11 CHARGED IN CONSPIRACY TO MANUFACTURE, DISTRIBUTE COUNTERFEIT 5-HOUR ENERGY DRINK

FROM:  U.S. JUSTICE DEPARTMENT
Friday, June 19, 2015
Eleven Defendants Charged in Nationwide Conspiracy to Manufacture and Distribute Counterfeit 5-Hour ENERGY Drink
Defendants Sold Millions of Bottles of Counterfeit 5-Hour ENERGY Drink

U.S. Attorney Melinda Haag of the Northern District of California, Special Agent in Charge David J. Johnson of the FBI’s San Francisco Field Office and Special Agent in Charge Lisa L. Malinowsk of the U.S. Food and Drug Administration’s (FDA) Los Angeles Field Office of Criminal Investigations announced today that 10 people were arrested after being charged with conspiracy to traffic in counterfeit goods, conspiracy to commit criminal copyright infringement and conspiracy to introduce misbranded food into interstate commerce.  The defendants were arrested on charges stemming from the illegal distribution and counterfeit of the liquid dietary supplement 5-Hour ENERGY.  One further defendant was not arrested but remains subject to an arrest warrant.

According to the indictment that was unsealed yesterday, all 11 defendants were involved in the illegal repackaging and eventual counterfeiting of 5-Hour ENERGY.  The supplement is owned by a group of entities referred to in the indictment as Living Essentials, which manufactured all 5-Hour ENERGY at factories in Wabash, Indiana.  Living Essentials has registered and owns all 5-Hour ENERGY trademarks and a copyright, including the “5-Hour ENERGY” name and various graphical elements of the product’s labeling and packaging.  The 5-Hour ENERGY trademarks and copyrighted material are displayed on every bottle of 5-Hour ENERGY and display boxes.  Living Essentials does not provide licenses to any individual or entity to manufacture 5-Hour ENERGY.

According to the indictment, defendants Joseph Shayota and Adriana Shayota, his wife, through their company Baja Exporting LLC, agreed with Living Essentials to distribute 5-Hour ENERGY in Mexico.  Living Essentials manufactured the liquid 5-Hour ENERGY product and provided Spanish-language labeling and display boxes to Baja Exporting.  Living Essentials additionally provided Baja a complete product package under the agreement that the 5-Hour ENERGY with Spanish-language labeling was only to be distributed by Baja in Mexico.  Nevertheless, according to the indictment, rather than distributing authentic 5-Hour ENERGY with Spanish-language labeling in Mexico, the defendants attempted instead to divert the product and to sell it in the United States at a higher price.  After initial efforts to sell the product failed because of the Spanish-language labeling and display boxes, the defendants replaced the labeling and display boxes with counterfeit labels and boxes designed to imitate Living Essentials’ packaging in the United States.  The defendants repackaged over 350,000 bottles of 5-Hour ENERGY and sold them in the United States at a price that was 15 percent lower than what Living Essentials charged for authentic United States 5-Hour ENERGY.  By December 2011, Joseph and Adriana Shayota had sold off Baja’s remaining stock of the repackaged/relabeled 5-Hour ENERGY.

Also according to the indictment, by early 2012, the defendants had moved into counterfeiting the entire 5-Hour ENERGY product.  The defendants manufactured the counterfeit 5-Hour ENERGY liquid at an unsanitary facility using untrained day workers.  The defendants mixed unregulated ingredients in plastic vats while attempting to mimic the real 5-Hour ENERGY products.

From December 2011 through October 2012, the defendants allegedly ordered more than seven million counterfeit label sleeves and hundreds of thousands of counterfeit display boxes and placed false lot and expiration codes on the bottles and boxes.  The defendants often changed the lot and expiration codes on the counterfeit bottles and boxes to parallel the valid codes being used on the authentic product.

The indictment further alleges that the defendants travelled to Guadalajara, Mexico, and hired manufacturers for the blank plastic bottles and plastic bottle caps imprinted with the Living Essentials-trademarked “Running Man” logo.  They also purchased equipment, including a steam tunnel machine, to shrink-wrap the counterfeit 5-Hour ENERGY labels on the counterfeit bottles and an inkjet printer to place false lot numbers and expiration dates on the bottoms of the counterfeit bottles.

The defendants also allegedly used code words in purchase orders and invoices for counterfeit 5-Hour ENERGY.  For example, defendants Walid Jamil, Juan Romero and Leslie Roman referred to the counterfeit 5-Hour ENERGY liquid contents as “michelada,” “juice blend” and “spices.”

