Turkish businesspeople indicted in multi-million-dollar fraud scheme to sell conventional grain as organic

A Turkish businessman and his associates masterminded an elaborate scheme to sell fraudulent organic grain in the United States market through a web of companies, leading to their indictment in a federal criminal complaint and a civil lawsuit in U.S. courts.

The businessman, the late Hakan Bahçeci, and his associates in Turkey, the United Arab Emirates (UAE) and the U.S. are at the center of the fraud conspiracy. Bahçeci and his associates operated a network of companies involved in supply chains of various agricultural commodities, including grain, beans, soybeans, feed, pulses, dry food, meat, and chicken.

According to the indictment filed with the United States District Court for the District of Maryland on August 4, 2022, two Dubai-based companies, Hakan Agro DMCC and Hakan Organics DMCC, were involved in purchasing non-organic soybeans and corn from Eastern Europe, which were then fraudulently labeled as organic before being shipped to the U.S.

Hakan Agro DMCC was the flagship company led by the late Turkish businessman Hakan Bahçeci, who is at the center of the fraud conspiracy. Hakan Organics DMCC appears to have been operating as the subsidiary of Hakan Group, which includes companies both in Turkey and the UAE.

According to the federal complaint, Turkey-based businessmen Göksal Beyaz, Nuray Beyaz, and Mustafa Çakıroğlu facilitated the fraudulent activities and were listed as defendants in the indictment. According to the case file, the three conspirators charged inflated prices for the grain they fraudulent sold as organic to the U.S. and pocketed millions in illicit profits.

U.S. federal investigators uncovered several instances of Hakan Bahçeci and his associates fraudulently selling grain as organic:

• Purchased non-organic, non-GMO soybeans from Ukraine for $423 per metric ton (MT) in 2015 and then sold to a U.S. customer as organic soybeans for $614 per MT, leading to an illicit profit exceeding $4.9 million.
• Orchestrated the purchase of non-organic corn for $168/MT, arranging for its delivery to Constanta, Romania. At the same time they arranged to sell the corn from Constanta through Baltimore as organic corn for $247/MT. Invoices for this falsely labeled corn amounted to over $3.3 million.
• Shipped 16,250 MT of non-organic soybeans falsely labeled as organic from Turkey to the U.S., where they were sold for over $10 million.
• In early 2017 the suspects arranged for 21,000 MT of non-organic corn to be shipped to the U.S., falsely labeled as organic. Invoices for the falsely labeled corn totaled over $6.7 million. Additionally, in the same year, the suspects arranged for a shipment of non-organic soybeans from Turkey to Baltimore, falsely labeled as organic soybeans.

In May 2017, an investigative report by the Washington Post detailed the fraudulent sale of non-organic grain by Hakan Organics DMCC and associates, which raised awareness of the fraud problems in the organic market.

The suspects were charged with conspiracy to defraud the U.S., smuggling goods into the U.S., wire fraud, and making false statements.

The case was investigated by the US Department of Agriculture Office of Inspector General. Senior trial attorney Adam Cullman of the Environment and Natural Resources Division’s Environmental Crimes Section, along with Assistant US Attorney LaRai Everett for the District of Maryland, are prosecuting the case.

Bahçeci’s companies and associates were also subjects of a civil lawsuit filed by the Maryland-based U.S. company Global Natural, LLC in October 2017 also for selling fraudulent shipments of organic grains.

Commenting on the organic fraud activities of the Turkish businessmen, Lynn Clarkson, CEO of Clarkson Grain, a leading U.S. supplier of organic grains, said: “The ease of fraud with organic shipments is just too frustrating. We have to have serious certification, penalties for those violating the National Organic Program rules, and buyers held responsible for policing their supply chains. The consequences to organic integrity and the welfare of legitimate farmers and processors in the U.S. is too important to leave drifting on hopes.”

Source: Nordic Monitor

To view source article, visit: https://nordicmonitor.com/2024/03/turkish-businesspeople-implicated-in-a-multi-million-dollar-fraud-targeting-us-organic-food-market/

Organic & Non-GMO Insights April 2024