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118.

Sample Indictment -- Food Fraud Prosecution -- Conspiracy Count

The Grand Jury charges that:

COUNT 1

Conspiracy

Beginning at a time unknown to the grand jury, but at least as early as 1979, and continuing at least until on or about February 19, 1991, in the Western District of Michigan and elsewhere, the defendants,

REALGOOD PRODUCTS COMPANY,
FEELIN FINE FOODS CORPORATION,
XXXXX X. XXXXXX,
* * *

[NOTE: names and places changed from original] together with other persons known and unknown to the grand jury, did knowingly, willfully, and unlawfully combine, conspire, and agree to commit offenses against the United States and to defraud the United States, more particularly:

1. to violate the Federal Food, Drug, and Cosmetic Act, Title 21, United States Code, Sections 331(a), 331(k), and 333(b) (since July 22, 1988, Title 21, United States Code, Section 333(b) has been recodified as Title 21, United States Code, Section 333(a)(2)), by causing, with the intent to defraud and mislead, adulterated and misbranded foods, labeled as and otherwise represented to be orange juice from concentrate and concentrated orange juice for manufacturing, to be introduced, and delivered for introduction, into interstate commerce, and by causing, with the intent to defraud and mislead, foods labeled as and otherwise represented to be orange juice from concentrate and concentrated orange juice for manufacturing to be adulterated and misbranded while held for sale after shipment of one or more of their components in interstate commerce,;

2. to defraud the United States, in violation of Title 18, United States Code, Section 371, by obstructing, hampering, hindering, frustrating, defeating, impairing, and impeding by craft, trickery, deceit, and dishonest means the United States Food and Drug Administration ("FDA") of its lawful and proper government functions of monitoring and controlling the manufacture, distribution, and sale of orange juice from concentrate and concentrated orange juice for manufacturing; and

3. to violate the Federal Mail Fraud and Wire Fraud statutes, Title 18, United States Code, Sections 1341 and 1343, by knowingly and willfully devising, and intending to devise, a scheme and artifice to defraud, and obtain money and property from, buyers of foods represented to be orange juice from concentrate and concentrated orange juice for manufacturing, by means of false and fraudulent pretenses, representations, and promises, knowing that the pretenses, representations, and promises were false when made.

A. Introduction

The Grand Jury finds that, at times material to this Indictment:

