Bernie Madoff and the Honey Trap

Bernie Madoff and the Honey Trap

 Detecting fraud is art, not science. Harry Markopolos, the man who figured out Bernie Madoff's fraud well in advance of the regulators, was a competitor of Madoff's, obsessed with figuring out why Madoff's results were so stable in all markets. Because of his obsession, and his instinctive knowledge of those markets, he knew that there weren't enough options in the world for Madoff to trade if he was telling the truth about his strategy. So it had to be fraud.

What does this have to do with honey?

Consider the case of two young German businesspeople, sent on their first mission abroad on behalf of food conglomerate Albert L. Wolff GmbH. One ends up in prison and the other under house arrest before they both left the United States for good. Why?  They were involved in bringing in honey from China without paying the stiff tariffs on such honey. One way in which they were found out is quite similar to how Markopolos figured out Madoff:  There wasn't enough honey available from the places they claimed it was imported.

The raid on the ALW office on North Wabash Avenue occurred seven months later, after U.S. honey producers had warned Commerce and Homeland Security that companies might be smuggling in cheap Chinese honey. Low prices made them suspicious. So did the large amount of honey suddenly coming from Indonesia, Malaysia, and India—more, in total, than those countries historically produced.

Just as Bernie Madoff could not have made the trades he claimed he was making, so too it was simply impossible that more than 100% of the annual production of honey in three large countries could have been sent to the United States for export, let alone to a single company. In this case, the complaints to the government (which, after all, had a fiscal stake in the matter) were heeded and at least some investigations launched and people jailed. 

Honey is a major issue today, both because of the issues with regard to disappearance of honeybees and because of illegal and adulterated imports. What can one do?

One organization that has the right idea is True Source Honey. They will certify the origin of honey on products, authorizing the placement of a trademark on honey that meets their standards. 

Of course, if you can, you can just know where your honey comes from. My honey comes from pretty much my own backyard. Our local Seattle Urban Honey, sold at farmers' markets, will show you exactly where the hives are for each jar of honey, which is designated by zip code. You can taste the difference between zip codes, too. One of the hives is close enough to our house that when I see a bee in my yard I can expect where it's heading to make honey. 

Read additional articles at the Food Liability Law Blog

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