China court fines OSI, jails employees over food safety scandal

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[February 01, 2016]  By Adam Jourdan

SHANGHAI (Reuters) - A Chinese court has fined two domestic units of U.S. food supplier OSI Group [OSIGP.UL] up to 2.4 million yuan ($364,875) and handed prison sentences to 10 of its employees for producing and selling inferior products.

The verdict marks the end of a long-running probe into OSI after a safety scandal in 2014 dragged in fast-food giants McDonald's Corp and Yum Brands Inc.

The Shanghai Jiading People's Court said in a statement on its Weibo microblog on Monday that Yang Liqun, a general manager at OSI China, would be sentenced to three years in prison and deported. It wasn't clear whether Yang, who the court said was an Australian citizen, would serve jail time in China.

OSI said it did not have an immediate comment on the verdict, which follows a trial held at the end of December. Lawyers for the company did not immediately respond to phoned and emailed requests for comment.

The Australian embassy in China did not have an immediate comment on the case.

The Jiading court statement said Yang and other workers at OSI's China units had reused products from returned or canceled orders in order to avoid financial losses, meaning that some unapproved products had entered the market.

It added nine other people in the case would be given shorter jail terms and would have to pay fines. Four of the nine would have their jail sentences suspended, it said.

The court added the punishments were relatively lenient because the defendants had been cooperative in the investigation. People with direct knowledge of the case had feared the fine could be much larger.

China is trying to clean up its reputation for food safety scandals, which range from recycled "gutter oil" and "zombie meat" to crops tainted with heavy metals. Senior Chinese leaders recently said food safety in the country remained "grim".

The OSI case broke in July, 2014, when a Chinese TV report alleged to show workers at a Shanghai unit of OSI using out-of-date meat and doctoring production dates, a scandal which rippled as far afield as Japan and prompted apologies from OSI clients McDonald's and Yum.

A senior executive for OSI in China told the official Xinhua news agency last July the scandal had cost the firm close to a billion dollars in lost revenue.

(Reporting by Adam Jourdan; Editing by Muralikumar Anantharaman)

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