1. REALGOOD PRODUCTS COMPANY ("Realgood"), was a corporation organized and existing under the laws of the State of Michigan and doing business at 2701 East Michigan Avenue, Lansing, Michigan. Realgood was, among other things, engaged in the business of manufacturing, processing, packaging, labeling, holding, shipping, purchasing, receiving, and selling in interstate commerce foods labeled as and otherwise represented to be orange juice from concentrate and concentrated orange juice for manufacturing. Realgood sold orange juice from concentrate under its own Valley Tree brand name, and packaged this product under the brand names of other companies.
2. XXXXXX X. XXXXXX was the owner and an officer and a director of Realgood. At various times, he held the titles of Chief Executive Officer and Chairman of the Board.
3. XXXXXX X. XXXXXXXXXX was a salaried employee and an officer of Realgood. He held the title of Vice-President of Finance.
4. XXXXX R. "XXXX" XXXXXXX was a salaried employee and an officer of Realgood. He held the title of Vice-President of Marketing.
5. Beginning on or about January 13, 1986, XXX XXXXX was a salaried employee of Realgood. He held the title of Quality Assurance Director.
6. XXXXX XXXXX XXXXXXX was a salaried employee and an officer of Realgood. At various times, he held the titles of Vice-President of Marketing, General Manager, President, and Chief Executive Officer.
7. Beginning on or about June 24, 1980, FEELIN FINE FOODS CORPORATION ("Feelin Fine") was a corporation organized and existing under the laws of the State of Illinois and doing business at 1234 North Pine, Chicago, Illinois. Feelin Fine was originally incorporated under the name of Feelin Fine Juices, Inc., but its name was changed to Feelin Fine Foods Corporation on or about September 9, 1983. Feelin Fine was, among other things, engaged in the business of manufacturing, processing, labeling, holding, shipping, purchasing, receiving, and selling in interstate commerce foods labeled as and otherwise represented to be orange juice from concentrate and concentrated orange juice for manufacturing. Feelin Fine sold orange juice from concentrate under the Feelin Fine brand name. Until approximately 1984, Feelin Fine did business under the name of Mr. Squigly, Inc. of Illinois ("Mr. Squigly"), an Illinois corporation that was Feelin Fine's corporate parent. On or about June 13, 1988, Feelin Fine and Mr. Squigly merged, with Feelin Fine being the surviving corporation.
8. DPXW, Inc. ("DPXW") was a corporation organized and existing under the laws of the State of Illinois, doing business at 1234 East Region Street, Suite 9876, Chicago, Illinois. DPXW was a broker and importer of food products.
9. XXXX X. XXXXXXXX was an owner, officer, and director of Feelin Fine and Mr. Squigly. He held the title of Vice-President of both Feelin Fine and Mr. Squigly. XXXXX X. XXXXXXXX also was an owner, officer, and director of DPXW. He held the titles of Secretary and Treasurer of DPXW.
10. XXXX X. XXXXXX was an owner, officer, and director of Feelin Fine and Mr. Squigly. He held the title of President of these firms.
11. XXX X. XXXXXXXX was a resident of Germany. He did business through a German entity known as RANDOM (also known as Really Random) and, among other things, sold preservatives for beverages, as well as equipment for use in injecting those preservatives into beverages.
12. "Concentrated orange juice for manufacturing" was the food product produced by removing water from mature oranges in compliance with FDA standards. Among other things, concentrated orange juice for manufacturing was used in the production of "orange juice from concentrate."
13. "Orange juice from concentrate" was the food produced by adding water to concentrated orange juice in compliance with FDA standards. It was not permissible for a manufacturer to add sugar, orange pulpwash, preservatives, citric acid, and amino acids to a product labeled as orange juice from concentrate or to a product labeled as concentrated orange juice for manufacturing.
14. Beet sugar (including a product known as invert beet sugar) was a commodity that, in commercial transactions involving large volumes, could be purchased and sold at prices that were commonly less than 32 cents per pound. When substituted for orange juice concentrate in the manufacture of orange juice from concentrate and concentrated orange juice for manufacturing, beet sugar yielded a savings of approximately $1.00 per pound for every pound of concentrate replaced.
15. The presence of beet sugar in orange juice from concentrate and concentrated orange juice for manufacturing was difficult to detect through chemical analysis.
16. Natamycin (which was also known as pimaricin or Delvocid) was an antibiotic that was approved by FDA for use as a preservative for cheese, but not for use as a preservative in beverages.
17. Orange pulpwash was the liquid left over after water was forced through the residue of juice processing (i.e., the skin, the peel, pulp, and other solids that remain after the juice is squeezed from oranges during processing). Orange pulpwash was generally sold for $.50 to $1.00 less per pound than orange juice concentrate.
18. FDA was the federal agency charged with the responsibility of protecting the American consuming public by, among other things, ensuring that foods were what their manufacturers represented them to be. FDA's responsibilities included monitoring products sold as orange juice from concentrate and concentrated orange juice for manufacturing so as to ensure that these products did not contain added sugar, preservatives, orange pulpwash, or other prohibited ingredients.
B. The Conspiracy

