Olive Firm Accused of Mislabeling Products ‘Organic’

A San Diego purveyor of “organic” olives and olive oil has been accused by state regulators of false advertising and of misbranding products, highlighting the sometimes dubious--and lucrative--claims made by firms seeking to exploit the popularity of organic food.

The California Department of Health Services said this week it has found evidence of 26 violations of the 1990 state Organic Foods Act by Petrou Foods Inc. Each violation carries a potential fine of $1,000. Department spokesman Ken August said the case has been turned over to the San Diego city attorney’s office.

Andreas Petrou, son of company founder George Petrou, said that the case involved a labeling problem and that the company simply could not produce the paperwork to satisfy inspectors that its olives were organic.

The case against Petrou Foods, which gets many of its olives from trees on a heavily fertilized golf course, comes as the organic food industry is scrambling to cope with soaring demand from shoppers.

Health-conscious consumers have shown a willingness to pay a hefty premium for organic foods. One California organic olive oil producer said it gets $58 a gallon at wholesale, nearly double what conventional producers receive.

That sort of premium has provided an incentive to cheat. In the first case of incarceration related to organic product fraud, two employees of a Minnesota company went to jail recently after being convicted of mislabeling conventionally produced grains and soybeans as organic. And a Sonoma County company was recently found to have sold falsely labeled organic apples and apple juice.

Since 1992, the California Department of Food and Agriculture has recorded nine instances of fines levied against companies for violating the state’s organic food law. The highest of these was $30,000 paid by a Sonoma County company that claimed its products were organic but was not registered as organic with the state, as required.

But courtroom drama is still relatively rare in the industry. In most cases, suspected culprits are turned in by competitors, neighbors or downstream handlers and retailers, and most cases tend to be dealt with quietly without food shoppers’ ever being the wiser.

“It’s a pretty tight network, and very good at self-policing and strongly motivated to do that,” said Barry H. Epstein, a San Francisco lawyer who wrote the 1990 state law on organics. “[But] it doesn’t take many bad apples . . . to raise concerns of the public.”

Bob Scowcroft, executive director of the Organic Farming Research Foundation in Santa Cruz, said cases of fraud are not surprising given the lack of federal regulation of the industry. Long-awaited proposed federal rules--which would for the first time define organic and establish a U.S. Department of Agriculture organic seal--have been pending in Washington.

In the case of Petrou Foods, the whistle was blown by two Los Angeles-area men who earlier this year briefly served as distributors for Petrou products.

The two, Dale Menagh, an independent TV editor and producer, and Raymond Luna, a certified chef at Parkway Grill in Pasadena, said natural and organic food stores showed unbridled enthusiasm for the Petrou products.

“Being organic was like an E ticket at Disneyland,” Menagh said.

Indeed, many stores did not even seek verification that the products were organic, they said.

The two said they began to see “red flags” about the company’s practices and reported their concerns to state authorities. On several visits over the summer to the company’s plant ear the Miramar Naval Air Station, inspectors from the department’s food and drug branch and the San Diego County agricultural commissioner’s office found that the company could not verify records relating to its sourcing and processing of olives, August said.

Inspectors also found a certification document from the Organic Crop Improvement Assn. of Lincoln, Neb., one of many organic-certification organizations nationwide, but OCIA officials said it had been altered. The certificate number, member number and address actually belonged to another California firm.

Menagh and Luna said the Petrous also showed them a document indicating that they had been approved by the California Department of Food and Agriculture as an organic producer, handler and processor. But Myrlys Williams, a spokeswoman for the department, said the application, filed in May, has not been approved.

George Petrou said the company has organic olives from San Diego and organic olive oil that is processed in Chico, Calif. He also said the company does not label every product as organic.

However, on their application with the state, the Petrous list as the source of their olives and olive oil only one address--the address of the Singing Hills Golf Course in El Cajon, which includes a nine-acre grove of olive trees and additional trees throughout the three 18-hole courses.

Mike Rivo, a deputy city attorney in San Diego in the consumer and environmental protection unit, said it is his office’s policy to neither confirm nor deny whether it is looking into a particular company.