In addition, the indictment alleges that from May 2012 to October 2012, Midwest Wholesale Distributors, a company owned by Jamil, distributed more than four million bottles of counterfeit 5-Hour ENERGY into commercial channels throughout the United States.  Midwest sold approximately 508,032 counterfeit 5-Hour ENERGY bottles to Baja Exporting and 3,521,232 counterfeit 5-Hour ENERGY bottles to the Dan-Dee Company, which was owned by defendants Kevin Attiq and Raid Attiq.  A partial list of retail vendors and wholesale distributors to whom the alleged counterfeit product was sold is attached.

“The defendants’ alleged conduct demonstrates a complete disregard of the health and safety of consumers,” said U.S. Attorney Haag.  “My office will continue to vigorously prosecute those individuals who place greed over the well-being of the community by distributing counterfeit dietary products.”

“The business of trafficking in counterfeit merchandise harms victims in many ways," said Special Agent in Charge Johnson.  “Intellectual property crimes are anything but victimless.  Intellectual property crimes can destroy jobs, suppress innovation and jeopardize the public health and safety.  In this complex case, the suspects allegedly produced a product to counterfeit a popular dietary supplement that was ultimately consumed by the public.  The FBI and its partners will continue to bring these types of criminals to justice.”

“U.S. consumers rely on FDA oversight of foods to ensure that they are safe and wholesome,” said Special Agent in Charge Malinowski.  “Criminals who produce and sell counterfeit and misbranded dietary supplements put the public health at risk by utilizing unknown and unregulated ingredients that could put the consumer in danger of serious illness or death.  This alleged counterfeit operation was especially egregious as the investigation revealed this product was sold, distributed and placed on the shelves of numerous retailers throughout the United States.  We will continue to investigate violators of our laws and work to bring them to justice.”

The 11 indicted defendants, all of whom are charged with conspiracy to traffic in counterfeit goods, conspiracy to commit criminal copyright infringement and conspiracy to introduce misbranded food into interstate commerce, include:

Joseph Shayota, 63, of El Cajon, California. Shayota was arrested yesterday at his residence.  He made an initial appearance before the Honorable U.S. Magistrate Judge Nita L. Stormes in the Southern District of California, who ordered him released on $250,000 bond and to surrender his passport.  Shayota’s next scheduled court appearance will be on July 9, 2015, at 1:30 p.m., before the Honorable U.S. Magistrate Judge Howard R. Lloyd to schedule further proceedings in U.S. District Court in San Jose, California.

Adriana Shayota, 44, also of El Cajon. Shayota was arrested yesterday at her residence.  She made an initial appearance before U.S. Magistrate Judge Stormes in the Southern District of California, who ordered her released on $100,000 bond and to surrender her passport.  Shayota’s next scheduled court appearance is on July 9, 2015, at 1:30 p.m., before U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Justin Shayota, 32, of Troy, Michigan. Shayota was arrested yesterday at his residence. He made an initial appearance before the Honorable U.S. Magistrate Judge David T. Grand in the Eastern District of Michigan, who ordered him released on a $10,000 unsecured bond and to surrender his passport by noon tomorrow. Shayota’s next scheduled court appearance is on July 9, 2015, at 1:30 p.m., before U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Walid Jamil, aka Wally Jamil, 65, also of Troy. Jamil self-surrendered to the FBI yesterday. He made an initial appearance before U.S. Magistrate Judge Grand in the Eastern District of Michigan, who ordered him released on a $10,000 unsecured bond and to surrender his passport by noon tomorrow. Jamil’s next scheduled court appearance is on July 9, 2015, at 1:30 p.m., before the U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Raid Jamil, aka Brian Jamil, 46, of West Bloomfield, Michigan. Jamil surrendered to the FBI yesterday. He made an initial appearance before U.S. Magistrate Judge Grand in the Eastern District of Michigan, who ordered him released on a $10,000 unsecured bond and to surrender his passport by noon tomorrow. Jamil’s next scheduled court appearance is on July 9, 2015, at 1:30 p.m., before U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Kevin Attiq, 51, of El Cajon. Attiq was arrested yesterday at his residence. He made an initial appearance before U.S. Magistrate Judge Stormes in the Southern District of California, who released him on $100,000 bond and to surrender his passport. Attiq’s next scheduled court appearance is on July 9, 2015, before U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Fadi Attiq, 57, of El Cajon. Attiq was arrested yesterday at his residence. He made an initial appearance before U.S. Magistrate Judge Stormes in the Southern District of California, who released him on $100,000 bond and to surrender his passport. Attiq’s next scheduled court appearance is on July 9, 2015, at 1:30 p.m., before U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Leslie Roman, 61, of Rancho Cucamonga, California. Roman was arrested yesterday at his residence. He made an initial appearance before the Honorable U.S. Magistrate Judge David T. Bristow in the Central District of California, who released him on $50,000 bond after he surrendered his passport. Roman’s next scheduled court appearance is on July 9, 2015, at 1:30 p.m., before U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Mario Ramirez, 55, of San Diego.Ramirez was arrested yesterday at his residence. He made an initial appearance before U.S. Magistrate Judge Stormes in the Southern District of California, who released him on $100,000 cash via cashier’s check and ordered him to surrender his passport. Ramirez’s next scheduled court appearance is on July 9, 2015, at 1:30 p.m., before U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Camilo Ramirez, 30, of San Diego. Ramirez was arrested yesterday at his residence.  He made an initial appearance before U.S. Magistrate Judge Stormes in the Southern District of California, who released him on $100,000 cash via cashier’s check and ordered him to surrender his passport.  Ramirez’s next scheduled court appearance is on July 9, 2015, at 1:30 p.m., before U.S. Magistrate Judge Lloyd to schedule further proceedings in U.S. District Court in San Jose.

