A Florida citrus company has become the first to be indicted for fraud in a 22-month nationwide investigation of illegal citrus practices involving hundreds of millions of dollars, federal officials said Thursday.
“It was the first indictment, but the investigation is not limited to Florida,” said Brad Knutter, supervisor of the the Tampa U.S. Customs fraud group which is coordinating the probe.
The lengthy probe, dubbed “Operation Orange Squeeze,” is an unprecedented investigation by the U.S. Customs Service of the citrus industry in Florida and other citrus-producing states, officials said.
A Highland City citrus processor, its Ohio parent company and two of its former presidents were indicted Tuesday, accused of conspiring to bilk the federal government in a customs rebate scam.
Allsun Pure Juice Corp., Ohio Pure Foods Inc. of Akron, Ohio, and two former Allsun executives, Robert W. Hurley, 57, of Lakeland and Herman B. Cohen, 67, of Ormond Beach, were charged with mislabeling export products between 1983 and 1986 in order to collect $776,458 in U.S. Customs rebates.
Import Duties Involved
Authorities charge that the defendants attempted to cheat the government by labeling almost 2 million gallons of citrus pulpwash as frozen concentrated orange juice in 36 export shipments.
Pulpwash is the residual citrus product left after the primary juice has been squeezed from the fruit. It contains orange solids, fruit skin and peeling.
The defendants attempted to claim the money as a legal rebate of import duties they had paid on imported concentrate, according to a statement from customs and U.S. Atty. Robert Genzman in Tampa. Such rebates are available to processors who have also exported concentrate.
However, they could not legally claim those rebates for exporting pulpwash, an inferior citrus byproduct, authorities say. Trying to pass the pulpwash off as concentrated orange juice was a fraud, the indictment says.
The defendants have so far declined to comment on charges listed in the indictment.
Customs laws allow companies a 99% refund of import duties if products made from imported merchandise are later exported. The rebate also is allowed if the export is produced from a domestic substitute of the same kind and quality as the duty-paid import.
Officials say more charges are expected against other exporters.
“Pulpwash may be one of the more fraudulent activities, but we’re not limiting the investigation to that,” Knutter said.
‘Just the Start’
In order to track exports, he said, investigators have to trace shipping records and trucking reports involving a number of companies.
“This is just the start,” said Customs agent Steve Bowman. “We’ll be busy for a while.”
Bowman said investigators discovered a number of citrus concentrate exporters involved in the practice of mislabeling pulpwash as concentrate to get the rebates.
When asked if future cases involved as much as hundreds of millions of dollars, Bowman said, “Overall, that would be a conservative estimate.”