1. It was an object and goal of the conspiracy to increase the sales and profits of Realgood and Feelin Fine, by secretly substituting beet sugar, orange pulpwash, and other ingredients for some of the orange juice concentrate in products that Realgood and Feelin Fine falsely represented to be orange juice from concentrate and concentrated orange juice for manufacturing. Furthermore, Realgood and Feelin Fine added preservatives to their purported orange juice products so as to increase the products' shelf life and obtain an unfair advantage over their competitors. In order to conceal the fact that there had been a substitution of ingredients for orange juice concentrate in products falsely represented to be orange juice from concentrate and concentrated orange juice for manufacturing, defendants caused false documents to be created to hide the identity and use of beet sugar, preservatives, and orange pulpwash. Defendants also misrepresented their actions to government personnel and others. By substituting beet sugar and orange pulpwash for some of the orange juice concentrate and then selling the resulting mixture as orange juice from concentrate and concentrated orange juice for manufacturing, defendants were able to sell products on the market at fraudulently inflated prices.
2. It was further part of the conspiracy that defendants caused foods labeled as and otherwise represented to be orange juice from concentrate and concentrated orange juice for manufacturing to be adulterated within the meaning the following sections of Title 21, United States Code: Section 342(b)(2), in that beet sugar, syrup containing beet sugar, and orange pulpwash were substituted in part for orange juice and orange juice concentrate; Section 342(b)(3), in that citric acid and amino acids were added to those foods to conceal damage and inferiority; and Section 342(b)(4), in that citric acid, amino acids, and preservatives were added to and mixed and packed with those foods so as to make them appear better and of greater value than they were.
3. It was further part of the conspiracy that defendants caused foods labeled as and otherwise represented to be orange juice from concentrate and concentrated orange juice for manufacturing to be misbranded within the meaning of the following sections of Title 21, United States Code: Section 343(a)(1), in that the labeling of those foods was false and misleading because the labeling represented and suggested that the foods consisted only of orange juice from concentrate or unsweetened orange juice concentrate, when in fact those foods contained large amounts of beet sugar, as well as preservatives, orange pulpwash, citric acid, and amino acids; and Section 343(g), in that foods represented to be foods for which definitions and standards of identity were prescribed by regulation (21 C.F.R. §§ 146.145 and 146.153), namely, orange juice from concentrate and concentrated orange juice for manufacturing, failed to conform to those definitions and standards of identity, in that they were composed, in part, of ingredients not permitted by the definitions and standards of identity, including beet sugar (without a labeling statement), preservatives, orange pulpwash, citric acid, and amino acids.
4. It was further part of the conspiracy that defendants would and did, with the intent to defraud and mislead, introduce and deliver for introduction, into interstate commerce, adulterated and misbranded foods, to wit: foods fraudulently labeled as and otherwise fraudulently represented to be orange juice from concentrate and concentrated orange juice for manufacturing; and did acts, while such foods or their components were held for sale after shipment in interstate commerce, resulting in such foods being adulterated and misbranded, namely, adding beet sugar, orange pulpwash, and other ingredients and then fraudulently labeling and otherwise fraudulently misrepresenting the foods to be orange juice from concentrate and concentrated orange juice for manufacturing.
5. It was further part of the conspiracy that defendants would and did devise a scheme to defraud Feelin Fine's and Realgood's customers by selling them products that were represented to be orange juice from concentrate and concentrated orange juice for manufacturing when in fact the products consisted in part of cheaper ingredients such as beet sugar and orange pulpwash and had an artificially extended shelf life due to the addition of preservatives. For the purpose of carrying out that scheme, defendants caused items to be placed in and taken from the United States mails and caused certain writings to be transmitted in interstate and foreign commerce by means of wire communications.
6. It was further part of the conspiracy that defendants sought to impair, impede, and defeat the FDA's efforts to monitor and control the manufacture and distribution of orange juice products in that defendants attempted to cover up the addition of beet sugar, preservatives, orange pulpwash, and other substances to products sold as orange juice from concentrate and concentrated orange juice for manufacturing, and attempted to prevent government personnel from uncovering those activities.
C. Manner and Means of the Conspiracy