Juan Romero, 68, of Upland, California. An arrest warrant remains outstanding for Romero.

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, the defendants face the following maximum statutory penalties:

For each count of conspiracy to traffic in counterfeit goods: 10 years imprisonment, a $2 million fine, three years of supervised release and a $100 special assessment.

For each count of conspiracy to commit criminal copyright infringement: five years imprisonment, a $250,000 fine, three years of supervised release and a $100 special assessment.

For each count of conspiracy to introduce misbranded food into interstate commerce: five years imprisonment, a $250,000 fine, three years of supervised release and a $100 special assessment.

However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence.

Assistant U.S. Attorneys Matt Parrella and Susan Knight of the Northern District of California are prosecuting the case with the assistance of Elise Etter.  The prosecution is the result of an investigation by the FBI and the FDA’s Office of Criminal Investigations.

COUNTERFEIT DRUG SMUGGLER SENTENCED TO 41 MONTHS IN PRISON

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, July 17, 2014

Illinois Man Sentenced for Smuggling Counterfeit Goods and Drugs into the U.S.

An Illinois man, who previously pleaded guilty to trafficking in counterfeit goods and introducing counterfeit drugs into interstate commerce in violation of the Food, Drug and Cosmetic Act, was sentenced today to serve 41 months in prison.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson for the Southern District of Texas and Special Agent in Charge Brian Moskowitz of Homeland Security Investigations (HSI) made the announcement.

Fayez Al-Jabri, 45, of Chicago, Illinois, was sentenced by U.S. District Court Judge Nancy F. Atlas in the Southern District of Texas.  In addition to his prison term, Al-Jabri will serve three years of supervised release and ordered to pay $15,066 in restitution and forfeit $47,750.

According to court documents, Al-Jabri conspired to smuggle more than 26,000 counterfeit Viagra tablets from China into the United States for further distribution.   As part of that conspiracy, between July 2011 and October 2012, Al-Jabri and his co-conspirator shipped thousands of counterfeit Viagra tablets from Chicago to an undercover agent in Houston, Texas.  HSI submitted all of the tablets seized during the investigation to both the U.S. Food and Drug Administration (FDA) and Pfizer, Viagra’s manufacturer, for analysis.  Both the FDA and Pfizer identified the tablets as counterfeit and misbranded Viagra.

Al-Jabri and Jamal Khattab, 49, of Katy, Texas, were indicted on Aug. 22, 2012.  On March 21, 2014, Al-Jabri pleaded guilty to one count of conspiracy to traffic in counterfeit goods, to introduce misbranded prescription drugs into interstate commerce and to import such goods contrary to U.S. law; one count of trafficking in counterfeit goods; and one count of introducing counterfeit drugs into interstate commerce in violation of the Food, Drug and Cosmetic Act.   Khattab pleaded guilty on Dec. 3, 2013, to the same charges, and his sentencing is scheduled for Aug. 14, 2014.

This matter was investigated by HSI, the FDA’s Office of Criminal Investigations, the Department of State - Diplomatic Security Service and police departments in Houston and Chicago.  The case is being prosecuted by Assistant Deputy Chief for Litigation John H. Zacharia of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorneys Kebharu Smith and Jennifer Lowery of the Southern District of Texas.

