A Florida-based import-export company has filed for Chapter 7 protection in bankruptcy court, listing more than $204 million in liabilities from litigation over its role in the import from China of powdered milk contaminated with melamine. In re Exim Brickell, LLC, No. 13-28502 (U.S. Bankruptcy Ct., S.D. Fla., filed August 3, 2013). Exim Brickell, LLC declared $300 in office furniture as its only asset. According to a news source, the 2008 tainted Chinese milk scandal, which affected hundreds of thousands of children in that country and killed six, resulted in verdicts and legal fees against the company as a result of litigation involving a Venezuelan company that recently won an appeal in their breach of contract dispute. See Law360, August 7, 2013.
In a related development, a new milk contamination scandal has developed in China over whey protein concentrate potentially contaminated with the C. botulinum bacterium. The dairy farm near Tangshan purportedly linked to the contaminated ingredient is managed by New Zealand’s Fonterra—a global dairy giant with revenues of about $16 billion—which announced that some of the ingredients used in infant formula and sports drinks tested positive for the bacteria. Producers in the supply chain immediately acted to stop sales and recall affected products. Fonterra has reportedly informed eight customers about the problem, which involves whey protein produced during the past year, but apparently refused to reveal who they are or what products and countries are affected. Botulism, although rare, can be a fatal paralytic illness caused by a nerve toxin.
Information about the contamination is slowly accumulating in media reports. New Zealand’s Ministry for Primary Industries has indicated that Nutricia used some of the tainted ingredient in its Karicare® line of infant formula and warned parents not to use it. Students at a New Zealand high school reportedly consumed protein drinks with the affected whey protein, supplied to the school in February. Minister of Health Tony Ryall reportedly said that illness was highly unlikely and the students are not at risk. Chinese officials called on milk powder producers to better manage their operations and said that any companies with quality or safety problems would be “severely” punished. Chinese consumers have apparently paid a premium for New Zealand milk products because of the country’s reputation for good manufacturing practices. China has also reportedly scrutinized milk powder producer pricing practices and this week fined six companies, including Fonterra, $110 million for price-fixing and anti-competitive behavior. See Associated Press, August 8, 2013; Reuters, August 9, 2013.