The Honey Launderers: Uncovering the Largest Food Fraud in U.S. History | Hacker News Reader

The Honey Launderers: Uncovering the Largest Food Fraud in U.S. History

businessweek.com

129 pointsacdanger92 comments

The largest food fraud in the US is not honey. It is the corporate farming conglomerates who take government welfare to not grow any crops at all many years.

$11 BILLION taxpayer money paid to not grow crops since 2003. Seriously, google it.

That and massive subsidies for ethanol from corn. Most massive scam in US history.

Oh and they de-coupled foodstamps from corporate welfare now so expect this to become more insane over the rest of the decade.

Not only do we pay American farmers to not grow anything, we also pay Brazilian farmers to not grow anything for our right to do so at home. (The WTO fined the US for cotton subsidies. Congress decided to just pay the fines to foreign farmers, rather than touch US farm subsidies.)

http://en.wikipedia.org/wiki/Brazil%E2%80%93United_States_co...

Other fun facts include:

1) The US price fixes raisins, to support farmers at the cost of consumers.

http://en.wikipedia.org/wiki/National_Raisin_Reserve

2) The US code has a minimum price for sugar. Yes, you can break the law just by selling sugar for less than an amount determined by congress. (Well, nobody in congress reads the thing, so it's probably coming straight from lobbyists.)

This is the main reason that everything we buy has corn syrup in it, and not sugar. (Sugar price fixing combined with corn subsidies.)

http://sugarreform.org/why-reform/what-the-experts-are-sayin...

Many candy factories that used to be in the US have moved to Mexico, because Mexico doesn't price fix sugar.

http://www.npr.org/blogs/money/2013/04/26/179087542/the-loll...

Experts will dispute this, but I swear Coke (the drink!) and chocolate tastes better everywhere else in the world. In part because they use real sugar and not corn syrup.

>Experts will dispute this, but I swear Coke (the drink!) and chocolate tastes better everywhere else in the world. In part because they use real sugar and not corn syrup.

Of course it does. Everyone knows this. There is a reason people pay extra for Coca Cola imported from Mexico (you can get it in the grocery store in South Texas). Same thing for Dublin Dr. Pepper vs Dr. Pepper.

http://drinks.seriouseats.com/2011/09/the-food-lab-drinks-ed...

This is a really wordy article to express very simple ideas. The author is trying hard to dismiss those of us who prefer the non-corn-syrup taste, but I don't think they've succeeded here.

At best they've shown some combination of:

* It's a minority of people who prefer the non-corn-syrup taste.

* Some people prefer glass bottles.

* Most people aren't that conscious of the difference.

As to this suggestion to Coca-Cola:

> Bottle American HFCS-sweetened Coke in Mexican Coke bottles, and just tell everyone it comes from Mexico.

They do sell corn syrup coke in single-serving glass bottles at some places. I have sometimes bought them mistakenly thinking it was the Mexican one. When this happens I taste the difference and don't like it.

Corn syrupy beverages just taste unpleasant to me. It took me a while to realize this, but once I did I found I can consciously discern the taste of corn syrup. I have the same objection with bottled sweetened tea, for example. Some brands have corn syrup and some brands have sugar. I tend to like the latter and dislike the former. This has happened to me even when I wasn't aware of the ingredients.

Well crap. http://blogs.dallasobserver.com/unfairpark/2012/01/buy_up_al...

Another reason chocolate tastes better everywhere else in the world is PGPR, an emulsifier derived from castor oil that's been replacing cocoa butter since 2006. Most European food standards heavily restrict the use of vegetable oil in chocolate.

Cocoa butter is a vegetable oil. I take your point, just being pedantic.

The trouble I have with US milk chocolate is that it's made with sour milk. It tastes like vomit to European taste buds.

By "heavily restrict" I mean they only allow certain vegetable oils to be used.

I like your call to arms and encourage you to both be angry and participate in the legislative process. But, the US imported $82 billion dollars worth of agricultural products in 2010 [1]. This makes the US potentially dependent on foreign nations for basic necessities. Preventing the loss of self-sufficient food and agriculture production, at a level that will provide for the population and keep prices reasonable during a crisis, is an aspect of national security.

[1] http://www.census.gov/compendia/statab/2012/tables/12s0851.p...

Unless there is a good reason I am not aware of (please tell me), if something can be done cheaper, better, etc, at home, then why would you want to stop that process and import, and still pay double (for import and for do-not-product).

