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American Grocers began as a small operation. The principals were Itani, brother Ziad and sister-in-law Lilly Patenotte; Suzanne Itani handled the accounting work. From the beginning, Itani's model involved shipping food to contacts solely in the Middle East, and, small company or not, doing so with massive volume. According to company documents, the "choice of the Middle East as a primary market area was based on extensive experience, cultural understanding, linguistic skills and personal contacts in Middle Eastern countries." The company ran under the motto, "Grocers to the world."
The choice proved wise. The Gulf War in the early 1990s increased the American presence on military bases and, more important to Itani at that time, in the oil fields of the Middle East. The demand mushroomed for food from the United States, and American Grocers secured shipping lines with contractors in Ad Dammam, the capital of the Eastern Province of Saudi Arabia. The city also rested on the country's main port, providing a direct pipeline to the oil fields and Riyadh, the largest city in Saudi Arabia. About 60 percent of Itani's business, according to court documents, came from shipping to corporations such as Exxon, Shell and Aramco in the Middle East, for "consumption by Americans living on civilian compounds."
Military contracts made up the rest of Itani's business. He shipped food to American soldiers stationed in Egypt, Iraq, Kuwait, Saudi Arabia and the United Arab Emirates. Food exporters in the United States aren't allowed to ship directly to military bases in the Middle East, but Itani positioned himself with contractors in Kuwait's The Sultan Center, a massive retail center in the country that is, according to court documents, "a leading supplier of supermarket items, perishables, and general merchandise in the Middle East."
Itani worked at a manic clip, Pallares says, as a perfectionist who allowed little room for error. In the workplace, it was stressful for Pallares, almost to a fault, but from a business standpoint, it paid off.
"He had a lot of exclusive lines [to the Middle East]," Pallares says. "He basically had a monopoly."
And, in fact, if food was shipped from the United States to the Middle East during the last two decades, there's a good chance it was routed through Houston and American Grocers. Court documents say Itani received "a constant stream of phone calls from domestic vendors" wanting to cash in on the company's leverage in the Middle East. Itani's list of American clients was long, but it included, to name a few, Kraft Foods, General Mills, Frito-Lay, Oscar Mayer, Betty Crocker and Blue Bell.
In May of 2003, as the initial push into Iraq by the U.S. military was winding down, the Department of Defense "awarded a multi-million dollar contract" to Public Warehousing Company, a "Kuwait-based company that operated warehouses and freight management services in the Middle East and around the world," according to Itani's criminal indictment. Public Warehousing, now the subject of its own federal probe, procured many of its food products from the United States through The Sultan Center, making American Grocers a "first-tier sub-contractor" to the military.
As American troops dug deeper into the battlefields of Iraq, business couldn't have been better for Itani, and all it took, court documents say, was "false promises, a warehouse, and a few hundred buckets of nail polish remover."
Delma Pallares's intersection with Itani started with her first husband, a Muslim man of Syrian descent. Pallares knew little of Middle Eastern culture and she wasn't a Muslim. She started attending Houston's El Farouq Mosque, just off I-10 and Gessner, to study Arabic and Islamic traditions.
She soon met and developed a relationship with Suzanne Itani, who herself had married into the religion. It was 1995, and even though Pallares had little experience or training in business, and certainly none in food exporting, Suzanne asked Pallares to work for her husband at the newish American Grocers. Pallares accepted.
The company was still in upstart mode, with only a few employees and none, besides Pallares, outside Itani's family. Pallares worked primarily as a "logistics manager," making sure food packages arrived and were shipped out on time. She worked long days, learning on the fly, getting trained by Itani and Lilly Patenotte. Itani was "very demanding," Pallares says, enough to make her want to quit, but she had little choice but to stay put. Her marriage had fallen apart and Pallares needed the job to support herself and her son, who at that time was entering elementary school.
But the crash course at American Grocers also helped Pallares gain an intimate knowledge of the business in a relatively short period of time. Itani taught her how to order a large shipment of food and create a "container," preparing and getting it approved for export. Patenotte trained Pallares on the paperwork — how to create order forms, invoices and shipping codes — and how to file properly. And because the company's offices were located in the same building as the warehouse, Pallares got hands-on experience in every aspect of the export chain. She excelled at the job, and by 1999, Pallares was promoted to the position of general merchandising manager.
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