1. Feelin Fine and Realgood entered into an arrangement whereby Feelin Fine provided Realgood with the orange juice concentrates that Realgood used to manufacture products that it labeled and represented as orange juice from concentrate. Part of that arrangement was that the concentrates that Feelin Fine provided Realgood were not 100% orange juice concentrate, but consisted of, among other things, beet sugar. Realgood used some of these sugared concentrates in making and labeling purported orange juice from concentrate under Feelin Fine's name. It then shipped the finished product back to Feelin Fine for distribution to the consuming public.
2. Realgood added preservatives to the products that it packaged under Feelin Fine's label and to the products that it packaged under other clients' labels. In addition, Realgood used the sugared concentrates that it received from Feelin Fine in the manufacture and labeling of a product represented to be orange juice from concentrate that was sold under its own Valley Tree brand name. Purported orange juice that bore the Valley Tree label was distributed to the consuming public and to several Michigan school districts that used the product in federally-funded school breakfast programs. The Valley Tree product also contained preservatives.
3. In order to help conceal the fact that Realgood was including, in the manufacture of purported orange juice from concentrate, beet sugar and other ingredients, beginning in February 1984 and continuing through March 1988, Feelin Fine, under the direction of XXXXX X. XXXXXXXX, invoiced the sugared concentrates to Realgood under code names such as "Orange 101," "Orange 103," and "Tangerine 103." Between 1984 and 1988, Feelin Fine invoiced over 600 shipments to Realgood in this fashion. These concentrates contained in excess of 7 million pounds of sugar, thereby defrauding the consuming public of more than $7 million.
4. Sometime in 1982, Feelin Fine, through DPXW, began importing a preservative through XXXX X. XXXXXXXX. In order to help conceal from government personnel that a juice manufacturer (namely, Feelin Fine) was importing a preservative, the preservative was invoiced as a "cleansing and aseptisizing compound" or simply as an "aseptisizing compound." For at least some of the time that DPXW imported it, the preservative provided by XXXX X. XXXXXXXX contained natamycin.
5. Beginning in 1983 and continuing through March 1989, Feelin Fine sold Realgood the preservative that Feelin Fine was importing. In order to help conceal the fact that two juice companies were trading in preservatives, XXXXX X. XXXXXXXX and XXXXXX XXXXX XXXXXXX agreed that Feelin Fine would falsely invoice the product to Realgood as "flavoring compound."
6. Beginning in June 1987, Realgood, through XXXX XXXXX, made purchases of natamycin from two domestic suppliers of the preservative. Realgood's use of natamycin continued until on or about February 19, 1991.
7. In order to manufacture the sugared concentrates, XXXXX X. XXXXXXXX caused Feelin Fine to purchase large quantities of beet sugar from several different suppliers. In addition, beginning in February 1985, Feelin Fine purchased syrup consisting of beet sugar and orange juice concentrate from foreign sources for use in the production of the sugared concentrates. On numerous occasions, Realgood, pursuant to an arrangement worked out between XXXXX X. XXXXXXXX and XXXXXX XXXXX XXXXXXX, supplied one of the foreign sources with the raw orange juice concentrate for the syrup that Feelin Fine was purchasing.
8. In order to conceal the fact that Feelin Fine's sugared concentrates contained beet sugar, XXXXX X. XXXXXXXX caused Feelin Fine to add citric acid and amino acids to them.
9. In attempting to ensure that the addition of sugar to Feelin Fine's sugared concentrates was undetectable, both Feelin Fine and Realgood would routinely submit samples of their sugared orange juice products to a laboratory in Cambridge, Massachusetts, for testing.
10. Beginning in January 1985 through September 1990, Realgood supplied a juice company in Detroit, Michigan, with a sugared concentrate manufactured by Feelin Fine and known by the code name of "Orange 110." Realgood represented this product as being concentrated orange juice for manufacturing, well knowing that the product contained beet sugar and other unlawful ingredients. Realgood, through Feelin Fine, made approximately 200 shipments of "Orange 110" to the Detroit company. These shipments contained over 2 million pounds of sugar, thereby defrauding the consuming public of more than $2 million.
11. For several months in 1988, the method of adulteration changed, when Realgood requested Feelin Fine to stop adding sugar to its concentrates. In August 1988, however, Realgood asked Feelin Fine to resume adding sugar to the concentrates that were being supplied to Realgood. Once again, in order to conceal the fact that the concentrate contained beet sugar and other ingredients, Feelin Fine and Realgood agreed to use a code name, this time calling the mixture Mexican concentrate. Furthermore, in order to hide the fact that Feelin Fine was the source of the concentrate, it was first sold by Feelin Fine to a food wholesaler in Chicago, which then sold the product to (and invoiced) Realgood. Between August 1988 and September 1989, Realgood received more than 100 shipments of the so-called Mexican concentrate.
12. Beginning in July 1990 and continuing at least through on or about February 19, 1991, Realgood itself added orange pulpwash to the purported orange juice from concentrate that it was producing for Feelin Fine, for its own Valley Tree brand, and for other customers. In order to conceal its use of orange pulpwash, Realgood made false entries on its production records.
13. At various times over the course of the conspiracy, XXXXX X. XXXXXX met with customers and distributors of Feelin Fine's products in order to promote the sale of purported orange juice from concentrate, well knowing that the product illegally contained beet sugar and other ingredients and without disclosing such facts to the company's customers and distributors.
14. At various times over the course of the conspiracy, XXXXXX XXXXXXXX met with customers and distributors of Realgood's products in order to promote the sale of orange juice from concentrate bearing the Valley Tree label, well knowing that the product illegally contained beet sugar and other ingredients and without disclosing such facts to the company's customers and distributors.
D. Overt Acts

In furtherance of the conspiracy and to effect the objects thereof, in the Western District of Michigan and elsewhere, the defendants and co-conspirators committed the following overt acts, among others:

