Charges filed in counterfeit energy drink scam

Eleven people in the US have been charged in connection with the diversion and counterfeiting of a dietary supplement drink sold by Living Essentials.

The Department of Justice (DoJ) reports that husband and wide Joseph and Adriana Shayota - along with nine other defendants - stand accused of conspiracy to traffic in counterfeit goods, conspiracy to commit criminal copyright infringement and conspiracy to introduce misbranded food into interstate commerce.

The Shayota's company Baja Exporting LLC had a license to distribute the 5-Hour ENERGY drink in Mexico under license from Living Essentials, but breached the terms of that agreement by attempting to sell the product - with Spanish language labelling - at a higher price in the US.

That effort failed so the conspirators sourced counterfeit English language labels and display boxes for the product, illegally re-packaging more than 350,000 bottles of the drink, according to the DoJ's indictment.

The defendants charged 15 per cent less per bottle than Living Essential's recommended retail price of $14.49 per six pack and were able to shift their entire stock by the end of 2011. After that, they started manufacturing counterfeit copies of the brand in "an unsanitary facility using untrained day workers", says the DoJ.

"The defendants mixed unregulated ingredients in plastic vats while attempting to mimic the real 5-Hour ENERGY products," it says in a statement, which provides some idea of the scale of the operation when it reveals the gang ordered more than seven million fake label sleeves and hundreds of thousands of counterfeit display boxes.

"The defendants often changed the lot and expiration codes on the counterfeit bottles and boxes to parallel the valid codes being used on the authentic product," notes the DoJ.

Some four million bottles were allegedly sold by Midwest Wholesale Distributors, a company owned by co-defendant Walid Jamil.

The indictment further alleges that the defendants travelled to Guadalajara, Mexico, and hired manufacturers for the blank plastic bottles and plastic bottle caps imprinted with the Living Essentials-trademarked 'Running Man' logo. 

They also purchased equipment, including a steam tunnel machine, to shrink-wrap the counterfeit 5-Hour ENERGY labels on the counterfeit bottles and an inkjet printer to place false lot numbers and expiration dates on the bottoms of the counterfeit bottles.

"The defendants' alleged conduct demonstrates a complete disregard of the health and safety of consumers," said US Attorney Melinda Haag.