Top Story: Law and order


James Wright, Senior Editor

Published on
March 1, 2012

Originally published in Seafood Business Magazine

As seafood fraud again makes headlines, enforcement efforts finally seem to be ramping up

Hearing Room A2 in Boston’s State House is just about filled, as a state senate investigation into seafood fraud gets under way. Local celebrity businessman Roger Berkowitz, CEO of the Legal Sea Foods restaurant chain that spans the East Coast from here to Florida, emerges from the hallway into the wood-paneled room flanked on each side by legal counsel. He finds his seat at the wide front table and adjusts the microphone. A New England Cable Network news crew readies its cameras and the murmuring crowd quiets.

Berkowitz is here to speak voluntarily, and also because his family-owned company, an institution in this city since 1950, was one of many named in a Boston Globe exposé about misbranded seafood in and around the city just a few months prior. Of the myriad offenses illustrated in the two-part, front-page “Fishy Business” series, Legal’s transgression was most likely a simple case of human error: A sample of a cod dish ordered by reporters from the Peabody, Mass., restaurant was proven by DNA testing at a Canadian lab to instead be haddock. In fillet form, the two groundfish species can be hard to tell apart, even for experts.

However, other instances outlined in the series demonstrated clear intent to defraud consumers via a bait-and-switch scheme known as species substitution. Multiple restaurants were selling tilapia as red snapper, Alaska pollock or Pacific cod as the regional favorite Atlantic cod, and escolar as the mysterious “white tuna,” among other transgressions. An astonishing 48 percent, or 87 of the 183 samples, were sold with the wrong species name, according to the Globe.

In nearly every case, a cheaper, more readily available species was masquerading as a more expensive species or given an appealing-sounding name that is illegal to use, according to federal regulations. In fact, there is no such thing as white tuna, but it looks good on a menu, far more recognizable and enticing to the average diner.

Cavalier use of vernacular fish names and outright deception had spun out of control and now all seafood businesses and restaurants in the region were under suspicion. State Sen. Thomas P. Kennedy would later say during the hearing that the story “touched a nerve” throughout Massachusetts, a state with deep seafood industry roots — the famous five-foot “Sacred Cod” carving, a symbol of this centuries-old connection, hangs in the chamber of the House of Representatives, just down the hall.

Berkowitz, perhaps the most well known fish guy in a town full of fish guys, told the committee that the problem is “easily fixable,” without a shred of the humor so evident in Legal Sea Foods’ TV spots and print advertisements.

“What we need is a process that is transparent, one that allows the public to have trust in the seafood they consume,” Berkowitz testified. “There are regulations out there, but the feds haven’t really paid attention to them. It’s really a question of enforcing. A public-private partnership is the quickest and most effective way of eliminating fraud.”

Cheating’s impact on local fishermen was a theme heard throughout the three-hour hearing, and if any consensus was reached, it was that not nearly enough is being done to protect them or the consumers who enjoy the fruits of their labor. Saying that the newspaper’s findings “cast a pall over the industry,” Berkowitz volunteered his company’s participation in a pilot program with state public health officials to educate the entire seafood supply chain — wholesalers, retailers and restaurants — about proper labeling and the economic and food-safety implications of flouting labeling laws (those efforts got under way just a few weeks later). Other state officials voiced interest in employing the same DNA-identification technology that busted the restaurants as a tool in renewed enforcement efforts.

Massachusetts is the first state to bring the issue of seafood fraud to a legislative session of this stature, yet rules governing the proper labeling of seafood products have been federal law for many years. But as the U.S. Food and Drug Administration, the Federal Trade Commission (FTC), the National Oceanic and Atmospheric Administration’s Fisheries Service (NOAA Fisheries) and various other local and state agencies across the country juggle multiple responsibilities on limited budgets, the duties of cracking down on fraudulent seafood trade practices has fallen through the cracks.

But that’s all changing: At press time, FDA agents were about to launch a “surveillance assignment” of seafood products in distributors’ inventories across the country. According to FDA spokesman Sebastian Cianci, the agency has six field labs outfitted with DNA-sequencing or “barcoding” technology (view sidebar here), but has recently purchased three more and is training staff to operate them. The initial effort will include multiple samples from no less than 100 product lots, targeting products known to be at high risk of substitution. A report on the early stages of this effort is expected to follow, but Cianci says the agency will ultimately use DNA barcoding on a routine basis.