1. On or about August 11, 1982, XXXX X. XXXXXXXX sent a letter to XXXXX X. XXXXXXXX setting forth a plan to secretly and unlawfully use a preservative.
2. On or about September 3, 1982, XXXXX X. XXXXXXXX sent a letter to XXXX X. XXXXXXXX advising that XXXXXX XXXXX XXXXXXX had been experimenting with XXXX X. XXXXXXXX'S preservative.
3. Sometime in or about January 1983, XXXXXX X. XXXXXX approved Realgood's purchase from Feelin Fine's former parent, Mr. Squigly, of a mechanical system supplied by XXXX X. XXXXXXXX's company to be used in injecting preservative into purported juices manufactured by Realgood.
4. On or about January 24, 1983, XXXXX X. XXXXXXXX and XXXXXX XXXXX XXXXXXX signed a "Manufacturing and Trademark Licensing Agreement" on behalf of Mr. Squigly and Realgood, respectively, which obligated Mr. Squigly to provide Realgood with Realgood's requirements of purported concentrate necessary to manufacture purported juice to be sold under the Feelin Fine label as orange juice from concentrate.
5. On or about January 31, 1983, Mr. Squigly sent Realgood an invoice in the amount of $11,497.98 to cover Realgood's purchase of XXXX X. XXXXXXXX'S preservative injection system, which was falsely described on the invoice as being a "Special Flavoring System."
6. Sometime in or about February 1983, XXXX X. XXXXXXXX traveled from the Federal Republic of Germany to Lansing, Michigan, in order to install a preservative injection system at Realgood's plant.
7. On or about July 3, 1985, XXXXXXX X. XXXXXXXXXX met with XXXXX X. XXXXXXXX and XXXXXX XXXXX XXXXXXX in Lansing, Michigan, to discuss the billing arrangement among Realgood, Feelin Fine, and a company in Ontario, Canada, arising out of the Canadian company's manufacture of a syrup composed of orange juice concentrate and invert beet sugar for Feelin Fine with orange juice concentrate that Realgood provided.
8. On or about September 10, 1986, XXXXX X. XXXXXXXX sent XXXX X. XXXXXXXX a letter about Realgood's concerns regarding the cost of the preservative that Feelin Fine was importing.
9. On or about October 16, 1986, XXXXX X. XXXXXX and XXXXXX XXXXX XXXXXXX met in Lansing, Michigan, to discuss sales of the purported orange juice from concentrate manufactured by Realgood and packaged under the Feelin Fine label.
10. On or about April 3, 1987, XXXX XXXXX requested a laboratory in Cambridge, Massachusetts, to analyze some samples of purported orange juice Realgood for the presence of sugar.
11. On or about October 15, 1987, XXXX X. XXXXXXXX sent a telex from Germany to a customs broker employed by DPXW, disclosing that the preservative natamycin was one of the active ingredients in the so-called "cleansing and aseptisizing" compound that DPXW had been importing for Feelin Fine.
12. On or about March 17, 1988, XXXXXX X. XXXXXX and XXXXXX XXXXX XXXXXXX met with an attorney in Field of Dreams, Michigan, concerning the legal consequences of Realgood's illegal use of sugar in purported juice products.
13. On or about March 17, 1988, XXXXXX X. XXXXXX resigned as Chief Executive Officer of Realgood and named XXXXXX XXXXX XXXXXXX as his replacement.
14. On or about April 1, 1988, XXXXX X. XXXXXXXX sent a letter to XXXX X. XXXXXXXX discussing how to deal with inquiries from American regulatory authorities about the identity of the preservative that DPXW had been declaring on customs forms to be a "cleansing and aseptisizing compound."
15. On or about January 13, 1989, XXXXX X. XXXXXXXX, XXXXXX XXXXXXXX, and XXXXXX XXXXX XXXXXXX met in Lansing, Michigan, to discuss sales of Realgood and Feelin Fine products that were being labeled as orange juice from concentrate, but which actually contained beet sugar, preservatives, and other ingredients.
16. On or about February 4, 1989, XXXX X. XXXXXXXX traveled to Lansing, Michigan, in order to service the injection system that Realgood had purchased for adding preservatives to its juice products.
17. On or about March 8, 1989, XXXX XXXXX signed an agreement with a laboratory in Cambridge, Massachusetts, for the laboratory to obtain samples from grocery stores of purported orange juice bearing the Feelin Fine and Valley Tree labels and to test those samples for the presence of adulterants.
18. On or about May 19, 1989, XXXXX X. XXXXXX and XXXXXX XXXXX XXXXXXX spoke over the telephone about Realgood's production of purported orange juice from concentrate for packaging and distribution under the Feelin Fine label.
19. On or about May 8, 1990, XXXX XXXXX signed a second agreement with a laboratory in Cambridge, Massachusetts, for the laboratory to obtain samples from grocery stores of purported orange juice bearing the Feelin Fine and Valley Tree labels and to test those samples for the presence of adulterants.
20. On or about February 13, 1991, Realgood received a shipment of 64 drums of orange pulpwash from a firm in California for use in the manufacture of purported juice to be fraudulently labeled as orange juice from concentrate.
18 U.S.C. § 371111111111

[cited in USAM 4-8.235; 4-8.255]