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Two tried over tainted milk powder

  • Story Highlights
  • NEW: Sanlu has net debt of $160M (1.1 billion yuan), Xinhua cites city as saying
  • Pair are accused of producing, selling "protein powder"
  • Chinese court accepts bankruptcy petition for Sanlu Group, Xinhua reports
  • Official: Melamine was found in nearly 70 milk products from more than 20 firms
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(CNN) -- A melamine dealer and a producer on Friday stood trial in China's Hebei Province, according to state media, in the latest development in the tainted milk powder scandal that left six babies dead and sickened 290,000 others.

Markets withdrew Sanlu milk powder in September after melamine was found as an additive.

Markets withdrew Sanlu milk powder in September after melamine was found as an additive.

Zhang Yujun is accused of producing and selling a so-called "protein powder" that was largely constituted of malt dextrin and the chemical melamine. Some collectors added the powder, which boosted readings of protein content, to raw milk and sold it to Sanlu Group, Xinhua news agency reported.

The Shijiazhuang Intermediate People's Court accuses Zhang of producing 850 tons (775 tonnes) of the powder from October 2007 to August 2008, according to Xinhua.

Zhang sold more than 660 tons (600 tonnes) with total sales value of nearly $1 million (6.83 million yuan), the court heard, according to Xinhua.

Zhang Yanzhang sold 250 tons (230 tonnes) to others for Zhang Yujun, Xinhua reported.

Sanlu stopped production on September 12 and had by October 31 recalled baby formula products worth nearly one billion yuan, Xinhua reported.

Shijiazhuang Intermediate People's Court received a bankruptcy petition by Sanlu this week, a court official told CNN.

Sanlu has $160 million (1.1 billion yuan) of net debts, said Wang Jianguo, a spokesman for the city government of Shijiazhuang, according to Xinhua.

Last week, Sanlu borrowed most of that amount to pay the medical fees of children sickened by the formula and to compensate the victims, Xinhua reported.

Baby formula produced by Sanlu -- previously one of China's leading dairy producers -- was first flagged in the scandal when it recalled about 700 tons of the powdered milk in September after discovering the product was contaminated with melamine.

Melamine is commonly used in coatings and laminates, wood adhesives, fabric coatings, ceiling tiles and flame retardants. Some Chinese dairy plants have added the chemical to milk products to make it appear to have a higher protein level.

Melamine is the same industrial contaminant from China that poisoned and killed thousands of U.S. dogs and cats last year.

Health experts say ingesting melamine can lead to kidney stones, urinary tract ulcers, and eye and skin irritation. It also robs infants of much-needed nutrition.

Chinese investigators found melamine in nearly 70 milk products from more than 20 companies, according to quality control official Li Changjiang, who was eventually forced to resign.

Thousands of tons of tainted milk powder were recalled, including pullbacks by Mengniu Dairy Group, China's largest milk producer, and Sanlu.

The fallout from the scandal led to the arrest of at least 18 people in September and new government safety measures.

New Zealand-based Fonterra, which owns a 43 percent stake in Sanlu, said the Shijiazhuang court issued the bankruptcy order against the Chinese company in response to a creditor's petition.

Under the court order, according to Fonterra, a court-appointed receiver will manage Sanlu and assume responsibility "for an orderly sale of the company's assets and payment of creditors" within six months.

"This bankruptcy order is not a surprise to us," Andrew Ferrier, Fonterra's CEO, said in a statement. "We were aware that Sanlu was in a very difficult situation and faced mounting debts as a result of the melamine contamination crisis."

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