One of the things that interests me in securities law is the disconnect between criminal prosecutions of securities fraud, which yield large numbers of plea agreements and lengthy jail sentences, and civil prosecutions of securities fraud, which have very low probability of success.  I have written about this before in The Undercivilization of Corporate Law.  So, I have been fascinated by watching a different kind of disconnect in China over the punishment of dairy producers and distributors who knowingly sold baby formula tainted with melamine, which caused 300,000 children to become ill and six die so far.  Eight hundred children are still hospitalized for severe kidney ailments caused by the added melamine.

Today, the NYT reports that the milk scandal has produced so far two death sentences and one "death sentence with a reprieve" for three milk producers who knowingly sold tainted milk to Sanlu Group, the largest dairy company in China.  The CEO of Sanlu, Tian Wenhua, admitted that she knew of the tainted milk, but the company continued to sell it to consumers.  She was sentenced to life in prison.  A total of 18 milk producers and distributor executives were given prison sentences for knowingly selling tainted milk.

However, civil remedies in China are few and far between.  Although families have tried to file lawsuits, no judge has "agreed to hear a case."  Judges in Chinese provinces are simply not accepting these cases when filed, reportedly due to governmental pressure.  Twenty-two dairy companies have sent letters to the parents of the 300,000 affected children offering compensation as follows:  $29,200 for children who died; $4,400 for children with kidney stones or kidney failure; and $300 for children with less serious injuries.  No children over three years of age are covered.  The total outlay for the 21 companies is $160 million for 300,000 children.  Now, we may think that $4,400 is a lot for someone living in a rural province in China, but it doesn't sound like a lot for someone with a child in the hospital for four months.  Because parents have little or no hope of an actual trial, this will presumably be the final offer.  Some parents are trying to organize others to reject the milk settlement.  So far, 250 individuals have demanded more.  More what?  Not more money, actually.  More long-term health costs and research into what the long-term effects of having their infants drink melamine-laced baby formula.  That doesn't sound particularly greedy.  Of course, they are having trouble organizing because the government censored their internet posting.

I would like to hear a Mark Lanier or John Edwards or other experienced trial lawyer estimate the value of a lawsuit against milk producers who have admitted knowingly tainting a food that killed six babies and counting and harmed 300,000 children.  I bet it would be more than $4,400 for each child that went to the hospital and $300 for each merely ill child.  Say what you will about the U.S. tort system, but at least lawsuits aren't rejected at the clerk's office and civil compensation for intentional wrongs is not that difficult to achieve.  And, we'll probably never know exactly who or what is to blame in this scandal surrounded by political controversy.

Now, we may say that the Chinese system of death penalties and life sentences works better for deterrence purposes than civil judgments.  That is an empirical question.

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