Behind bars

If the Globe brought seafood fraud to the attention of consumers in New England, then Consumer Reports sought to do the same thing on a national level, less than a week later. The world’s largest independent product-testing organization reported that about 20 percent of the 190 seafood samples it purchased from restaurants and retailers in New York, New Jersey and Connecticut were mislabeled. Not to be outdone, environmental group Oceana also conducted a similar sting operation and found about one-fifth of the 88 seafood samples it collected from 15 Boston-area supermarkets were incorrectly identified. Undercover reports like these have been common for almost a decade.

But last year was an active one on the prosecutorial front as well — at least as far as the supply chain is concerned. A number of cases involving seafood mislabeling and illegally harvested seafood were resolved in 2011, with many of the charged parties ending up in jail as a result of convictions or plea bargains.

Wayne Hettenbach, senior trial attorney for the Environmental Crimes Section of the U.S. Department of Justice’s Environment and Natural Resources Division, has prosecuted several seafood companies engaged in fraudulent activities over the past decade, including Consolidated Seafood Enterprises-Reel Fish. In that case, which concluded last May, three individuals — Karen Blyth and David Phelps from Arizona and John Popa from Connecticut — pled guilty to switching the labels on pangasius from Vietnam to more costly species like grouper and selling more than 100,000 pounds of it throughout Alabama, Florida and Mississippi.

Not only that, the defendants falsely labeled farmed shrimp as wild, altered the country of origin on labels and changed the harvest dates on fresh shellfish tags.

“That’s not the only case where we have seen both corners cut on food safety and a willingness to engage in illegal seafood products,” Hettenbach told SeaFood Business in a January interview. “The motive is to make money and the mentality is ‘anything it takes’ to make money.”

Blyth, Phelps and Popa are currently serving prison sentences of up to 33 months; it took almost five years from the time of the first product seizure to the sentencing, which also included barring them from working with seafood for three years.

Just two years prior, Peter Xuong Lam of Fairfax, Va., got 63 months in prison and was ordered to reimburse $12 million to the government for unpaid antidumping duties on more than 10 million pounds of pangasius, which he sold as sole, grouper and other species.

Hettenbach says a confluence of events brought seafood fraud schemes to the attention of federal authorities. And once they looked, they kept finding more.

“The market pressures have been changing over time. More and more fisheries are more closely regulated. There’s more and more pressure on prices, and therefore there’s more and more pressure to substitute either scarce fish with more readily available fish or less expensive fish for more expensive fish,” says Hettenbach, who would not confirm nor deny that other cases are pending. “I’m not surprised when I see that happening because there’s an incentive for it to be done.”

The fragmented seafood industry, which has a large number of small companies, can make things difficult for investigators.

“Seafood fraud cases do pose a high level of complexity in order to successfully bring a case,” Hettenbach says. “That doesn’t deter us from bringing these cases but it explains why it sometimes takes a while to unravel what exactly is going on. It makes for challenging work.”

According to NOAA’s Office of Law Enforcement, recent seafood fraud convictions have resulted in $444,000 in fines, more than $12 million in forfeitures, more than $64 million in unpaid tariffs and 271 months of prison time or home confinement. Here’s a quick look at some recent seafood fraud convictions:

• Thomas Katz of Burlington, Mass., was fined $75,000 and sentenced to one year of probation and three months of home detention (due to failing health) for falsely labeling 2.5 million pounds of frozen fish from China and Vietnamese pangasius as cod or grouper in an effort to skirt import duties of up to 64 percent. His company, Universal Group, got three years probation and a $75,000 fine.

• Stephen Delaney of Quincy, Mass., was found guilty of Lacey Act and Food, Drug and Cosmetic Act violations for work he carried out for Universal Group. The president of South Shore Fisheries had changed the countries of origin on the labels as well as the net weights of the items. He also got three months of home confinement, a $5,000 fine and one year of probation.

• Adrian Vela and Sea Food Center of Tampa, Fla., were each sentenced to three years probation and more than $15,000 in fines for conspiring to mislabel farmed shrimp from Asia as shrimp from Panama.

• Just last month, California-based Seafood Solutions was ordered to pay $1 million in fines and community service payments for misbranding pangasius as “paradise grouper.” Company executives were scheduled for sentencing later in the month.

When asked what investigators are looking for or what businesses they are focused on, Hettenbach says, “The answer to that question is as broad as the different kinds of fraud there are.”

Alteration of the species, production method or country of origin on seafood packaging labels can happen at any point of the supply chain, from the producer to the importer to the restaurant that prepares it. Still, buyers who get caught, like some of the Boston-area restaurants implicated in the Globe stories, frequently blame their suppliers.

But what about the restaurants that get caught switching fish species to steal a few bucks here and there? There’s got to be a stiffer penalty than bad press.