I agree with OP, regardless the reason, it sounds like huge scam.

The location of the line between necessity and desire is the source of many heated conflicts.

Comparative advantage is a one thing that comes to my mind.

http://en.wikipedia.org/wiki/Comparative_advantage

I agree with you about how terrible that is, but that's bad policy. It is not fraud because it is legal, even though the law may be crazily ill-advised and pander to a particular constituency.

In principle, farm subsidies are to protect farmland from development, and prevent the necessity of food imports. It seems to be administered pretty terribly in practice.

Actually, if the corporate farmers grew the same crops in the field year after year, the land would eventually not be arable. This payment allows for the land to recover from the disastrous methods the corporate farmers use.

So we're making up the difference for short-sighted corporate farming policies that they would otherwise have to institute themselves?

Corporate welfare.

> Actually, if the corporate farmers grew the same crops in the field year after year, the land would eventually not be arable.

So you reckon corporate farmers, left to their own devices, will destroy their own ability to grow crops?

Happens all over the world that short termed farming leads to massive long term damage. Dust bowl etc.

Farming always focuses on the current and next year.

> Farming always focuses on the current and next year.

Citation needed.

I'm a (admittedly small-scale) farmer myself, and I've yet to meet a farmer who had that mindset. Further, I simply can't see a good reason why a farmer would destroy his most precious asset - his land.

Because it's cheaper to get a new one. If you don't happen to have your house nearby, plan to live there for next fifty years and want to raise kids.

It's normal for corporations to destroy arable land in Czech Republic too, they can always move elsewhere...

At large scale, there's no incentive to do basic crop rotation.

That is the nature of farm business! Deal with it or gtfo.

It stunts other countries too. Aggressive protectionism affects those who want to sell to America, although this probably isn't of too much concern to Americans.

It does rather expose the arch-evangelist of free trade, the USA, as a bit of a hypocrite.

> Seriously, google it.

Why don't you post a link?

If Ann believes something strongly she is likely to cherry pick sources to support her view.

If Bob wants to check her information it's useful if he does his own searching, because he might find (very quickly) a bunch of sites carefully debunking some nonsense, while Ann could have posted a credible sounding link.

What you stated doesn't really provide a good reason for not providing sources.

Imagine turning in a paper to a professor without sources and telling them that they should verify the information themselves.

>>Imagine turning in a paper to a professor without sources and telling them that they should verify the information themselves.

Except you aren't a professor and this is not a college paper. It's a discussion on the Internet.

Citation needed.

Its not fraud. Congress explicitly decided that they should pay farmers not to grow crops as a method of price control. Fraud would be if those farmers took the money and proceeded to grow the crops.

I'm all for harsh punitive measures for (convicted) business-crooks, but are these SWAT raids on peoples' businesses (and homes) ever a good idea? What good can come from a bunch of stormtroopers bum-rushing an office?

Justification for budget increases of said SWAT teams?

Absolutely. You might be interested in Radley Balko's book: http://www.amazon.com/Rise-Warrior-Cop-Militarization-Americ...

Intimidation. They use the same tactics against raw dairy operations.

Bingo. You see a bunch of guys with machine guns coming out of nowhere, you may spill your beans right there and all of that is admissible in court.

We New Zealanders are so in awe of this BS technique that we showed off our copy to our US overlords with the Dotcom raid. Unfortunately we neglected to make the techniques used legal first, so the drawn out court process has been a bit painful and compensation payouts to him are likely.

I'm not sure where you got the idea that these raids were conducted by SWAT teams. The article only vaguely alludes to "federal agents".

"Sometime around 10 a.m., von Buddenbrock heard a commotion in the reception area and went to have a look. A half-dozen armed federal agents, all wearing bulletproof vests, had stormed in. “They made a good show, coming in with full force,” he recalls. “It was pretty scary.” "

Sure, the article doesn't report the use of flashbang grenades, or shooting anyone's pets, but it also doesn't sound like agents in suits conducting themselves like rational people.

In bulletproof vests. Presumably heavily armed.

I don't think that just because they were wearing bulletproof vests you can reasonably infer "SWAT". Many law enforcement agencies have written or unwritten requirements to wear bulletproof vests when in the field.

http://www.bja.gov/Publications/PERF_BodyArmor.pdf

"Our first main finding was that almost all law enforcement agencies (99.4 per- cent) from across the country report that their officers wear body armor when on duty." - BJA/PERF Body Armor National Survey - page 36

Ignoring the word "SWAT" for the moment this was a raid on corporate offices for people smuggling honey.