TEXAN PLEADS GUILTY IN COUNTERFEIT VIAGRA TABLETS CONSPIRACY

FROM:  U.S. JUSTICE DEPARTMENT 

May 20, 2014

Texas Man Pleads Guilty to Conspiring to Smuggle and Traffic Counterfeit Viagra Tablets

A Texas man pleaded guilty today to conspiring to smuggle and to traffic in counterfeit and misbranded pharmaceuticals, including Viagra tablets, from China, announced Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas.

Nasif Baqla, 26, of Houston, pleaded guilty before U.S. District Judge Nancy F. Atlas in the Southern District of Texas to one count of conspiracy to traffic in counterfeit goods, to introduce misbranded prescription drugs into interstate commerce and to import such goods contrary to U.S. law.

Baqla was indicted on Aug. 22, 2012, as were two other individuals – Jamal Khattab, 49, of Katy, Texas, and Fayez Al-Jabri, 45, of Chicago – in a separate, but related case.  Khattab and Al-Jabri each pleaded guilty on Dec. 3, 2013, and March 21, 2014, respectively, to the same conspiracy charge as Baqla, as well as trafficking in counterfeit goods and introducing counterfeit drugs into interstate commerce in violation of the Food, Drug and Cosmetic Act.

According to court documents, in July 2010, a package of counterfeit Viagra tablets was shipped from China to Houston, intended for Baqla and Khattab.   The package was intercepted by Customs and Border Protection officers.   Baqla claimed the pills were his and that he received them on behalf of a friend.  Although the tablets were marked with trademarks substantially indistinguishable from the genuine marking on a legitimate Viagra pill, the drugs in the package were counterfeit and misbranded.

This matter was investigated by Homeland Security Investigations, the Food and Drug Administration - Office of Criminal Investigations, Diplomatic Security Service and police departments in Houston and Chicago.  The case is being prosecuted by Assistant Deputy Chief for Litigation John Zacharia of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Kebharu Smith of the Southern District of Texas.

SALMONELLA-TAINTED PEANUTS ALLEGEDLY DISTRIBUTED IN U.S.

Peanuts.  Credit:   Wikimedia Commons.

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, February 21, 2013
Former Officials and Broker of Peanut Corporation of America Indicted Related to Salmonella-Tainted Peanut Products

Allegations Include Mail and Wire Fraud, Introduction of Adulterated and Misbranded Food into Interstate Commerce with Intent to Defraud or Mislead, and Conspiracy

A 76-count indictment was unsealed yesterday charging four former officials of the Peanut Corporation of America (PCA) and a related company with numerous charges relating to salmonella-tainted peanuts and peanut products, the Justice Department announced today. Stewart Parnell, 58, of Lynchburg, Va.; Michael Parnell, 54, of Midlothian, Va.; and Samuel Lightsey, 48, of Blakely, Ga., have been charged with mail and wire fraud, the introduction of adulterated and misbranded food into interstate commerce with the intent to defraud or mislead, and conspiracy. Stewart Parnell, Lightsey and Mary Wilkerson, 39, of Edison, Ga., were also charged with obstruction of justice.

Also yesterday, an information filed against Daniel Kilgore, 44, of Blakely was unsealed. On the same day that charges against Kilgore were filed, he pleaded guilty to that information, which charged him with mail and wire fraud, the introduction of adulterated and misbranded food into interstate commerce with the intent to defraud or mislead, and conspiracy.

The investigation into the activity at PCA began in 2009, after the Food and Drug Administration and the U.S. Centers for Disease Control and Prevention traced a national outbreak of salmonella to a PCA plant in Blakely as the likely source. As alleged in the indictment, the Blakely plant was a peanut roasting facility where PCA roasted raw peanuts and produced granulated peanuts, peanut butter, and peanut paste; PCA sold these peanut products to its customers around the country.

The charging documents charge that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in a scheme to manufacture and ship salmonella-contaminated peanuts and peanut products, and in so doing misled PCA customers. As alleged in the indictment, those customers ranged in size from small, family-owned businesses to global, multibillion-dollar food companies.

"When those responsible for producing or supplying our food lie and cut corners, as alleged in the indictment, they put all of us at risk," said Stuart F. Delery, who heads the Justice Department’s Civil Division. "The Department of Justice will not hesitate to pursue any person whose criminal conduct risks the safety of Americans who have done nothing more than eat a peanut butter and jelly sandwich."

