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Is black-market baby formula financing terror?
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Less convinced is Mardi Mountford, executive director of the International Formula Council, an Atlanta-based trade association that represents infant formula manufacturers in the United States. "We've heard that speculation, but we're not aware of a direct connection."
Theft of baby formula from store shelves has risen over the past decade, costing retailers billions of dollars. Formula was the fourth most-often-shoplifted item last year, according to a survey by the Food Marketing Institute, a Washington, D.C., trade group.
In the wake of several cases in North Carolina and Florida, some retailers have transferred formula from store shelves to behind the counter. One big grocery chain, Albertsons Inc., now keeps a few cans on the shelf - along with a sign directing customers to the courtesy counter.
Calling it "a serious security issue" for retailers, the National Retail Federation unveiled its 200-page report highlighting "organized retail theft" of infant formula. At least seven of the report's 10 case studies detail fencing operations run by citizens of Middle Eastern origin.
"The rings I identified dealing in stolen infant formula are operated mostly by Middle Easterners," says Charles Miller, a loss-prevention consultant and author of the report. They typically organize the rings, pay the shoplifters (who are mostly from Latin America), repackage the formula, and resell it. Out of $30 billion in annual retail theft, about $7 billion of infant formula is stolen and resold for a tidy profit, Mr. Miller estimates.
The scheme works this way: A shoplifter may get $5 for a can of formula from his fence, who then reboxes the loot and sells that to a dishonest retailer for $9 a can. That retailer then sells it for perhaps $15 or $16 a can. The result may be a $6 or $7 profit a can for the dishonest retailer - instead of pennies a can for the honest merchant, Miller says.
Several Middle Eastern businessmen have already been charged or convicted in connection with baby-formula thefts.
Mohammed Khalil Ghali was sentenced in February to 14 years in prison, convicted on 15 counts that included transporting stolen goods and money laundering. A search warrant states that money generated from the sale of the goods was wired to banks in the Middle East, "specifically Jordan, Egypt, and Palestine." Nine of the 11 individuals indicted in the case are of Middle Eastern descent, according to the Department of Homeland Security.
Samih Fadl Jamal was a fixture in Phoenix, until investigators discovered that his company gained $11 million in profits from the sale of $22 million of stolen baby formula from 2001 to 2003, prosecutors say.
In all, 27 people connected to the Jamal Trading company scheme were indicted, most from Iraq, Jordan, or Lebanon. Some are naturalized US citizens; others overstayed student or visitor visas, the National Retail Federation report said. Investigators' wiretaps indicated that about $8 million was funneled to countries in the Middle East, where it disappeared. Mr. Jamal, a naturalized US citizen born in Lebanon, was convicted in April of 20 counts of conspiracy to transport and receive stolen property and other related charges, as well as money laundering.