I'm not sure why officers were armed. I guess I can understand why they wear protective clothing (but are shootings in that situation common?)

Are honey smugglers really going to shoot law enforcement?

You need lots of people in the raid to prevent employees shredding and deleting everything.

I think the difference is "armed" verses "guns drawn". You can't expect anyone to raid an allegedly illegal operation or building or confront someone without at least having a weapon on them.

A gun in my face or pointed at me without me presenting any danger to that person would be unacceptable.

It's not easy to properly assess a situation when you are waving a gun around. Requiring an officer/agent to draw his weapon would give him a few extra critical seconds to judge whether or not someone/something is an actual threat.

If an officer/agent busts into a room with a gun drawn and I set down a water bottle too fast or startles my 30 pound dog, then I or my pet has the chance of being shot unnecessarily, that's unacceptable and is something that needs to change.

> I'm not sure why officers were armed.

My assumption is that any officer who is armed at the moment is always armed, and any officer who is always armed will be armed when he visits you. In other words, being armed in this instance may not be particularly interesting. Now, if they had their arms drawn at the ready, that might be more than interesting.

Police in NZ are not routinely armed, at least, not with anything more than some pepper spray and a batton.

I am aware that this is not the case in many other parts of the world, but I still pay attention to the difference between 'normal' and armed police.

It's the same in Norway, not sure about the other Scandinavian countries. Of course, our distinction between 'normal' and 'armed' police has no bearing in the US where the environment is completely different and armed civilians is almost an everyday occurrence.

I hate defending the feds here, but often times these types of legitimate-looking businesses are actually fronts for something else, such as arms trade. When you're raiding an office you have no idea what you will find, so it's better to be over-prepared and over-armed than under-prepared and under-armed.

>When you're raiding an office you have no idea what you will find,

These are not responders chasing a suspect, they are investigators. How does a professional investigator find himself in some kind of Jean Claude van Damme B-movie-esque arms warehouse cum office by surprise? Sounds like you think they shouldn't need to investigate anything, just barge in and see how it goes.

>so it's better to be over-prepared and over-armed than under-prepared and under-armed.

Better for whom?

Sure. But by that logic, why don't we have the SWAT teams perform all traffic stops? I would be willing to bet that more cops are shot during traffic stops than anywhere else.....

So only punishment for the fraud (of masking the country of origin, adulterating honey with banned antibiotics, rice molasses and such) was one year of jail for two executives, who were declared rogue by the company after their arrest. How will you deter future frauds then?

this part reminded me of breaking bad.

You must be confusing morality with complying with regulations. The one has got nothing to do with the other. It is actually quite the opposite: "And then spoke the creator, the god who freed us out of slavery in Egypt. One. First Law. You shall not recognize any other lawmaker than me." The punishment for breaking the First Law, is that you shall become a slave again. You probably are one already.

I always thought this was the largest food fraud, it almost brought down American Express. And they weren't forging the origin of the product but actually replacing it with water!

http://en.wikipedia.org/wiki/Salad_Oil_Scandal

I get a broken link on my mobile device. This link seems to work, though:

http://mobile.businessweek.com/articles/2013-09-19/how-germa...

"After U.S. beekeepers accused Chinese companies of selling their honey at artificially low prices, the government imposed import duties in 2001 that as much as tripled the price of Chinese honey. Since then, little enters from China legally."

If Chinese companies were truly selling their honey at artificially low prices -- that is, dumping the honey below cost, in an attempt to destroy the competition -- then this entire scheme would not make sense. Why sell some small amount of honey at below-cost prices as part of an illicit scheme bypassing tariffs?

What this truly proves is that U.S. tariffs against Chinese honey producers are not actually based on "artificially" low prices. It's just pure protectionism for an industry group, at the expense of consumers.

You seem to have missed the bits about Chinese honey being commonly collected and processed in non-standard ways (machine dried, it said) that lead to inferior taste, which was then covered up with various additives. Also the bits about Chinese honey often containing residues of antibiotics that are banned in US food.

So I read "artificially low prices" not as "dumping below cost" but rather "cutting costs by ignoring legally required quality controls".

