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Counterfeit 5-Hour ENERGY Empire Crumbles
U.S. Attorney Melinda Haag of the Northern District of California and law enforcement officials announced today that 11 defendants have been charged with conspiracy to traffic in counterfeit goods, conspiracy to commit criminal copyright infringement, and conspiracy to introduce misbranded food into interstate commerce.
The defendants, including Joseph Shayota and Adriana Shayota, his wife, were arrested on charges stemming from the illegal distribution and counterfeiting of the liquid dietary supplement 5-Hour ENERGY. The supplement is owned by Living Essentials, which manufactured all 5-Hour ENERGY at factories in Wabash, Indiana.
According to the indictment, the defendants agreed with Living Essentials to distribute 5-Hour ENERGY in Mexico, but instead attempted to divert the product and sell it in the United States at a higher price. They replaced the labeling and display boxes with counterfeit labels and boxes designed to imitate Living Essentials’ packaging in the United States.
The defendants repackaged over 350,000 bottles of 5-Hour ENERGY and sold them in the United States at a price that was 15 percent lower than what Living Essentials charged for authentic United States 5-Hour ENERGY. By December 2011, Joseph and Adriana Shayota had sold off Baja’s remaining stock of the repackaged/relabeled 5-Hour ENERGY.
By early 2012, the defendants had moved into counterfeiting the entire 5-Hour ENERGY product. They manufactured the counterfeit 5-Hour ENERGY liquid at an unsanitary facility using untrained day workers. The defendants mixed unregulated ingredients in plastic vats while attempting to mimic the real 5-Hour ENERGY products.
From December 2011 through October 2012, the defendants allegedly ordered more than seven million counterfeit label sleeves and hundreds of thousands of counterfeit display boxes and placed false lot and expiration codes on the bottles and boxes. The defendants often changed the lot and expiration codes on the counterfeit bottles and boxes to parallel the valid codes being used on the authentic product.
Law enforcement officials arrested 10 of the 11 defendants, with one remaining subject to an arrest warrant. The indictment alleges that the defendants travelled to Guadalajara, Mexico, and hired manufacturers for the blank plastic bottles and plastic bottle caps imprinted with the Living Essentials-trademarked ‘Running Man’ logo.
Key Facts
- State: California
- Category: Drug Trafficking|Fraud & Financial Crimes|Violent Crime|White Collar Crime|Organized Crime
- Source: DOJ Press Release â†â€â€
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