the outbreak of the scandal, all the decisions were made behind closed doors.'

On Wednesday it was revealed that Sanlu was bankrupt, prompting 400 to 500 distributors to converge on Shijiazhuang. They claimed Sanlu owed them up to 1 billion yuan in prepayments or deposits, and were worried about possibly being forced to help Sanlu pay compensation for a problem they say they were not responsible for.

One legal expert told China Central Television that, according to mainland bankruptcy law, consumers could ask Sanlu's distributors to pay compensation on the theory that they were jointly liable.

That provoked sharp comments from some distributors.

'We distributors are also victims of the scandal,' one said. 'If this is true, we have no way to survive.'

Sanlu halted milk production on September 12 and has recalled suspect products worth 1 billion yuan. Its products were the first to be found laced with melamine, an industrial chemical.

Twenty-two dairy firms were eventually involved in the scandal, which not only rocked the mainland's milk industry but also tarnished the 'Made in China' label.

At least six babies died and more than 290,000 others nationwide showed symptoms of urinary disorders after consuming the tainted milk.