China has notoriously poor food standards and regulations, and only enforces them when they need to have some heads roll because the public is outraged. Business culture in mainland China is also strongly a "caveat emptor" market, so every buyer is left to their own devices to perform due diligence when purchasing something. In the US, regular inspections and regulations keep things mostly orthodox, and while irregularities happen in US food manufacturer, they are far and few between relative to China.

With that in mind, what would be reasonable if providing an exception to the tariff, if, and only if, the Chinese honey manufacturer can demonstrate provably that their honey and manufacturing meet high standards. This should apply everywhere. If these manufacturers were employing better manufacturing methods, their honey prices would probably be more inline with US prices.

Why not ban non-standard honey then, not Chinese honey? I am sure some real honey is made in China.

It does seem that way, however, much of the honey appeared to be contaminated or adultered and passed of as higher quality.

What's frustrating for me is that the Commerce Department never releases any data when they levy anti-dumping tariffs. U.S. tariffs against Chinese solar cells is a great recent example. Where is the evidence that Chinese companies are actually dumping, rather than simply being cheaper?

if you can get a controlling interest of a market you can then dominate the market. If they can afford a loss for enough time to ensure that they control the market they can raise the price and start really making large profits

This. And if you happen to have a powerful government propping you up, and your government expects that as a result of your combined efforts you'll have a monopoly and put the other country's industry out of business, you can afford to operate at a loss for a long time.

Look at semiconductor fab plants in Asia, compared to semiconductor fab plants in the US, circa 1980s and 1990s.

Always buy local honey from real beekeepers. Otherwise you are probably buying sugar water made by non worker bees.

Doesn't that open a market for local "beekeepers" to buy honey from China and package it up with inkjet printed labels and hand screwed lids that say "local from <insert town>"? Placebo and power of suggestion is strong. I often wonder myself if produce I am buying at farmers markets a really authentic or just resold produce from grown on a large agro-business farm someplace across the country.

Also, I am a ware of a scheme that is importing Chinese garlic into Western Europe through Eastern Europe. You see Chinese garlic much like honey is banned there. Yet unbeknownst to them West Europeans (Germans, French) have been chowing down on Chinese garlic for a while now. The way it works it like this. A large shipment is brought into a city next to the EU border. Then small paid cargo van drivers make lots of trips across the border seemingly as local farmers going about their business. Then it is either sold at farmers market or "local" farmers buy it from them and sell it as "local" produce. Easy peasy.

Bees can be raised, with a few precautions, even in urban settings. What you really need is an experienced mentor who can help consider things like where to place the hive so it doesn't pose a problem for neighborhood kids (rooftop is good btw), and other precautions, such as not wearing gloves when handling the bees if in an urban environment.

I am an amateur beekeeper but I do not understand how wearing gloves is related to raising bees in an urban environment.

You are right, that urban bees are fine. Providing a water source will prevent most nuisance issues.

The argument is that if you wear gloves you miss out on the early signs of alarm from the bees, and therefore they are more likely to swarm and get aggressive towards bystandards. Without gloves you get a better sense of the alarm state and can avoid problems. It's generally easier to manage alarm state without gloves.

I got my first hive a few years ago, and I am noticing that there are fewer recommendations of working without gloves in urban environments today. I don't know why this is the case. Also I am used to a large yard/small town environment (lots of pedestrians, folks doing yard work, etc), and there are plenty of other environments where I would expect this to be less of an issue (for example a rooftop hive on the third storey is going to provide a lot less exposure in this regard). So demographics and hive placement may have something to do with it.

I like the idea that foreigners got a harsher sentence than the Texans in a case involving exceptionnally big tariffs against a chineese product, it reinforces my prejudice that Americans are xenophobes.

Do you have any evidence to suggest that the crimes that both the citizens and the non-citizens were charged with were different and yet one group got a lesser sentence?

These are not non-citizens, these are citizens from another country. I'm a bit tired of US people using this vocable too.

While I agree with the sentiment, as an American, it becomes a bit difficult to not let the verbiage of the media and power seep into your vernacular.

Orwell agrees. "foreigner" or "alien" convey the exact meaning you are looking for without implying the person comes from a barbaric non-democratic country (ironically on the day they elect their deputies, and transitively, their leader).

Uh, since "people not claimed by any country" is essentially an empty set, I don't see a reason to avoid using this term for it's more usual meaning of "people not a citizen of the country with the law to which we're referring".

