$1,200 a Life: Clothing Company Pays Peanuts to Families of Factory Fire Victims

STRINGER/AFP/Getty Images(NEW YORK) -- A company that makes clothes for Sean Combs' clothing brand ENYCE and other U.S. labels reassured investors that a factory fire that killed 112 people over the weekend would not harm its balance sheet, and also pledged to pay the families of the dead $1,200 per victim.

In an announcement Monday, Li & Fung Ltd., a middleman company that supplies clothes from Bangladesh factories to U.S. brands, said "it wishes to clarify" that the deadly Saturday-night blaze at the high-rise Tazreen Fashions factory outside Dhaka "will not have any material impact on the financial performance" of the firm.

The fire broke out on the ground floor of the nine-floor building as hundreds of workers were upstairs on a late-night shift producing fleece jackets and trousers for the holiday rush at American stores, including Walmart, according to labor rights groups. Fire officials said the only way out was down open staircases that fed right into the flames. Some workers died as they jumped from higher floors.

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After reassuring investors about its financial health, Li & Fung's statement went on to express "deepest condolences" to the families of the dead, and pledge the equivalent of $1,200 to each family. The company also said it would set up an educational fund for the victims' children.

As reported on ABC World News with Diane Sawyer earlier this year, Bangladesh has become a favorite of many American retailers, drawn by the cheapest labor in the world, as low as 21 cents an hour, producing clothes in crowded conditions that would be illegal in the U.S. In the past five years, more than 700 Bangladeshi garment workers have died in factory fires.

"[It's] the cheapest place, the worst conditions, the most dangerous conditions for workers and yet orders continue to pour in," said Scott Nova, executive director of Worker Rights Consortium, an American group working to improve conditions at factories abroad that make clothes for U.S. companies. Nova said the fire was the most deadly in the history of the Bangladesh apparel industry, and "one of the worst in any country."

Monday, U.S. companies extended condolences to the families of the victims, and scrambled to answer questions about the dangerous factory that had been making their clothes.

Walmart inspectors had warned last year that "the factory had violations or conditions which were deemed to be high risk," according to a document posted online.

Yet Walmart clothing continued to be made at the factory, according to workers groups who found clothing with Walmart's private label, Faded Glory, in the burned-out remains along with clothing for a number of other U.S. labels, including ENYCE, Dickies and a brand associated with Sears.

Walmart confirmed Monday that its clothes were being made at the Tazreen factory. Even though Walmart is famed for maintaining tight control over its supply chain, the company said its clothes were being made at the plant without its knowledge.

A Walmart spokesman said that the Tazreen factory "was no longer authorized to produce merchandise for Walmart. A supplier subcontracted work to this factory without authorization and in direct violation of our policies. Today, we have terminated the relationship with that supplier. The fact that this occurred is extremely troubling to us, and we will continue to work across the apparel industry to improve fire safety education and training in Bangladesh." Though Li & Fung is known to supply clothes to Walmart, and to have subcontracted work to the Tazreen factory, Walmart did not name the supplier it had fired.

Sears initially told ABC News the company "does not source from this factory. In addition, Sears recognizes that fire safety is a critical international issue that we intend to address through specialized training for management in those factories that produce merchandise for Sears Holdings."

Told that lingerie labeled True Desire, a Sears brand, had been found in the burned factory, a Sears spokesman said "any merchandise found at that factory should NOT have been manufactured there and we are currently investigating further." Sears said it had not used the Tazreen factory since 2011.

The president of ENYCE clothes, which is owned by Sean Combs, extended the firm's "deepest condolences [to] the families of the victims" and confirmed that ENYCE Kids is licensed to Li & Fung, "which operates, produces and oversees all manufacturing for the brand."

"Compliance and safety are important to us," said Jeffrey Tweedy, president of ENYCE, "and we expect all our licensees to have in place compliant standards for fire and safety conditions at any factory that may produce our brand."

Labor activists also said they found garments with the Dickies label in the factory, and provided photos. Dickies said in a statement that the company's "thoughts and prayers" were those affected by the fire, but that the company had concluded its production schedule "with this vendor earlier this year."

The statement also said that "it is standard operating procedure at Williamson-Dickie to ensure the global vendors and suppliers we work with provide a safe work environment in accordance with all applicable laws and fair labor practices."

ABC News reached out to Li & Fung's New York office for comment, but messages left Monday were not returned.

Copyright 2012 ABC News Radio

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