Peter Christie, president and CEO of the Massachusetts Restaurant Association (MRA), testified at the senate hearing that the sheer number of seafood species available is naturally confusing. The MRA alerted all of its members that they should never substitute species without telling customers; that they need to be familiar with the FDA Seafood List (which includes acceptable market names, scientific common names, Latin names and vernacular names for about 1,700 species); and reminded them to work with reputable suppliers.

“Through education, this should go away. It’s the FDA whose jurisdiction this comes under, but the question about who’s guilty is the $64,000 question,” says Christie, who thinks seafood suppliers should state every acceptable name for a given species on the invoice. That way, he says, restaurants would have a choice of names and suppliers would be covered if a buyer wasn’t compliant.

Christie also feels that the Globe reporter targeted ethnic restaurants, or those that serve sushi, where the fish served often has multiple names in multiple languages, to bump up the count of offenders. “She went where the fish were biting,” he says.

“I don’t think restaurateurs are deceiving intentionally. Ninety-nine percent of them don’t believe they’re doing anything wrong. Part of it is naiveté and part of it is on the supply side. It’s not unlike so many other things relative to life: It starts with education and the biggest enemy is ignorance,” says Christie.

Hettenbach says federal prosecutors are unsympathetic and consider buyers at all levels — whether willing or unknowing participants in the scheme — equally guilty.

“For most of the types of fraud that we charge, we have to prove knowledge, or for lower-level crimes at least a recklessness or negligence that a person in the exercise of due care should have known that what they were buying was something other that what it appeared to be,” says Hettenbach. “So I will say if you look at the facts in the cases we have prosecuted, the question of the buyer’s knowledge of the illegality of the product in my view was not in question.”

Not just money

Aside from stronger enforcement tactics to deter misbranding, assuring accurate seafood species names and product weights is a task that falls upon individual companies, many of which are using DNA tests to bolster security.

Members of the National Fisheries Institute, which launched the Better Seafood Board in 2007, are required to sign an economic integrity pledge and use the watchdog group as a complaint mediator, if necessary. NFI spokesman Gavin Gibbons thanked the Massachusetts senate panel for helping to address the matter and added that no NFI members were implicated in the Globe series, “as we would expect.”

The United States’ top three foodservice distributors — Sysco, U.S. Foods and Performance Food Group — last fall wrote letters to all their seafood suppliers to inform them that they will not tolerate products that are inaccurately labeled for weight, origin or species. Numerous other seafood companies have spoken publicly about their zero-tolerance policies for fraud, like Jetro Holdings of College Point, N.Y. The operator of Jetro Cash & Carry and Restaurant Depot wholesale foodservice operations demanded 100 percent labeling compliance from all its suppliers, according to a Jan. 5 letter “We know and appreciate that the majority of our seafood vendors proudly comply with the standards that we detail in this letter,” wrote Gene Casazza, Jetro’s VP-perishables. “We also know that at Jetro there is no room for those who do not.”

Gib Brogan, a campaign projects manager for Oceana, also makes the case that seafood fraud harms the environment. During its investigation, Brogan says Oceana found fraud across a range of species like snapper and flounder, but he was especially discouraged to see Pacific cod being subbed for Atlantic cod in the Boston market. And one of the snapper samples collected was a whole fish from a major supermarket chain. “I could tell just by looking at it that it was the wrong snapper species,” he says.

“We’re finding there’s potential for fish from IUU (illegal, unregulated and unreported) fisheries to find a market in the United States. That’s a serious conservation concern,” he adds. “If we can clamp down, there are benefits for the oceans. We need large-scale testing. The benefits of a testing program justify the costs, from a management side, a consumer side and a public health side.”

Despite so much attention on fraud, shady dealings persist, and those seeking a level playing field welcome any help they can get. The inaugural meeting of the Massachusetts Seafood Marketing Commission, which includes Legal Sea Foods’ Berkowitz and several state legislative figures, occurred on Jan. 31. The commission is seeking to spin the Globe exposé and a call for more testing into a campaign to promote locally harvested seafood.

The heat is on in Washington, D.C., as well after two congressmen lit a fire under the FTC. Reps. Edward Markey and Barney Frank (D-Mass.) challenged the agency last October to step up its involvement in protecting consumers from seafood mislabeling. Markey is confident that cooperation among enforcement agencies can make a difference.

“There are ways to improve the communication and data sharing between the FDA, NOAA and FTC,” Markey says. “I’m drafting legislation that will improve their coordination and combat seafood fraud. The federal agencies also need to partner with the states to ensure that restaurants caught selling fraudulent fish aren’t let off the hook. Sinking seafood fraud is good for consumers and fishermen.”

Email Senior Editor James Wright at [email protected]

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