China Food Safety Scare: 581 More Firms Under Scanner As Scandal Spreads

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A man walks out of the entrance of Husi Food factory in Shanghai July 23, 2014. Shanghai police said on Wednesday they detained five people in an investigation into a Chinese-based supplier of foreign fast-food brands, including KFC, McDonald's Corp and coffee chain Starbucks Corp, over allegations the firm supplied old and rotten meat. The five detained include the head of the company - Shanghai Husi Food Co Ltd, a unit of U.S.-based OSI Group LLC - and the firm's quality manager, the police said in an online statement. Picture taken July 23, 2014.

Amid growing fears about the quality of food sold at fast-food outlets in China, a regulatory body visited nearly 600 restaurants and businesses suspected of using expired meat from Shanghai Husi Food, a local arm of Illinois-based OSI Group.

The Shanghai Municipal Food and Drug Administration said, in a statement, that it visited 581 food-related businesses as part of its investigation and had dispatched 875 personnel to conduct inspections, Reuters reported, adding that Chinese police, local governments and prosecutors are also now involved in the case. Earlier in the week, the Chinese government had suspended operations at Shanghai Husi after local media reported Monday that the company was selling chicken and beef beyond the expiration date.

The latest developments follow the arrest of five people, including the head of Shanghai Husi Food and its quality manager, on Wednesday, after an investigation into the food scandal discovered that it had affected many global brands, such as McDonald’s Corporation (NYSE:MCD), Yum! Brands Inc. (NYSE:YUM) and Starbucks Corporation (NASDAQ:SBUX).

Yum Brands, the owner of KFC and Pizza Hut chains, said that it had suspended business with OSI, while McDonald's said that it would change its supply source from Shanghai Husi to OSI’s new facility in the province of Henan.

On Wednesday, OSI issued a statement saying that local authorities have inspected all its other facilities in China and found no issues, according to Reuters. “What happened at Husi Shanghai is completely unacceptable,” Sheldon Lavin, OSI’s chairman and CEO, said in the statement. “We will bear the responsibility of these missteps, and will make sure they never happen again.”

Gu Zhenghua, deputy director of the Shanghai Municipal Food and Drug Administration, had told the Xinhua news agency earlier that the regulator found at least some of Shanghai Husi’s transgressions were “not that of certain individuals but was an arrangement organized by the company.”

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