Good afternoon Mr. Chairman and members of the Subcommittee. I appreciate the opportunity to appear before the Subcommittee today in support of HR 2100, the Anti-Tampering Act of 1999. To provide some brief background information I am currently president and co-owner of a security and crisis management consulting firm in the Washington, DC area (Integrity Resource Group, Inc.). Previously, I was a manager at a large international security consulting firm and before that a federal criminal investigator for more than 25 years. During my last five years of government service I served as Assistant Director of the Food and Drug Administration’s Office of Criminal Investigation (OCI) and had headquarters oversight responsibility for all criminal investigations conducted by the FDA.

As I begin my remarks I would like to acknowledge – and clarify – one very important issue. There is often a mistaken tendency to correlate the term "diversion" with criminal activity. I, perhaps, understand that as well as anyone because of my experience with FDA’s Office of Criminal Investigations. Certainly, in that role we saw numerous cases where the diversion of regulated products was a key element of a sophisticated criminal enterprise. And it is because of that experience that it was important to remind ourselves, as investigators, that there are very legitimate forms of diversion or parallel trading. However, what I want to talk about here are those cases in which the line between legal trade practices and criminal activity is crossed, often resulting in a risk to the public health.

I would like to share with you a few examples from my years at FDA. These examples highlight how altered product coding is used to disguise criminal activity, and perhaps more importantly, how the safety of American consumer goods can be affected by this conduct. They are also representative of what I believe is a continuing problem.

Mr. Graham has mentioned the investigation in which counterfeit infant formula was distributed from California. I would like to point out that that case involved the use of fraudulent identification codes and expiration dates sprayed onto the bottom of cans with an ink jet machine to simulate the legitimate manufacturer’s coding. Fortunately, the criminals made a mistake and used an identification code for a French-Canadian version of this product that was never distributed in the United States. Since the counterfeit labels used in this scheme were of relatively high quality, it was actually the illicit product code that facilitated identification of the totally counterfeit infant formula and the seizure of these dangerous goods by FDA/OCI.

As an offshoot of the California case involving totally counterfeit infant formula, OCI special agents began looking at other related criminal activity. What we found was a massive "gray market" industry involved in counterfeiting registered trademarks on boxes of infant formula and marking those containers with expiration dates sometimes pre-dating the actual expiration date of the products. To give you an idea of the extent of these operations just one indictment charged a Lexington, Kentucky firm with various criminal offenses involving more that $44 million in diverted infant formula sales in one 15 month period.

Food and drug manufacturers often have a very legitimate need to destroy or dispose of their products. These products could be expired, substandard, damaged, produced only for test purposes, adulterated, over production limits, etc. The means used to dispose of these products vary, but if a criminal gets custody of the product prior to destruction you can be sure he will try to divert it for his own economic gain, and most often this will involve tampering with code numbers and expiration dates.

A 1999 indictment in the Southern District of Florida charged multiple defendants in an elaborate scheme to illegally divert food products to unsuspecting food wholesalers around the country. These products were considered unsuitable for human consumption by their manufacturers, and were to be destroyed by being used as ingredients in the manufacture of animal feed. However, the products were diverted from the Missouri animal feed manufacturer through a Canadian distribution firm to another company in Miami. Ultimately, the Miami firm removed product codes and expiration dates on many products by using a solvent. They then re-applied fraudulent codes using their own ink jet equipment. The potential health consequences of this operation were apparent during the execution of a search warrant when OCI special agents seized rodent infested products and realized that the criminals were even re-coding an expired adult nutritional product commonly used to feed comatose hospital patients through nose tubes.

In another FDA/OCI investigation counterfeit versions of a drug commonly prescribed to AIDS patients was found in commercial distribution channels. The code numbers and packaging were fraudulent and counterfeit, although the drug itself is believed to have been from a long outdated batch rejected years ago by the manufacture for quality reasons. In this case it is believed the criminals "invented" fraudulent code numbers for consumer packages. In other cases expensive prescription drugs used for the treatment of AIDS and other serious illnesses frequently surface in packaging bearing fraudulent code numbers. In many cases these drugs have been stolen from pharmacies, hospitals, commercials shippers, and warehouses. In some instances the drugs are believed to have originated in other countries where they are often produced in unknown, unregulated or possibly unsanitary environments. These criminals typically apply bogus code numbers to the packaging to extend the life of the drug and to cover up the true source of the product.

An undercover FDA/OCI investigation in New York involved wholesale purchases of expensive fertility drugs. Fraudulent code numbers appeared on the counterfeit packaging containing these injectible products. Although laboratory analysis indicated the presence of the active ingredient in these products, the FDA was not able to determine the place or conditions of their manufacture largely because of the absence of legitimate batch code data. This case is scheduled for trail in New York in two weeks.

Fraudulent product identification coding has even been used in schemes involving bulk food products such as metric tons of frozen shrimp. For instance, a Florida indictment charged an importer with criminal offenses involving the repeated "washing, mixing and soaking" of putrid and decomposed shrimp in a solution containing copper sulfate, chlorine, lemon juice and other chemicals to conceal the inferiority of the product. Central to this scheme was the "re-coding" of product lots as they were repeatedly rejected by buyers, chemically treated, and re-sold to others who did not know the products history.

Reliable product identification code data are critical identifiers used by government investigators and regulators on a daily basis. These identifiers are also used by manufacturers, distributors and consumers to effectively recall defective, unhealthy, or dangerous products. Often these recalls are done only for reasons related to the public health. Sometimes, as in the case of malicious product tampering, recalls also involve criminal activity. In still other instances manufacturers use product identification codes to help consumers verify that they possess legitimate product. For instance, earlier this month an infant formula manufacturer put out a news release asking consumers to double check embossed product identification codes on the cans before feeding the product to babies. This was necessary after the company confirmed reports that some cans of another milk based infant formula were discovered with counterfeit labels falsely indicating the product was their soy based infant formula. Obviously, the possibility of a lactose allergic child consuming this product could produce disastrous results.

I hope these few examples based on my experience at FDA help demonstrate the absolute confidence we must demand in product identification codes. It is true that criminals often violate several laws when they engage in unlawful activity. It should be obvious in the cases I described today that the cited unlawful activity might have been more aggressively prosecuted using HR 2100. What worries me most are the more subtle activities involving code tampering that have gone or will go undetected without the strong consumer protection legislation set forth in HR2100.

Opponents of this bill will argue that its provisions will "impede free trade", and interfere with legitimate secondary sales markets. That is not at all the issue. As constructed, the bill will not impede the legitimate sale of consumer goods. What the bill will do is provide law enforcement authorities with a valuable tool to combat complex criminal schemes – schemes that often include the obliteration of the manufacturers’ product identification codes and the use of fraudulent or counterfeit codes in their place.

In conclusion, I can think of no legitimate reason for any person to remove product identification codes or expiration dates from consumer products. I urge your favorable consideration of HR 2100 to help prevent the undocumented, unregulated and potentially life threatening business that may otherwise occur.