McHenry County Blog

A press release from the U.S. Attorney’s Office:

TWO COMPANIES AND FIVE INDIVIDUALS CHARGED WITH ROLES IN ILLEGAL HONEY IMPORTS; AVOIDED $180 MILLION IN ANTIDUMPING DUTIES

CHICAGO— Five individuals and two domestic honey processing companies have been charged with federal crimes in connection with a nationwide investigation of illegal importations of honey from China that was mislabeled as coming from other countries to avoid antidumping duties or was adulterated with antibiotics not approved for use in honey.

Altogether, the seven defendants allegedly avoided antidumping duties totaling more than $180 million.

None of the charges allege any instances of illness or other public health consequences attributed to consumption of the honey.

The charges represent the second phase of an investigation led by agents of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). In June 2011, an undercover agent assumed the role of director of procurement at defendant HONEY HOLDING I, LTD., which by then was cooperating with the investigation.
Honey Holding, doing business as Honey Solutions, of Baytown, Tex., and defendant GROEB FARMS, INC., of Onsted, Mich., two of the nation’s largest honey suppliers, have both entered into deferred prosecution agreements with the government, subject to court approval, with Honey Holding agreeing to pay a $1 million fine and Groeb Farms agreeing to the payment of a $2 million fine. Both companies have agreed to implement corporate compliance programs as part of their respective agreements.

The individual defendants include three honey brokers, as well as DOUGLAS A. MURPHY, former director of sales for Honey Holding, and DONALD COUTURE, president of Premium Food Sales, Inc., a broker and distributor of raw and processed honey in Bradford, Ontario.

In December 2001, the Commerce Department determined that Chinese-origin honey was being sold in the United States at less than fair market value, and imposed antidumping duties. The duties were as high as 221 percent of the declared value, and later were assessed against the entered net weight, currently at $2.63 per net kilogram, in addition to a “honey assessment fee” of one cent per pound of all honey. In October 2002, the Food and Drug Administration issued an import alert for honey containing the antibiotic Chloramphenicol, a broad spectrum antibiotic that is used to treat serious infections in humans, but which is not approved for use in honey. Honey containing certain antibiotics is deemed “adulterated” within the meaning of federal food and drug safety laws.

In 2008, federal authorities began investigating allegations involving circumventing antidumping duties through illegal imports, including transshipment and mislabeling, on the “supply side” of the honey industry. The investigation resulted in charges against 14 individuals, including executives of Alfred L. Wolff GmbH and several affiliated companies of the German food conglomerate whose U.S. honey-importing business was based in Chicago, and others for allegedly avoiding approximately $80 million in antidumping duties on Chinese-origin honey. Authorities seized and forfeited more than 3,000 drums of honey that entered the country illegally.
The second phase of the investigation, announced today, involves allegations of illegal buying, processing, and trading of honey that illegally entered the U.S. on the “demand side” of the industry. The investigation is continuing.

Gary Shapiro

“We applaud the efforts of HSI, Customs and Border Protection, and other agencies involved in this complex, long-term investigation to enforce the laws that exist to protect U.S. consumers and the honey market,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.

“These businesses intentionally deprived the U.S. government of millions of dollars in unpaid duties,” said ICE Deputy Director Daniel Ragsdale. “Schemes like these result in legitimate importers and the domestic honey-producing industry enduring years of unprofitable operations, with some even being put out of business. We will continue to enforce criminal violations of antidumping laws in all industries and ports of entry so American businesses and foreign producers of goods all play by the same rules.”

Also announcing the charges were Gary Hartwig, Special Agent-in-Charge of HSI Chicago; William A. Ferrara, Acting Director of Field Operations for U.S. Customs and Border Protection (CBP) in Chicago, and Daniel Henson, Special Agent-in-Charge of the Chicago Field Office of the Food and Drug Administration’s Office of Criminal Investigations.
The U.S. Food and Drug Administration operates a toll-free number for consumer inquiries: 1-888-INFO-FDA (463-6332).

The government is being represented by Assistant U.S. Attorney Andrew S. Boutros.

