Industry Hardens Defenses Against Food Fraud, Counterfeiting Threats

Better detection tools provide the means to identify misrepresented products and ingredients. Brand owners want to give food companies the motivation to use them.

By Kevin T. Higgins, Managing Editor

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Sunlight has been called Nature’s great sanitizer. It also could be regarded as a stimulant of paranoia, especially when it illuminates festering sores that previously were out of sight, out of mind.

The extent of fraud in the food industry is coming into focus, and it’s a particularly ugly sight. It has lurked in the background for years, but the internationalization of raw materials and finished goods is putting the extent of the problem front and center and causing alarm among many food and beverage professionals.

Security consultants anticipated a business bonanza from the Food Safety Modernization Act (FSMA), expecting the preventive controls rules to spur huge investments in physical security. That didn’t happen; food plants already had tightened facility access in the wake of the Bioterrorism Act of 2002. But FSMA regulations significantly stiffened companies’ oversight responsibilities of their suppliers, and that in turn has trained a harsh light on economically motivated adulteration, a euphemism for fraud.

Until recently, food fraud was separate and distinct from food safety, but the two are merging. Melamine in milk powder from China that poisoned U.S. pets and contaminated European chocolates helped link them, and the global nature of the supply chain strips any pretense that fraud events are local or regional problems.

5hourEnergyCounterfeiting is a high-profile form of fraud. Geoffrey Potter, chair of the anti-counterfeiting practice at Patterson Belknap Webb & Tyler LLP ( in New York recently litigated what is believed to be the first U.S.-based food counterfeiting case. As lead counsel for 5-hour Energy’s parent, Living Essentials, he also assisted federal prosecutors in criminal investigations against the ringleaders.

The scheme had its origins eight years ago, when some of the defendants made a wholesale purchase of 350,000 bottles with Spanish-language labels from Living Essentials, purportedly intending to sell them in Mexico. Instead, they were redirected to California, relabeled with English-language labels and sold at retail at a deep discount.

The scheme emboldened the conspirators to cut out the middleman and fill bottles with their own home-made caffeinated energy drink. Bearing labeling that Potter termed “very high quality,” the bottles entered distribution channels as diverted product or returns.

Multiple companies supplied millions of bottles, shrink sleeves and packaging equipment to a clandestine warehouse in southern California where day laborers conducted manufacturing operations 24 hours a day in 50-worker shifts. “When we seized the warehouse, they were producing about 1.5 million bottles a month,” Potter reports.

“There was so much money involved, they had to use shopping bags to pass it out.”

The owner of Flexopack, an Alto Loma, Calif., manufacturer of shrink sleeves and pressure-sensitive labels, was the only supplier among the 11 individuals named in criminal indictments. The rest were among the 70 businesses ordered to pay a total of $20 million in civil judgments.

Potter was most offended by Walid “Wally” Jamil, who refused to provide lot codes that could have limited the scope of 5-hour recalls that began in November 2012. Describing him as “a real tough cookie” and “a Sopranos wannabe,” Potter says it wasn’t Jamil's first foray into food fraud. An earlier counterfeiting and repackaging scam involving Pillsbury products and the sweeteners Equal, Splenda and Truvia unraveled when the Michigan Dept. of Agriculture investigated a rat infestation complaint.

The rodents were attracted by raw materials for counterfeit packages of Uncle Ben’s Rice. No criminal or civil charges were placed. But for a robust pest control program, the counterfeiting may have continued undetected.

Tools of detection

The energy drink scheme began to unravel when a Living Essentials sales rep, curious as to why a retail customer wasn’t placing orders with him but still had 5-hour on the shelf, purchased some of the bogus product and mailed it to headquarters for analysis. The results triggered the recall and subsequent investigation.

“The highest quality manufacturers are very vigilant when the product is in their facilities or their warehouses,” Potter observes, “but they need a way to monitor what is being sold where and for how much.” When an individual calls a company’s consumer hot line, Potter advises getting the package in house to determine if it is legitimate or counterfeit. Regardless if the contents were assembled in a rogue plant in Michigan or Moldavia, the packaging likely will be high quality and barely distinguishable from the real thing.

Content testing can be a tool or a weapon. When used internally on incoming ingredients and materials, it can head off fraud before a public embarrassment occurs while also ensuring FSMA compliance. If testing is commissioned by someone else and performed at an independent lab, the findings can result in serious brand damage.

The means of testing are becoming more numerous, less expensive and more easily applied. Isotope ratio mass spectrometry and immediate constituent analysis may be too advanced and expensive for a food or beverage lab, but alternative technologies and even existing pathogen-detection equipment can spot adulterants, notes Deepali Mohindra, senior market development manager-food & beverage for Thermo Fisher Scientific’s ( U.K. office.

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