American Grocers: Houston Company Sold $36 Million Worth Of Outdated Food To U.S. Troops

The Department of Justice announced today that Houston's American Grocers, Inc., has agreed to pay $15 million to settle a lawsuit that charged the company with shipping expired food to U.S. troops in the Middle East.

The suit, which turned into one of the government's largest whistleblower cases out of Houston, started in 2005 with confessions from Delma Pallares, a former employee of American Grocers.

The law firm Berg & Androphy, which represented Palleres, issued a press release today about the case:

Mr. Itani (the company's owner) schemed to purchase aging or out-of-date food products, change the expiration dates, and then resell the more than $36 million in products to military contractors for consumption by U.S. troops.

The release continues:

The [expiration] dates were changed by eradicating expiration or "sell by" dates with acetone (an ingredient in nail polish remover), or with spray paint or a "Dremel" tool...So much acetone was housed at American Grocers, according to the complaint, that its insurance company warned after an inspection that the acetone created a dangerous work environment and a fire hazard.

Under the direction of Itani, the company also routinely forged health certificates and, perhaps worse, Halal certificates, which require that food imported to countries like Saudi Arabia and Kuwait meet "appropriate requirements for Muslim religious slaughter."

From the press release:

Mr. Itani obtained fake Halal certificates created by a sheik [who] never inspected the product. Further, the complaint alleges, Mr. Itani eventually bypassed even the sheik's fees by duplicating the sheik's certificate and forging Halal certification within his company.

The details of the lawsuit, which have been under seal, were released today. Itani was also criminally prosecuted by the feds for charges related to this case, and he pled guilty on July 21 of last year.

The criminal charges stemmed from, according to the press release, "overcharges [that] took the form of distribution fees and bogus trucking costs, which were concealed by inflated and fabricated invoices."

Itani faces 24 months in prison, and his sentencing is set for December 3.

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