The public is reminded that indictments and informations contain only charges and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt. If convicted, courts must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. Three of the five individuals charged have authorized the government to disclose that they intend to plead guilty to the charges against them.

Some wonder, "How much more money is in the taxpayers' honey pot?"

Special Prosecutor Henry Tonigan’s bill for his multi-year investigation of McHenry County State’s Attorney Lou Bianchi’s alleged misuse of office resources for political purposes took another step Monday when he filed a bill for August through November of last year.

It was for almost $90,800.

That brings the total almost to $312,300.

Besides the original scope of the investigation, he and Thomas McQueen, the man billing for the most legal time for the four months, have expanded their probe with the approval of Circuit Court Judge Gordon Graham to include official acts of alleged favoritism by State’s Attorney Lou Bianchi and a “nephew” of his Investigator Ron Salgado who was attending Prairie Ridge High School in Crystal Lake.

In addition, Bianchi is charged with “agree(ing) to recognizance bond in a felony theft case for…John Doe #3 who Bianchi said was his ‘nephew’ and that the Assistant State’s Attorney should continue the case until a first offender program was in place in McHenry County so John Doe #3 could have the benefit of that program.”

Bianchi has denied that he had a nephew who got into trouble.

Similar allegations have been lodged against State’s Attorney Investigator Ron Salgado for some shirttail nephew resulting from a long-ago divorce of a relative.

A second investigator has been charged with using his car for personal purposes.

For the second time today, the U.S. Attorney’s Office has taken action concerning illegalities on the part of Chinese business.  First, there were indictments against Chicagoans, Germans and Chinese for illegally importing Chinese honey.

Now, a plea agreement has been reached with David Yen Lee, a former Valspar chemist.

FORMER PAINT MANUFACTURING CHEMIST PLEADS GUILTY
TO STEALING TRADE SECRETS VALUED UP TO $20 MILLION

CHICAGO — A former chemist for a northwest suburban paint manufacturing company pleaded guilty today to theft of trade secrets, admitting that he stole numerous formulas and other proprietary information valued up to $20 million as he prepared to go to work for an overseas competitor.

David Yen Lee, formerly a technical director in Valspar Corp.’s architectural coatings group since 2006, admitted using his access to Valspar’s secure internal computer network to enter databases containing trade secrets and to download approximately 160 original batch tickets, or secret formulas for paints and coatings.  He also obtained raw materials information, chemical formulas and calculations, sales and cost data, and other internal memoranda, product research, marketing data, and other materials from Valspar’s offices in Wheeling.

Lee, 54, formerly of Arlington Heights and currently of Jersey City, N.J., pleaded guilty to one count of theft of trade secrets after being charged in early 2009.  U.S. District Judge Robert Gettleman set sentencing for Nov. 23.  He faces a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or gross loss resulting from the offense.  A written plea agreement contemplates an advisory federal sentencing guideline range of 57 to 71 months in prison.  The Court also must order mandatory restitution.

According to the plea agreement, between September 2008 and February 2009, Lee negotiated employment with Nippon Paint, located in Shanghai, China.  On Feb. 27, 2009, Lee accepted employment with Nippon as vice president of technology and administrator of research and development beginning on April 1, 2009, in Shanghai.  Lee purchased a ticket to fly from Chicago to Shanghai on March 27, 2009.  He did not inform Valspar that he had accepted a job at Nippon until he resigned on March 16, 2009.

At Valspar, Lee’s duties included scouting new paint technologies, coordinating with other paint laboratories, coordinating staffing and projects with Huarun Limited, a Valspar subsidiary located in China, and overseeing Valspar’s technical service group, which conducted experiments for paint coloring.

Between November 2008 and March 2009, Lee downloaded technical documents and materials belonging to Valspar, including the paint formula batch tickets.  He further copied certain downloaded files to external thumb drives to store the data, knowing that he intended to use the confidential information belong to Valspar for his own benefit.  The total value of the trade secret  information Lee took is estimated at between $7 million and $20 million, the plea agreement states.

The guilty plea was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation.

The government is being represented by Assistant U.S. Attorney Jessica Romero.