Food fraud being fed by EU’s financial crisis

From counterfeit cod to sham champagne, food fraud is far more widespread than authorities previously suspected, with imposter ingredients such as engine grease in olive oil or high levels of methanol in vodka posing a danger to consumers

By Stephen Castel and Doreen Carvajal  /  NY Times News Service, GREAT DALBY, England

Mon, Jul 01, 2013 - Page 9

Invisible from the roadway, hidden deep in the lush English countryside, Moscow Farm is an unlikely base for an international organized crime gang churning out a dangerous brew of fake vodka.

However, about 400m off a one-lane road in the countryside, tens of thousands of liters of counterfeit spirits were distilled, pumped into genuine vodka bottles with near-perfect counterfeit labels and duty stamps, and sold in corner shops across Britain. The fake Glen’s vodka looked real, but analysis revealed that it was spiked with bleach to lighten its color and contained high levels of methanol, which in large doses can cause blindness.

No one knows the harm done to those who drank it, or whether they connected any illness with their bargain vodka, but cases of poisoning have been reported throughout Europe, including in the Czech Republic, where more than 20 people died last year after drinking counterfeit liquor.

The Europe-wide scandal surrounding the substitution of cheaper horse meat in what had been labeled beef products caught the most attention from consumers, regulators and investigators this year. Yet that is just a hint of what has been happening in terms of food fraud as the economic crisis persists, regulators and investigators say.

Investigators have uncovered thousands of cases of fraud, raising fresh questions about regulatory oversight as criminals offer bargain-hunting shoppers cheap versions of everyday products, including counterfeit chocolate, adulterated olive oil, Jacob’s Creek wine and even Bollinger Champagne. As the horse meat scandal showed, even legitimate companies can be overtaken by the murky world of food fraud.

“Around the world, food fraud is an epidemic — in every single country where food is produced or grown, food fraud is occurring,” said Mitchell Weinberg, president and chief executive of Inscatech, a company that advises on food security. “Just about every single ingredient that has even a moderate economic value is potentially vulnerable to fraud.”

Speaking at a recent conference organized by consulting firm FoodChain Europe, Weinberg added that many processed products contain ingredients like sugar, vanilla, paprika, honey, olive oil or cocoa products that are tainted.

Increasingly, those frauds are the work of organized international criminal networks lured by the potential for big profits in an illicit trade in which most forgers are never caught. Vodka gang boss Kevin Eddishaw was caught, but not before he had counterfeited liquor on an industrial scale, generating profits to match, according to investigators, who estimated that his distillery produced at least 165,000 bottles costing the British government £1.5 million (US$2.3 million) in lost tax revenue.

“He was living a very nice lifestyle — a couple of properties, nice cars: a Range Rover, a Mercedes,” said Roddy Mackinnon, a criminal investigation officer for Her Majesty’s Revenue and Customs.

At Moscow Farm, the gang used the production techniques of a modern-day factory equipped with at least £50,000 in equipment, while ignoring safety rules. Gang members bought bottles from the supplier of the real makers of Glen’s vodka, saying they were destined for Poland. When forged label prototypes printed in Britain were deemed unpersuasive, higher-quality ones were brought from Poland. The gang faked duty stamps on boxes.

“They tried to do as much as they could to replicate the real thing,” Mackinnon said. “They were very professional, there was attention to detail.”

The secret plant was so well-hidden that it was detected only when someone suspected in another investigation led authorities to the spot in 2009.

Though Eddishaw worked through intermediaries and used pay-as-you-go cellphone numbers, investigators tracked his calls, proving from the location where they were made that the phone belonged to him and linking him to a fraud that brought him a seven-year prison term.

The plot fits a pattern, identified by Europol, the EU’s law enforcement agency, which says organized crime groups have capitalized on the economic downturn.

“In response to reduced consumer spending power, counterfeiters have expanded their range of products,” a recent Europol report said.

In addition to the traditional counterfeit luxury product, organized crime groups “now also counterfeit daily consumer goods such as detergents, foodstuffs, cosmetic products and pharmaceuticals,” the report added.

University of Minnesota associate professor Shaun Kennedy estimated that 10 percent of food that consumers buy in the developed world was adulterated. Because the profit margins for foodstuffs are often within single digits, “if you dilute by 2 percent, that’s a big deal.”

He cited a report from the US’ Grocery Manufacturers Association saying that economic adulteration and counterfeiting of global food and consumer products was expected to cost the industry US$10 billion to US$15 billion a year.

“Mostly the perpetrators are not intending to cause anyone harm — that would be bad for repeat business — often they don’t understand the potential impact,” Kennedy added.

Investigators say a huge array of deceptions exist. Simple ones involve presenting cheap products as branded or top-quality ones, like selling catfish as sea bream, labeling farmed salmon as wild or marketing factory-produced eggs as organic or free-range. For example, in February, the German authorities began investigating about 160 farms suspected of breaking rules on organic and free-range egg production.

In other cases, cheaper ingredients are added to genuine products to increase profit margins. Sometimes vegetable oil goes into chocolate bars, or pomegranate juice, wine, coffee, honey or olive oil is adulterated with water, sweeteners or cheaper substitutes.

Whenever there is tampering, there are potential risks to health. Indian restaurants in Britain have been prosecuted for adding ground peanuts to almond powder, which poses a risk to allergy sufferers. Food experts say that engine oil is among the substances found in olive oil.

In a week-long food fraud crackdown last year, the French authorities seized 90.7 tonnes of fish, seafood and frogs legs whose origin was incorrectly labeled; 1 tonne of fake truffle shavings; 500kg of inedible pastries; false Parmesan cheese from the US and Egypt; and liquor from a Dutch company marketed as tequila. They also found fraudulent Web sites claiming to sell caviar.

Illegally fished and contaminated shellfish often finds its way to fish markets. Even the fish that is safe to eat may not be what consumers think it is, as shown by the case of a fish and chip shop owner in Plymouth, England, who was fined last year for selling a cheaper Asian river fish called panga as cod.

Another fraud is to fake the packaging of well-known brands with writing in a foreign language so consumers believe they have a genuine product that was diverted abroad at a bargain price.

Even religious communities are not immune. In Britain, the British Food Standards Agency has warned against drinking Zam Zam water, which is sacred to Muslims and comes from Saudi Arabia. Bottles sold in Britain “may contain high levels of arsenic or nitrates,” the agency said.

In a depot in south London, trading standards officers display fake foods including about 300 bottles of counterfeit red and white wine, labeled Jacob’s Creek. One small detail gives away these otherwise convincing forgeries: the counterfeiters misspelled the name of the country where the real wine is produced, Australia, leaving out the middle “a.”

Wandsworth Council trading standards officer Russell Bignell said bottles normally contained cheaper wine, but added: “The fact is we don’t know what’s in it.”

Other items include two convincingly packaged boxes of fake Durex condoms and a bottle of counterfeit Bollinger Champagne.

Christopher Roe, the council’s chief trading standards officer, said the problem affects sales of goods online, but that much conventionally sold counterfeit produce turns up in markets or small independent corner stores.

“Whether or not they know it’s counterfeit is a moot point,” Roe said, adding that there are just not enough resources to combat the problem.

With counterfeit products, “the more you look, the more you know you will find,” he added.