Although PCA is now no longer in business, the allegations against each of the defendants arise from his or her conduct while at PCA and a related company. The following allegations are set forth in the indictment: Stewart Parnell was an owner and president of PCA; Michael Parnell, who worked at P.P. Sales, was a food broker who worked on behalf of PCA; Lightsey was the operations manager at the Blakely plant from on or about July 2008 through February 2009; and Wilkerson held various positions at the Blakely plant – receptionist, office manager and quality assurance manager – from on or about April 2002 through February 2009. As charged in the information, Kilgore served as operations manager of the PCA plant in Blakely from on or about June 2002 through May 2008.

"We all place a great deal of trust in the companies and individuals who prepare and package our food, often times taking it for granted that the public’s health and safety interests will outweigh individual and corporate greed," said Michael Moore, U.S. Attorney for the Middle District of Georgia. "Unfortunately and as alleged in the indictment, these defendants cared less about the quality of the food they were providing to the American people and more about the quantity of money they were gathering while disregarding food safety. This investigation was complex and extensive, and I credit the cooperation of our federal agencies with not only making sure that the cause of this outbreak was uncovered and the people responsible called to account, but also with working hard every day to make sure that parents across the country can feel confident that the food they are feeding their children is safe."

The charging documents allege that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in several schemes by which they defrauded PCA customers about the quality and purity of their peanut products and specifically misled PCA customers about the existence of foodborne pathogens, most notably salmonella, in the peanut products PCA sold to them. As the charging documents allege, the members of the conspiracy did so in several ways – for example, even when laboratory testing revealed the presence of salmonella in peanut products from the Blakely plant, Stewart Parnell, Michael Parnell, Lightsey and Kilgore failed to notify customers of the presence of salmonella in the products shipped to them.

In addition, the charging documents allege that Stewart Parnell, Michael Parnell, Lightsey and Kilgore participated in a scheme to fabricate certificates of analysis (COAs) accompanying various shipments of peanut products. COAs are documents that summarize laboratory results, including results concerning the presence or absence of pathogens. As alleged in the charging documents, on several occasions these four defendants participated in a scheme to fabricate COAs stating that shipments of peanut products were free of pathogens when, in fact, there had been no tests on the products at all or when the laboratory results showed that a sample tested positive for salmonella.

After the salmonella outbreak that gave rise to this investigation, FDA inspectors visited the plant several times in January 2009. According to the indictment, the inspectors asked specific questions about the plant, its operations, and its history, and, in several instances, Stewart Parnell, Lightsey and Wilkerson gave untrue or misleading answers to these questions.

"The charges announced today show that if an individual violates food safety rules or conceals relevant information, we will seek to hold them accountable," said FDA Commissioner Margaret A. Hamburg, M.D. "The health of our families and the safety of our food system is too important to be thwarted by the criminal acts of any individual or company."

Stewart Parnell, Michael Parnell, and Samuel Lightsey are each charged with two counts of conspiracy; multiple counts of introducing adulterated food into interstate commerce with the intent to defraud; multiple counts of introducing misbranded food into interstate commerce with the intent to defraud; multiple counts of interstate shipment fraud; and multiple counts of wire fraud. Stewart Parnell, Lightsey and Wilkerson are also charged with multiple counts of obstruction of justice.

Kilgore pleaded guilty to one count of conspiracy to commit fraud, one count of conspiracy to introduce adulterated and misbranded food into interstate commerce, eight counts of introducing adulterated food into interstate commerce with the intent to defraud, six counts of introducing misbranded food into interstate commerce with the intent to defraud, eight counts of interstate shipment fraud, and five counts of wire fraud.

Mark F. Giuliano, Special Agent in Charge, FBI Atlanta Field Office, stated, "The FBI was brought in to this matter to provide additional resources and expertise to a complex and very serious investigation. We fully understand the victim impact as a result of this salmonella outbreak and will be asking to hear from other possible victims in this matter."
The case is being prosecuted by Trial Attorneys Patrick Hearn and Mary M. Englehart of the Consumer Protection Branch of the Civil Division of the Department of Justice and Assistant U.S. Attorney Alan Dasher of the Middle District of Georgia. Marietta Geckos, formerly a Trial Attorney with the Consumer Protection Branch, also worked on the prosecution. The case was investigated by the Food and Drug Administration’s Office of Criminal Investigations and the FBI.

An indictment is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.