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MCDONALD'S CORPORATION

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McDonald : Chinese Prosecutors Charge 10 in Connection to Selling Expired Meat

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09/30/2015 | 08:56pm EDT

Chinese prosecutors charged 10 people connected with Shanghai Husi Food Co., a unit of U.S.-based OSI Group LLC, more than a year after authorities accused it of selling expired products to fast food companies in China.

Courts in Shanghai brought charges of selling substandard products against 10 people connected with two OSI meat-processing facilities in Shanghai and in China's northern Hebei province, the Shanghai People's Procuratorate said in a statement on its website late Wednesday in China. A processing manager for OSI China was among those charged.

Aurora, Ill.-based OSI, a top supplier to McDonald's Corp. and other fast-food chains around the world, "will address the charges according to legal procedures," a spokeswoman said. She added that "we have confidence in China's legal system and believe that the judicial authority will come to a fair and reasonable judgment with full respect to the facts and laws."

Chinese authorities in July 2014 suspended operations for Shanghai Husi, which, at the time of the scandal, was one of the biggest suppliers in the country by volume for chains including McDonald's and Yum Brands Inc.'s KFC. Authorities had accused OSI's Chinese unit of intentionally selling expired meat following a local television report alleging the practice.

The Shanghai Food and Drug Administration launched an investigation into OSI's practices and six Shanghai Husi employees were arrested a month later. The employees have been held for the past year without charges. It is unclear which employees had been arrested or if any have legal representation.

The authorities did not outline the details of its investigation. Earlier this year, the Shanghai Food and Drug Administration destroyed batches of what it called "questionable products" that it recalled from the OSI division Shanghai Husi.

Closely held OSI said in a statement at the time that it is disappointed in the agency's actions and that it doesn't want the disposal to be seen as an admission of food-safety problems.

Sheldon Lavin, chief executive and owner of OSI, apologized last year to Chinese consumers for the problems and said he would focus on overhauling the company's China business, with an emphasis on quality assurance. "It was terribly wrong, and I am appalled that it ever happened in the company that I own," he said at the time.

McDonald's, OSI's largest customer, halted the meat vendor's supply to its 2,000-plus restaurants across the country after the incident, as did Yum Brands.

The episode dealt a significant blow to the reputation of OSI and was a major setback to its ambitions in China, where it had invested $750 million over two decades in a bid to become one of the country's biggest meat producers.

An OSI spokeswoman earlier this year said the scandal had cost the company hundreds of millions of dollars in lost revenue in China.

Ken Petersen, OSI's senior vice president of quality assurance and regulatory affairs, said last week at an industry event in China that OSI has remained committed to the country. "Our motto of 'In China, for China' hasn't changed," he said.

Write to Laurie Burkitt at laurie.burkitt@wsj.com and Jacob Bunge at jacob.bunge@wsj.com

Access Investor Kit for "Yum! Brands, Inc."

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ChangeLast1st jan.
MCDONALD'S CORPORATION 0.69% 195.26 Delayed Quote.9.21%
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Financials ($)
Sales 2019 20 834 M
EBIT 2019 9 262 M
Net income 2019 6 160 M
Debt 2019 32 735 M
Yield 2019 2,40%
P/E ratio 2019 23,90
P/E ratio 2020 22,08
EV / Sales 2019 8,68x
EV / Sales 2020 8,61x
Capitalization 148 B
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Number of Analysts 29
Average target price 200 $
Spread / Average Target 2,9%
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Stephen J. Easterbrook President, Chief Executive Officer & Director
Enrique Hernandez Non-Executive Chairman
James R. Sappington Executive VP-Operations & Technology Systems
Kevin M. Ozan Chief Financial Officer & Executive Vice President
Robert A. Eckert Independent Director
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