Importer, executives convicted of selling substandard shrimp

FDA Consumer, April, 1997 by Marian Segal

A St. Petersburg, Fla., corporation and three of its executives were convicted of felonies and misdemeanors related to selling about $4.5 million worth of decomposed shrimp. Much of the tainted seafood ended up in supermarkets and restaurant chains, but it was not possible to determine if consumers got sick from eating the shrimp.

A federal jury in the U.S. District Court for the Middle District of Florida returned guilty verdicts Oct. 18 against Sigma International Inc.; its vice president, William Andrew Walton, 47; plant manager Charles Sternisha, 64; and head salesman, international division, Robert Fields, 34; on a variety of federal crimes involving FDA and U.S. Customs fraud. They were found guilty of conspiring to import shrimp from India using false entry documents and false labeling to avoid compulsory product testing, of obstructing justice, and of adulterating and selling tainted shrimp.

Two other indicted defendants, Yaw Bin "Tony" Huang, owner of Sigma, and Geogy Kannikal, Sigma's purchase agent in India, remain fugitives in India and east Asia. A sixth defendant, Jagadeesh Reddy, was acquitted of charges against him.

During a 10-week trial, the government proved that Sigma had chemically treated the decomposed Chinese shrimp with a solution of chlorine and copper sulfate and then, with some success, passed it off to customers as "fresh frozen." It also showed that the firm imported frozen shrimp from unapproved packers in India. FDA places shipments from unapproved manufacturers on automatic detention, prohibiting the shipments' entry into the country until the shipper or importer proves the product meets FDA standards. Sigma used false invoices with the names of approved packers to avoid detention.

For three years, FDA's Office of Criminal Investigations (OCI) and the U.S. Customs Service collected evidence to bring the defendants to trial. "Chemists and experts in the shrimp business were flown in from India and England to testify for the government," said OCI agent Rande Matteson. He noted that Sigma spent more than $1 million for its defense.

The investigation was prompted by a routine FDA inspection of imported shrimp in Tampa, Fla., in October 1991. Norman Harvey, an investigator with FDA's Tampa resident post, noticed that the labels on cartons of shrimp imported from India identifying the packer had been altered or removed. Other cartons from the same shipment had labels from unapproved packers. Further checking revealed that the invoice submitted for the shipment listed the name of an approved packer. Examination of other entry documents showed discrepancies indicating that the invoice and India's Certificate of Health had been altered.

Harvey then notified the Customs Service about the problem and told inspectors that another shipment was scheduled to arrive in November. Harvey and a Customs inspector examined cartons from the November shipment and found the same kinds of discrepancies.

"Shrimp can be purchased from unapproved packers at rock-bottom prices and sold as legitimate product for handsome profits," Matteson explained. FDA's review of documents later showed that Sigma had imported more than 50 shipments of shrimp with false labels over a two- to three-year period.

The U.S. Customs Service initiated a criminal investigation, and customs agent Robert Siberski called Matteson to enlist OCI's collaboration. In December 1992, FDA and the Customs Service executed a search warrant of Sigma's business premises and subpoenaed letters of credit from the Los Angeles branch of a Taiwanese bank Sigma used to purchase its shrimp from India. The search turned up evidence that included correspondence in which Sigma's vice president, Walton, instructed Kannikal, the firm's purchasing agent in India, to falsify invoices and other documents to avoid automatic detention of the shipment. Copies of invoices in the bank's letter of credit files showed the shrimp was processed and packed by an unapproved packer, while the invoices Sigma submitted to FDA and the Customs Service showed the name of an approved packer.

In addition, Matteson said, "We found many handwritten notes by Walton instructing Kannikal to get doctored paperwork to present to the Customs Service and FDA showing that the shrimp came from an approved packer." At one point, Walton sent a message to Huang, Sigma's owner, apparently warning him that a U.S. firm in the New York-New Jersey area had been charged with importing shrimp from unapproved packers. That message, Matteson said, established that they both knew and were concerned that the Customs Service and FDA scrutinized shrimp from unapproved packers.

A review of additional records corroborated other evidence that Sigma engaged in a dual invoicing scheme, using false invoices to fraudulently bring the shrimp from India into the United States.

In December 1994, Jean Peoples, a consumer safety inspector in FDA's Tampa resident post, told Matteson that during a routine inspection of a cold storage facility, she walked by a pallet of frozen shrimp imported by Sigma from China and could smell it was rotten.