Food Vendor to U.S. Troops Settles Spoiled Food Case for $15 million

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Samir Mahmoud Itani thought he had the perfect business model; purchase foods for pennies on the dollar as they neared their expiration date, and sell them to the U.S. government to feed our hungry troops in Iraq.

The plan worked well from 2003 through 2006, when Itani shipped over $36 million of expired and mislabeled foods to U.S. bases in the Middle East.  Eventually, Itani and his company, American Grocers Ltd, were exposed by a former employee after the filing of a whistleblower lawsuit.

The warehouse that spoiled food built, American Grocers in Houston, Texas.

Prosecutors said that Itani’s company supplied a variety of foods to the U.S. military including potato flakes, peanut butter, produce, salad dressing and hamburger meat. The supplies were shipped from the company’s warehouses in Texas, to troops in Iraq and elsewhere. The company developed procedures to “erase” the manufacturer’s expiration date, and mark products with a new one, usually adding nine to eighteen months on the label.

Tracking the expansion of our troops in the Middle East, American Grocers’ business blossomed. At some point, the company began purchasing nearly-expired products from top U.S. food companies, including Kraft Foods International and ConAgra Foodservice. Once the food products arrived at the company’s Houston warehouses, employees went to work altering the expiration dates.

Employees used acetone, the same substance found in nail polish remover, to wipe out the printed expiration dates on labels. Employees then applied new stickers or stamped new dates on the goods, effectively extending the freshness date on foods whose shelf life had expired.

Delma Palleres, a former sales manager and the whistleblower in the lawsuit said that so much acetone was used in the operation, that it often smelled like a nail salon.

Itani, his wife and brother were accused of making false claims and falsifying documents in making claims about the condition of the food products. The Itani’s and their company, American Grocers, were charged with violating the Food Drug and Cosmetics Act. Itani, his wife Suzanne, and brother Ziad agreed to settle the lawsuit by paying a $15 million fine.

Suzanne Itani, CEO of American Grocers, released a statement denying any wrongdoing and said that the settlement was a way to avoid lengthy litigation. She said that the company was “proud of the service and products it delivers to its customers” and that company “looks forward to returning our full attention to serving our many loyal customers throughout the world.”

Last year, the Itanis pleaded guilty to conspiracy charges arising from overcharging the U.S. government for bogus transportation fees to ship the food. Sentencing in the case will occur next month in Houston’s U.S. District Court.

Los Angeles Times

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  1. […] for this report was sourced from Civilian Contractors and Corrupt Authority where you can read more on this case and others involving contractor fraud. Book Mark it-> […]

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