UPDATE: U.S. Attorney Names Defendants in Counterfeit 5-Hour Energy Case

GT-5HE-BerryThe U.S. Attorney’s Office of the Northern District of California has issued a press release on last week’s arrests of 10 individuals charged in the case of counterfeit 5-hour Energy being produced and sold in the United States. The release names the eleven defendants, all of whom have been charged with conspiracy to traffic in counterfeit goods, conspiracy to commit criminal copyright infringement, and conspiracy to introduce misbranded food into interstate commerce. 10 of the 11 defendants named have been arrested, while 68-year-old Juan Romero of Upland, California still remains subject to an arrest warrant.

The now unsealed indictment alleges the defendants, working out of California, Mexico and 5-hour’s home state of Michigan, went into the business of producing and selling knockoff energy shots in the United States in late 2011, after originally securing a legitimate agreement with Living Essentials to distribute the energy shot in Mexico. Furthermore, the indictment accuses the defendants of distributing more than four million bottles of counterfeit product to retailers throughout the country.

“The defendants’ alleged conduct demonstrates a complete disregard of the health and safety of consumers. My office will continue to vigorously prosecute those individuals who place greed over the well-being of the community by distributing counterfeit dietary products,” said U.S. Attorney Melinda Haag.

The press release can be found below and the unsealed indictment can now be read in full here.

Representatives from 5-hour ENERGY declined to comment for this article.

SAN JOSE – United States Attorney Melinda Haag, Special Agent in Charge David J. Johnson of the FBI’s San Francisco Field Office, and Lisa L. Malinowski, Special Agent in Charge, FDA Los Angeles Field Office of Criminal Investigations, announced that ten people were arrested after being charged with conspiracy to traffic in counterfeit goods, conspiracy to commit criminal copyright infringement, and conspiracy to introduce misbranded food into interstate commerce.  The defendants were arrested on charges stemming from the illegal distribution and counterfeiting of the liquid dietary supplement 5-Hour ENERGY.  One further defendant was not arrested, but remains subject to an arrest warrant.

According to the indictment that was unsealed yesterday, all 11 defendants were involved in the illegal repackaging and eventual counterfeiting of 5-Hour ENERGY.  The supplement is owned by a group of entities referred to in the indictment as Living Essentials, which manufactured all 5-Hour ENERGY at factories in Wabash, Indiana.  Living Essentials has registered and owns all 5-Hour ENERGY trademarks and a copyright, including the “5-Hour ENERGY” name and various graphical elements of the product’s labeling and packaging. The 5-Hour ENERGY trademarks and copyrighted material are displayed on every bottle of 5-Hour ENERGY and display boxes.  Living Essentials does not provide licenses to any individual or entity to manufacture 5-Hour ENERGY.

According to the indictment, defendant Joseph Shayota and his wife Adriana Shayota, through their company Baja Exporting, LLC, agreed with Living Essentials to distribute 5-Hour ENERGY in Mexico. Living Essentials manufactured the liquid 5-Hour ENERGY product and provided Spanish-language labeling and display boxes to Baja Exporting. In addition, Living Essentials provided Baja a complete product package under the agreement that the 5-Hour ENERGY with Spanish-language labeling was only to be distributed by Baja in Mexico.  Nevertheless, according to the indictment, rather than distributing authentic 5-Hour ENERGY with Spanish-language labeling in Mexico, the defendants attempted instead to divert the product and to sell it in the United States at a higher price.  After initial efforts to sell the product failed because of the Spanish-language labeling and display boxes, the defendants replaced the labeling and display boxes with counterfeit labels and boxes designed to imitate Living Essentials’ packaging in the United States. The defendants repackaged over 350,000 bottles of 5-Hour ENERGY and sold them in the United States at a price that was 15 percent lower than what Living Essentials charged for authentic United States 5-Hour ENERGY. By December 2011, Joseph and Adriana Shayota had sold off Baja’s remaining stock of the repackaged/relabeled 5-Hour ENERGY.

Also according to the indictment, by early 2012, the defendants moved into counterfeiting the entire 5-Hour ENERGY product. The defendants manufactured the counterfeit 5-Hour ENERGY liquid at an unsanitary facility using untrained day workers.  The defendants mixed unregulated ingredients in plastic vats while attempting to mimic the real 5-Hour ENERGY products.

From December 2011 through October 2012, the defendants allegedly ordered more than seven million counterfeit label sleeves and hundreds of thousands of counterfeit display boxes, and placed false lot and expiration codes on the bottles and 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.

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 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 also allegedly used code words in purchase orders and invoices for counterfeit 5-Hour ENERGY. For example, defendants Walid Jamil, Juan Romero, and Leslie Roman referred to the counterfeit 5-Hour ENERGY liquid contents as “michelada,” “juice blend,” and “spices.”

In addition, the indictment alleges that from May 2012 to October 2012, Midwest Wholesale Distributors, a company owned by defendant Walid Jamil, distributed more than four million bottles of counterfeit 5-Hour ENERGY into commercial channels throughout the United States. Midwest sold approximately 508,032 counterfeit 5-Hour ENERGY bottles to Baja Exporting and 3,521,232 counterfeit 5-Hour ENERGY bottles to the Dan-Dee Company, which was owned by defendants Kevin Attiq and Raid Attiq.  A partial list of retail vendors and wholesale distributors to whom the alleged counterfeit product was sold is attached.

United States Attorney Melinda Haag stated, “The defendants’ alleged conduct demonstrates a complete disregard of the health and safety of consumers. My office will continue to vigorously prosecute those individuals who place greed over the well-being of the community by distributing counterfeit dietary products.”

