Official website of the Department of Homeland Security
Fraud Investigation Cases
From counterfeit designer clothing to bogus pharmaceuticals, fraud by its very nature is a crime of deception. Explore how DHS sees past the fake facade to bring the makers to justice.
Uncovering the Largest Food Fraud in U.S. History
Bidding "Cheerio" to Honey Non Grata
The level of intricate detail put into the deception in order to cover up the sheer scale of the infiltration rivaled even what the Allies had employed to throw off the Germans before the invasion of Normandy. This invasion, however, was in the reverse: it was the Germans invading American territory, and not with soldiers but with cheap, contaminated containers of honey.
The reason for this invasion was not a tyrant, but a tariff. In 2001, American beekeepers accused the Chinese of keeping the price of their honey exports artificially low. This glut of dirt cheap honey entering the U.S. market threatened to put American honey makers out of business and beekeepers out of their jobs. Congress came to their rescue with an import duty aimed quelling this unfair competition. The new tariff more than tripled the price of honey coming from China; little has come from there ever since.
Honey, however, is big business in the United States. 400 million pounds of the stuff is consumed by Americans each year, more than anywhere else in the world. ALW, a Germany-based foodstuffs company, saw a distinct market opportunity: if it could only figure out a way to get Chinese honey around the tariff and into the U.S., it could undercut the rest of the market and make a killing.
Eventually they did. In 2002, eight ALW executives—including the CEO, Alexander Wolff—devised an elaborate plot to illegally import Chinese honey into the U.S. tariff-free by disguising its origins. Here’s how it worked:
- ALW hired Michael Fan, a Taiwanese businessman, who brokered the sale of honey from Chinese manufacturers to his operation in Taiwan.
- Fan would then transfer the honey from the green 50-gallon drums it arrived in (only China uses green drums for honey) and into standard black drums (used by the rest of the world).
- The repackaged honey was then shipped to Fan’s network of brokers in India, Malaysia, Russia, South Korea, Mongolia, Thailand, Taiwan, and the Philippines.
- At these sites, falsified labels were attached to the drums. The honey itself was filtered to remove traces of pollen that could reveal its true origins, and it was then loaded up with sugar and other additives to disguise the distinctly bitter taste unique to Chinese-made honey.
- These measures, along with faked shipment documents, allowed the doctored honey shipments to pass through the tariff barrier, after which it was sold throughout the U.S.
- If commercial buyers of the honey rejected it on quality grounds, a less-than reputable food firm— Texas-based Honey Holdings—could always be relied upon to purchase ALW’s supply, no matter how tainted it was.
This globetrotting fraud scheme managed to continue unnoticed for four years. Then, in 2006 U.S. Customs and Border Protection (CBP) agents inspecting a shipment bound for ALW’s clients discovered something strange: the honey came from China, but it had been labeled “Korean White Honey.” By 2007, there was an unprecedented volume of honey suddenly coming in from Indonesia, Malaysia and India. This made CBP more suspicious, after all, the total volume of these shipments far exceeded the total amount of honey historically produced by these counties. American honey makers also began crying foul, warning the Department of Commerce and U.S. Department of Homeland Security that the peculiarly low price of honey in the country could indicate companies were illegally importing Chinese honey.
This culminated in a raid of ALW’s American headquarters in Chicago by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) in March 2008, and another that June. What they found were hundreds of E-mails in German going back and forth between various senior ALW personnel and their Chinese brokers detailing the plot quite openly. They discussed falsifying reports from German labs chemically testing the honey’s origins, producing fake documents for U.S. customs officials, and finding new modes of routing the honey through other countries to throw off the scent.
This damning evidence was enough to arrest two mid-level ALW employees for directly overseeing the $80 million food fraud. ALW folded its U.S. operations soon thereafter. Neither did Honey Holdings escape prosecution for its role in the conspiracy and evading $180 million in tariffs.
ALW’s managers thought they could get away with it if they communicated exclusively in German, as if it were a form of linguistic encryption like an Enigma Machine. The real enigma, however, is how they thought no one in America could translate German.