« June 2007 Table of Contents
Can an honor system unmask seafood scammers?
By James Wright
June 01, 2007
Soon after man learned to fish, he learned to tell a fish
story. Economic deception, consequently, has accompanied the
seafood industry throughout its history. Each link in the
seafood supply chain is increasingly at risk as buyers continue
expanding their global sourcing network. Fraud, in its many
forms, is costing U.S. seafood companies - and ultimately
consumers - untold millions of dollars every year.
temptation to cheat persists, the industry and federal
regulators remain virtually powerless to stop seafood swindlers
who falsify product sizes or weights, sell farmed fish as wild
or simply substitute an entirely different species.
The National Marine Fisheries Service says it's cracking
down on fraud, but admits it lacks the resources to do the job
right - a refrain heard throughout federal commerce agencies.
But with imports representing about 80 percent of the U.S.
seafood supply, and a cash-strapped and embattled U.S. Food and
Drug Administration overwhelmed with food-safety issues, the
industry is left to police its own fraud cases.
The National Fisheries Institute of McLean, Va., hopes that
its Economic Integrity Program, launched earlier this year,
will turn the tide. When annual membership fees were due on
March 31, NFI required its 241 member companies to sign a
pledge to never transship product in an attempt to bypass
antidumping and countervailing tariffs; mislabel product or
substitute species; or mislabel weights or product counts.
Additionally, NFI is forming an independent entity, the Better
Seafood Bureau, to arbitrate unresolved disputes among
"The Better Seafood Bureau is an opportunity to resolve
complaints and find companies with systematic problems," says
NFI President John Connelly. "This isn't about making mistakes.
This is about people who systematically cheat. Our members want
to identify them and hold them accountable." Connelly says the
bureau could be established as early as this month.
However, thousands of seafood companies that are not NFI
members will not be held to the BSB code of conduct. And
whether the program is successful by any measure will depend on
the consequences of non-compliance, says Richard Gutting, a
partner in the law firm Redmon, Peyton & Braswell in
Washington, D.C., which represents about 60 seafood companies,
many of them importers. Gutting, who served at NFI for 20
years, including five as president, says that the association's
anti-fraud program will only work if members are willing to
report each other.
"There has been an historic reluctance to name names," says
Gutting. "But if they don't name names, who will? I guess my
questions are: Are there going to be meaningful consequences?
Is the culture of the industry ready yet? Is there a
willingness on the part of the industry to turn individual
companies in? I haven't seen it."
"Be careful who you squeal on," warns Aiden Coburn, director
of seafood education and quality control at The Fish Market
seafood restaurant chain in Palo Alto, Calif. "Let sleeping
dogs lie has always been a motto in this industry."
Fraud in the headlines
What seafood companies have been hesitant to do, the media
has done willingly. Over the past year, newspapers and TV news
stations reported about a species substitution scandal in
Florida restaurants. Samples from prepared fish dishes
advertised on menus as grouper, one of the state's premier
seafood species, were routinely collected undercover and sent
to specialized laboratories to verify the species'
In most published cases, the majority of the samples were
indeed fakes, typically inexpensive whitefish imports
masquerading as more expensive species. As the reports mounted,
the restaurants' and their distributors' reputations came into
Then in December, Danny Nguyen, owner of Panhandle Trading
and Panhandle Seafood in Panama City, Fla., was sentenced to 51
months in prison and ordered to pay the federal government
$1.13 million in restitution for selling 1.6 million pounds of
Vietnamese basa, a catfish relative, to Florida restaurants and
other customers falsely labeled as grouper, channa, snakehead
and bass between 2002 and 2005. For law enforcement, the
verdict was a stern warning to industry cheats.
"This is not a new issue. It happens all over the United
States every day. It's that prevalent," says Ken Conrad,
chairman of Libby Hill Seafood Restaurants in Greensboro, N.C.,
NFI treasurer and a National Restaurant Association board
"I'm telling NRA members now that many of them don't have a
clue as to what's coming into their back doors. They're not
getting the full measure of what they're paying for," Conrad
says. "But at the end of the day, there'll always be
"[Seafood fraud is] just as rampant as it ever was," says
Bob Jones, executive director of the Southeast Fisheries
Association in Tallahassee, Fla., who adds that grouper prices
paid to Florida fishermen have risen as a result of all the
media attention. "You're not going to stop a culture overnight.
