Good afternoon Mr. Chairman and thank you for the opportunity to speak before your Committee about this important matter. It is an honor to be here and speak on behalf of HR 2100, The Anti-Tampering Act of 1999. I believe my professional experience in the area of federal law enforcement and corporate security has prepared me to provide expert testimony in this area. As the Director of Assets Protection for Matrix Essentials, Inc., and a former senior special agent with both the US Drug Enforcement Administration (DEA) and FDA – Office of Criminal Investigations (FDA-OCI), I feel strongly that this proposed legislation should be considered first and foremost a consumer safety initiative.

The decoding of personal care products leads to the distribution of goods of questionable authenticity, safety and efficacy. Without the ability to track a product through the batch code or other codes affixed to products for such purposes, the manufacturer is precluded from conducting a recall in the event of adulteration, contamination or performance issues. Furthermore, this unscrupulous practice creates an alternate channel of distribution through which the distribution of misbranded, decoded, adulterated and counterfeit products flourishes. My experience has shown that there is a definite link between the many facets of criminality involving these offenses.

I would like to describe for you the manner in which product tampering, adulteration, decoding, counterfeiting and theft are interrelated. I will also provide anecdotal evidence to support the assertion. In the professional beauty care field for example, hair care products are generally manufactured and sold through independent distributors. The products are then resold to strictly professional beauty salons. At this point individuals called collectors approach salon professionals and attempt to entice them to sell these products out the back door for a 20% tax-free profit. The products are then often times decoded and moved several times in order to disguise the origins of the products, much the same as in a traditional money laundering scheme.

This clandestine decoding and transferring of product creates an alternate channel of distribution which is completely unmonitored for good manufacturing practices or safe handling procedures. Once this unmonitored alternate channel of distribution is established, it is ripe for the introduction and unauthorized distribution of counterfeit, outdated or adulterated products. These products of questionable authenticity, efficacy and safety are then offered for sale at traditional retail outlets, leaving the consumer virtually unprotected.

In my years in federal law enforcement and corporate security I have seen serious and dangerous felons engage in product theft, tampering, counterfeiting and diversion of consumer goods. Furthermore, I believe it is reasonable to presume that career criminals have made a conscious decision to traffic in decoded consumer goods due to the inherent lack of consequences. Unfortunately, today’s laws do not adequately address product tampering as HR 2100 will if passed as currently written. Please allow me to identify several instances in which product decoding, tampering, counterfeiting and other examples of criminality are indicative of the need for this legislation and how the consumer is at risk without it.

In November 1998, United States District Judge James Moody permanently enjoined an individual from Scott, AR, from dealing in diverted Matrix products. The subject referenced above, who ran a major shampoo diversion operation on a national level, had previously been convicted of a felony narcotic trafficking charge. In addition, sworn depositions taken in this matter revealed that this previously convicted felon had hired and paid individuals to use potentially life threatening and dangerous chemicals to decode professional hair care products. It should be added that to my knowledge nobody in this matter ever identified why they were decoding these products in this manner.

In another example, while with the FDA-OCI I personally supervised an investigation involving the distribution of counterfeit infant formula. In this investigation, suspected members of a terrorist organization operating in Los Angeles, CA, were identified as those responsible for manufacturing and distributing the counterfeit infant formula. The basic scenario, however, is key to understanding the complexity of the issues involved. These subjects began by purchasing infant formula as a loss leader from a retail store. They then established an alternate channel of distribution by re-distributing the products under the guise of acting as an authorized distributor of authentic goods. Once credibility as a "legitimate" distributor was established, they proceeded to manufacture counterfeit infant formula in an unsafe environment with absolutely no attention to Good Manufacturing Practices. The bandits then distributed the counterfeit products through this alternate channel of distribution, taking advantage of the relationship they had established under false pretenses. Several infants had adverse consequences from consuming the counterfeit formula.

In another incident I investigated while at the FDA-OCI, we encountered subjects who had purchased empty soda bottles from a major manufacturer under the pretext of shipping the bottles to the Soviet Union. The suspects in this matter subsequently found bottle caps from a separate vendor. They then convinced a soda bottler to fill the authentic bottles with generic soda, essentially manufacturing a counterfeit product. The bottler subsequently told me that they had not carefully washed the bottles before filling them with the generic soda. The counterfeit products were then sold to unassuming retail vendors and customers in the Armenian community of Los Angeles, CA.

A separate incident involved a cargo theft of nearly $1,000,000.00 of Matrix Essentials Vital Nutrients hair care products in Los Angeles, CA. While much of the contraband was recovered by law enforcement, nearly 25% of it remains unaccounted for. Investigative results revealed that suspects in this incident may have used counterfeit passports from a southeast Asian country to facilitate this scheme, once again indicative of the complexity and sophistication of those involved in this criminal arena. We have since purchased Vital Nutrients products (similar to those that were stolen) from unauthorized retail locations and the batch codes have been removed. The decoding of these products effectively precluded law enforcement from successfully identifying and apprehending those responsible for this crime.

In another recent investigation that is still active, I have discovered new evidence of the decoding of consumer goods. The subjects responsible for re-distributing professional- only hair care products have gone so far as to list "decoding" as a separate line item on the actual invoices under cost of goods. Because this investigation is active I am not in a position to further elaborate.

In a recent industry specific incident involving shampoo and conditioner, Redmond Products, Inc. issued a press release stating that they were voluntarily recalling all Aussie Land Kangaroo Island Detangler because routine quality assurance testing revealed that the shampoo may have been contaminated. The batch codes for the products in question were provided to retailers so the products could be pulled from retail shelves and returned to Redmond for destruction. Redmond also provided a toll free telephone number for consumers. Needless to say, without the ability to recall these products by batch numbers there would have been no way to accurately recall these products and protect consumers.

Through the few examples I have mentioned above, I have tried to identify and articulate the complexities and dangers of the proliferation of decoded, misbranded and counterfeit consumer goods and the inner-relationship they share. Once a product is diverted out of the authorized channels of distribution, where merchandise is acquired, stored and transported under unknown conditions, by unauthorized individuals, its authenticity, quality, and efficacy are questionable. And this leaves the consumer at risk, to say the least.

In summary, let me just add that I am not aware of any legitimate reason to tamper with or remove a batch code from a consumer product. I urge your support in furtherance of passage of this critical piece of consumer safety legislation, HR 2100.