FBI charges 11 in ‘first’ food counterfeiting case
The FBI has charged 11 US residents with “knowingly and intentionally” conspiring to sell a dietary supplement with fake labels, in what apparently represents the first time the US has indicted people for allegedly selling counterfeit food products.
The group will possibly face jail terms if found guilty for its role in the sale and distribution of more than four million bottles of 5-Hour Energy across the US. The bottles, which allegedly had fake labels, were sold between May 2011 and October 2012.
California-based Living Essentials manufactures 5-Hour Energy, which is sold at more than 100,000 retail locations across the US.
The charges, handed down by the FBI and US Food and Drug Administration, stem from a 2009 deal between Living Essentials and Joseph Shayota, a California resident and principal of export company Baja, also based in California.
Shayota agreed to purchase Living Essentials’s product at 40% of the price the manufacturer charges US retailers, before selling it to the Mexican market. The products he purchased had Spanish labels.
But in their complaint, filed under seal at the US District Court for the Northern District of California, San Jose Division, the FBI and FDA claimed that the products were instead sent to Joseph Shayota’s brother, Justin Shayota, in Michigan.
Justin was the owner of JT Wholesale and the authorities claimed he hired people to remove the Spanish labels and replace them with fake copies of English labels that included Living Essentials’s registered trademark.
Two other defendants, Walid and Raid Jamil, printed the English labels and produced cardboard boxes that added to the perceived authenticity of the product, the FBI and FDA claimed.
Kevin Attiq, owner of Dan-Dee, has been charged with distributing the products to retailers. The items were then allegedly sold for a fee 15% lower than the standard retail price of 5-Hour Energy at the time.
The claim, originally filed last month but which was revealed last week, accused the individuals of “knowingly and intentionally conspiring ... to traffic in counterfeit goods” and “repackaging and counterfeiting” products.
Geoffrey Potter, partner at law firm Patterson Belknap Webb & Tyler and representing Living Essentials, said that the case has “monumental importance” because it is the “first” time a criminal indictment has been filed “relating to a food counterfeiting matter”.
“Unfortunately, it may not be the last, as we are seeing rampant counterfeiting across many industries,” he added.
Ralph Cathcart, partner at law firm Ladas & Parry, said the lawsuit is a "creative way to bring criminal charges" against counterfeiters.
He said the move was "indicative" of US authorities keeping a close watch on dietary products like 5-Hour Energy.
The laws covering the labelling of such products "overlap" with the Lanham Act, he added, which is how the authorities were able to bring criminal charges.
"Many of the laws governing the safety of food and drink products overlap with the Lanham Act, which was how they were able to bring criminal charges," he added.
The 11 defendants could not be reached for comment.