It's going to take a lot of work."
The media frenzy over species substitution put the heat
squarely on restaurants. Coburn, of The Fish Market, says that
when the upscale chain's Phoenix restaurant was investigated by
a local TV news station a couple of years ago, a simple human
error in the kitchen was blown out
"[The customers] ordered and paid for Pacific rockfish but
were served the more expensive New Zealand bluenose. Who lost
on that deal? In all fairness, we screwed up and we owned up to
it, but what really upset me was [the news station] alleged we
were selling Atlantic red snapper when we didn't even have that
species in the building," Coburn says. "These folks had made up
their mind. They were on a mission."
Under the microscope
Will Gergits, managing member of business development and
marketing for Therion International, an animal DNA-testing
laboratory in Saratoga Springs, N.Y., has seen his share of
fraud in the seafood industry. Therion was sent fish samples
from news reporters in the Great Lakes region several years ago
to determine if local restaurants were selling walleye, as
advertised, or the cheaper substitute, zander, a whitefish
farmed in Europe. Visually, there was scant difference between
the two species, says Gergits, but walleye cost at least $2 per
pound more at the time.
In that initial test, seven of 12 "walleye" samples were
actually zander. Since then, Therion has fielded about 30 sets
of samples from reporters looking to expose illegal seafood
substitution at foodservice outlets; of those, 25 had some
substitutions. In most cases, says Gergits, a greater profit
margin is the motive, as popular species like cod, mahimahi,
red snapper and grouper, all of which can be too expensive for
many buyers, are prime candidates for substitution. And since a
majority of fish is sold in fillet form, without the buyer ever
seeing the fish whole, the opportunities for fraud abound, says
"We're seeing substitution across the country now. It's
prevalent," says Gergits. "But the substitution can happen
anywhere along the supply chain, from the fisherman to the
importer or the distributor - anywhere along the way. Certainly
there are restaurants doing it. As long as there are humans
involved, there's the possibility of corruption."
Therion's DNA-amplification technology is 99 percent
accurate, Gergits says, adding that a great deal of his work is
for shrimp farmers interested in the genetics of their
broodstock. But when hired as a private eye to identify a
particular species, Therion looks for "markers" or "primers"
that are consistent throughout a species or group of animals.
The information collected in any given test is then compared to
the data on GenBank, a public genetic-sequence database
administered by the National Institutes of Health in Bethesda,
Therion's technology, which Gergits calls the "gold
standard," is not infallible, says LeeAnn Applewhite, CEO of
Applied Food Technologies, a molecular diagnostics company in
Gainesville, Fla. She says GenBank data is not taxonomically
verified and that DNA tests are not federally approved for
regulatory compliance matters. AFT, which employs isoelectric
focusing, a protein analysis technique, has implemented
species-identification processes for U.S. Foodservice and Wild
American® Shrimp, among other organizations.
"There's no refereeing with the [GenBank] database,"
Applewhite says. "There are numerous reports of errors. There
is no official DNA-sequencing method [approved] for regulatory
"GenBank is an international service that has served the
scientific community for decades," retorts Gergits. "We've
testified in murder cases and dozens of other court cases where
we've used GenBank information. It's not like a Google or a
Wikipedia search. [Applewhite is] just trying to poke holes
into a valid scientific resource."
Tricks of the trade
Species substitution garners the most headlines, but
mislabeling weights and counts costs the industry the most
money, says Randy Petersen, VP of sales for Berdex Seafood in
San Francisco. Petersen says excessive glazing or soaking
(adding excess water or preservatives to inflate product
weight), incorrect sizing and mislabeling weights are
offenses. But they're simply not a priority with the U.S.