“The business of trafficking in counterfeit merchandise harms victims in many ways,” said Special Agent in Charge David J. Johnson of the FBI’s San Francisco Field Office. “Intellectual property crimes are anything but victimless. Intellectual property crimes can destroy jobs, suppress innovation, and jeopardize the public health and safety. In this complex case, the suspects allegedly produced a product to counterfeit a popular dietary supplement that was ultimately consumed by the public. The FBI and its partners will continue to bring these types of criminals to Justice.”

“U.S. consumers rely on FDA oversight of foods to ensure that they are safe and wholesome. Criminals who produce and sell counterfeit and misbranded dietary supplements put the public health at risk by utilizing unknown and unregulated ingredients that could put the consumer in danger of serious illness or death.  This alleged counterfeit operation was especially egregious as the investigation revealed this product was sold, distributed, and placed on the shelves of numerous retailers throughout the United States,” said Lisa L. Malinowski, Special Agent in Charge, FDA Office of Criminal Investigations’ Los Angeles Field Office. “We will continue to investigate violators of our laws and work to bring them to justice.”

The eleven indicted defendants – all of whom are charged with conspiracy to traffic in counterfeit goods, in violation of 18 U.S.C. § 2320(a); conspiracy to commit criminal copyright infringement, in violation of 18 U.S.C. § 371; and conspiracy to introduce misbranded food into interstate commerce, in violation of 18 U.S.C. § 371 – include:

  • Joseph Shayota, 63, of El Cajon, California. Shayota was arrested yesterday at his residence. He made an initial appearance before the Honorable Nita L. Stormes, United States Magistrate Judge in the Southern District of California, who ordered him released on $250,000 bond and ordered to surrender his passport. Shayota’s next scheduled court appearance will be on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Adriana Shayota, 44, of El Cajon, California. Shayota was arrested yesterday at her residence. She made an initial appearance before the Honorable Nita L. Stormes, United States Magistrate Judge in the Southern District of California, who ordered her released on $100,000 bond and ordered to surrender her passport. Shayota’s next scheduled court appearance is on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Justin Shayota, 32, of Troy, Michigan. Shayota was arrested yesterday at his residence. He made an initial appearance before the Honorable David T. Grand, United States Magistrate Judge, Eastern District of Michigan, who ordered him released on a $10,000 unsecured bond and ordered to surrender his passport by noon tomorrow. Shayota’s next scheduled court appearance is on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Walid Jamil, a/k/a Wally Jamil, 65, of Troy, Michigan. Jamil self-surrendered to the FBI yesterday. He made an initial appearance before the Honorable David R. Grand, United States Magistrate Judge in the Eastern District of Michigan, who ordered him released on a $10,000 unsecured bond and ordered to surrender his passport by noon tomorrow. Jamil’s next scheduled court appearance is on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Raid Jamil, a/k/a Brian Jamil, 46, of West Bloomfield, Michigan. Jamil surrendered to the FBI yesterday. He made an initial appearance before the Honorable David R. Grand, United States Magistrate Judge in the Eastern District of Michigan, who ordered him released on a $10,000 unsecured bond and ordered to surrender his passport by noon tomorrow. Jamil’s next scheduled court appearance is on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Kevin Attiq, 51, of El Cajon, California. Attiq was arrested yesterday at his residence. He made an initial appearance before the Honorable Nita L. Stormes, United States Magistrate Judge in the Southern District of California, who released him on $100,000 bond and ordered to surrender his passport. Kevin Attiq’s next scheduled court appearance is on July 9, 2015 before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Fadi Attiq, 57, of El Cajon, California. Attiq was arrested yesterday at his residence. He made an initial appearance before the Honorable Nita L. Stormes, United States Magistrate Judge in the Southern District of California, who released him on $100,000 bond and ordered to surrender his passport. Fadi Attiq’s next scheduled court appearance is on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Leslie Roman, 61, of Rancho Cucamonga, California. Roman was arrested yesterday at his residence. He made an initial appearance before the Honorable David T. Bristow, United States Magistrate Judge in the Central District of California, who released him on $50,000 bond after he surrendered his passport. Roman’s next scheduled court appearance is on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Mario Ramirez, 55, of San Diego, California. Ramirez was arrested yesterday at his residence. He made an initial appearance before the Honorable Nita L. Stormes, United States Magistrate Judge in the Central District of California, who released him on $100,000 cash via cashier’s check and ordered to surrender his passport. Ramirez’s next scheduled court appearance is on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Camilo Ramirez, 30, of San Diego, California. Ramirez was arrested yesterday at his residence. He made an initial appearance before the Honorable Nita L. Stormes, United States Magistrate Judge in the Southern District of California, who released him on $100,000 cash via cashier’s check and ordered to surrender his passport. Ramirez’s next scheduled court appearance is on July 9, 2015 at 1:30 p.m. before the Honorable Howard R. Lloyd, United States Magistrate Judge, to schedule further proceedings in District Court in San Jose.
  • Juan Romero, 68, of Upland, California. An arrest warrant remains outstanding for Romero.

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants face the following maximum statutory penalties:

  • Count One: Conspiracy to Traffic in Counterfeit Goods, in violation of 18 U.S.C. § 2320(a): 10 years imprisonment, $2,000,000 fine, 3 years supervised release, $100 special assessment.
  • Count Two: Conspiracy to Commit Criminal Copyright Infringement, in violation of 18 U.S.C. § 371: 5 years imprisonment, $250,000 fine, 3 years supervised release, $100 special assessment.
  • Count Three: Conspiracy to Introduce Misbranded Food into Interstate Commerce, in violation of 18 U.S.C. § 371: 5 years imprisonment, $250,000 fine, 3 years supervised release, $100 special assessment.

However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant United States Attorneys Matt Parrella and Susan Knight are prosecuting the case with the assistance of Elise Etter. The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Food and Drug