1) alas it's a largely non-empty set, there are international treaties (one of them asking countris not to remove the last citizenship of someone) and UN branches dedicated to the problem. I think currently it happens mostly in eastern Europe and Africa. At the personal level, loosing some papers, having registries burned during a war and being from a not really liked ethnic background might make your nationality hard to prove. There are systems trying to give "quickly" a nationality to a refugee. It is seen as a legal emergency. 2) the word was actually created as the opposite of "subject" (of the ruler), to insist on the democratic side, not as the opposite of "foreigner".

Hm. I guess my objection to using "foreigner" is that it sounds slightly pejorative. "Non-citizen", by contrast, sounds only descriptive. But I'd be fine with figuring out a different mainly-descriptive word. :)

As a happy non-citizen of the U.S., I think the term is acceptable and succinct.

Last year I visited Germany for the first time and was astounded at how good their English was, despite it being so far from French/Spanish/Italian (which I'm a little familiar with)...everywhere I went, people were happy to speak to me in English, almost in a slightly condescending way, like "poor American, let me speak your language for you" (and the condescension is well-deserved, IMO).

But wow, the German executives at hand must think Americans are really anti-multi-lingualism if "WRITE IT IN GERMAN" is one of their protocols for obfuscating their fraud.

"and the condescension is well-deserved, IMO"

Really? You are to be expected to speak fluently in every language of any country you might visit? Or is it that you are expected to be polite and refuse to visit any country where you can't speak the language?

Criminy, there are far too many languages and interesting foreign countries around to be holding yourself to that standard. As english is the most common lingua franca, knowing it allows one to travel freely to the vast majority of the world and communicate on some level with some locals.

I am friends with a linguist - speaks 9 languages - if German wasn't one, would condescension still be well-deserved? Would you be condescending to a german/thai/ecuadorian visiting your hometown if they couldn't speak english?

Get over your self loathing and enjoy your travels...

I think OP is referencing the fact that most Americans are monolingual, and that we place a low priority on languages in our educational system. If OP spoke three languages fluently, but not German, the condescension wouldn't be deserved.

It's getting more common in Europe to be fine with speaking English in a variety of circumstances, not mainly because of Americans, but because it's often the only feasible way to communicate among Europeans. When Danes visit Berlin, they typically speak English, and when Germans visit Copenhagen, they typically speak English there too.

You're aware English is primarily a Germanic language, right?

Not particularly relevant, partly because English has been corrupted by all sorts of influences. There's some common vocabulary, but the syntax and sound are very very different.

Look at it from the other perspective: German is commonly (and IMO properly) considered a bit harder for anglophones to learn as compared to Spanish or Italian. The linguistic family is only a small piece of information, and doesn't tell the whole story.

As far as I know the fact that "the sound is different" from most European languages is not really due to any "corruption" (like the Norman Conquest) but due to this: http://en.wikipedia.org/wiki/Great_Vowel_Shift

Quoting from the Wikipedia article linked above:

> Vowels of Middle English had "continental" values much like those remaining in Spanish and liturgical Latin. However, during the Great Vowel Shift, the two highest long vowels became diphthongs, and the other five underwent an increase in tongue height.

As for syntax I've always heard and read that it sounds very natural to speakers of Germanic languages.

I was recently listening to some real Saxon from the dark ages and was struck by how, knowing modern Swedish and English, I could sort of understand it.

The big thing about modern German is the word order, which is what makes machine translation so daunting iirc some Google presentations on the subject.

I wonder whether they were arrested in a sting operation.

Would you say the feds set up a honeypot?

YEEEEAAAAHHHHHHH

I'm not too much of a conspiracy theorist but I wonder if the Chinese are behind Colony Collapse Disorder that is devastating our bee populations... They destroy our bees and we are therefore beholden to them in yet another critical piece of infrastructure. I guess the best way to determine that is to figure out if CCD is destroying bee populations in China at the same rate as in the U.S. and Europe.

Far-fetched? Cut back on the weed? Stop reading Hacker News and get back to work?

No, the bees just went back to their home planet. I'm sure it's nothing to worry about.

Paint some bees on the containers, replace ALW with Madrigal GmbH, Hamburg with Hannover, and you get another eposide of...

I was shocked at the fines involved. $180 million in tariffs avoided, but from what I read, only $3 million in fines were meted out.

the take away in this history is that if they sold honey at regular prices at the honey holdings "over the table" while still giving the deal to the buyer and eating the fiscal difference for the fake vs received price, they would still be operating.

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