"We were requested by a company we work with to inspect and
review products," says Petersen. "They were supposed to be
getting one size of shrimp, [but were getting] a significantly
smaller size and were being overcharged by 40 to 60 cents per
It's a significant amount when you're talking about
"The reason why [fraud] is catching steam is [offenders]
know it's not an investigated act. They don't have to worry
about it," he adds. "But if the FDA kicked just 10 of their
boxes for being short, it would stop them. Even a cursory
inspection on master cases will catch it in a lot of cases. But
to the FDA, if [the food] doesn't kill you, they don't care.
They don't follow up on economic deception issues."
With imports dominating the U.S. seafood supply, many are
quick to blame foreign suppliers for fraud. What's more, the
Associated Press reported in April that only 1.3 percent of all
imported food is actually inspected by the FDA. Connelly,
however, is wary of blaming foreign exporters or big-volume
"It's an equal-opportunity problem," says Connelly,
referring to the diverse array of interests that approached NFI
in 2005 about taking action against economic deception.
"Domestic producers, importers, even a couple of exporters
said that our business was not going to be sustainable if we
don't keep chasing the folks that are cheating the system,"
The urge to falsify size counts or weights or increase water
weight to artificially inflate the product's value is a
systematic problem, Connelly says, brought on by an extremely
"No one wants to cheat," he says. "But in order to compete,
some companies do things they don't want to do. With our
members, no one is afraid to compete. But they want to make
sure everyone is playing by the same rules. Those that take
advantage - we don't want them in NFI, and we're willing to
take a hard stand against them."
The NMFS Office of Law Enforcement in Silver Spring, Md., is
also stepping up efforts to combat seafood fraud. Paul Raymond,
assistant special agent in charge of the OLE's Southeast
Division, says a task force was established two years ago to
snuff out tariff-evading schemes involving Vietnamese basa.
"You'd see, in post-tariff imports, the same importers all
of a sudden importing a different critter - snakehead, sole,
all sorts of things," Raymond says. "It may be one tiny
element, but it can spread throughout the country, impacting
hundreds of distributors."
Investigations of other fraud cases, many of them similar in
scope to the substitution scandal by Panhandle Trading in
Florida, are "progressing along," says Raymond. However, the
agency is hamstrung by a lack of resources to effectively
tackle mislabeled product weights and other scams. "To be
frank, we don't have the manpower to deal with that," says
Raymond. "We know the reality. We have to pick our
Berdex Seafood inspects every container of shrimp for size
and quality before it is placed
on a container ship for
port, says Petersen. But not all companies can afford to
take such precautions.
"In all honesty, with a lot of buyers, [buying
short-weighted product is] just a 'course-of-doing-business'
kind of thing," he says. "It's the grade-B distributors and
second-tier retailers that are being impacted. It's the
restaurant group accountant figuring out why his gross revenue
isn't keeping up with costs. He's losing shrink and doesn't
even know it."
Eventually, the higher cost gets passed on to the
"Any time you see mislabeling of product, and some of this
may be intentional or accidental, it leads to marketing
deception, and consumers have the ultimate right to know that
the product they're buying is exactly as advertised," says
Roger Barlow, president of The Catfish Institute in Jackson,
Miss. "I believe there need to be fines and legal ramifications
for deceptive marketing when proven. I certainly support
anything that tries to maintain the integrity of the
Tough talk needs tough action. NFI's economic integrity
pledge only represents a small fraction of a fragmented
industry, and the Better Seafood Bureau will have no authority
over non-NFI members. The industry or the government may
propose more regulations, but the question remains: Who will
Retailers currently must comply with Country of Origin
Labeling (COOL) laws, while foodservice outlets are not
required to disclose the origin of their seafood. But, in light
of the ongoing species substitution scandal, many foodservice
operators feel the winds are blowing in that direction.
"The only reason [COOL for restaurants] hasn't been
implemented is the cost. It's just like HACCP," says Coburn.
"It's an awful pity God didn't put a ZIP code on the side of
fish, isn't it?"
Assistant Editor James Wright can be e-mailed at