In the late afternoon of 13 July 2011 five Lithuanian men died and another was left with 75% burns following an explosion at an industrial unit on the Broadfield Industrial Estate in Boston. The Police later confirmed that the industrial unit housed a filtration plant that was being used to produce counterfeit vodka. Three lorry loads of counterfeit vodka were also found and these bottles were falsely labelled as the ‘Smirnoff’ brand.
Lincolnshire Police are still trying to find out who was behind this illegal facility and how big an operation it is. They have even been considering manslaughter as a line of enquiry. The Boston incident has sensationally exposed this illegal trade to the local Police and to the wider public, but this has been recognised as a growing area of concern for some time. The Police, HMRC and Trading Standards usually co-operate with each other in cases such as this.
A Growing Concern
Over the past year there have also been several discoveries of illegal alcohol production and bottling factories across the country. Last year, six men were sentenced to a total of 56 years after a massive illegal distilling operation was uncovered at Hackney in north London. Here, Polish migrants were housed and worked in a rundown warehouse, where two dozen bottles of vodka were being produced every minute around the clock. HMRC officers also seized around 25,000 litres of counterfeit vodka, along with bottling and labelling equipment, in Manchester. Trading Standards Officers have been carrying out spot checks on licensed premises and have found counterfeit alcohol to be a growing problem. At the end of 2010 around 26% of outlets in the South West were found to be selling counterfeit alcohol, with around 17% doing the same in Manchester and around 10% in West Yorkshire. If one were to extrapolate these figures across the country, it is not difficult to see why this is a growing concern. The Government has estimated that alcohol fraud costs the UK around £1bn a year in lost revenue.
HMRC carried out a pilot operation in Spring 2011, raiding shops to try and find out who was buying and selling counterfeit alcohol and to try and stop it reaching the shelves. Prosecutions were brought in Peterborough, Newcastle, Boston and St Albans. Some 16 premises, including a pub and several international stores owned by foreign nationals, have had alcohol or cigarette licences revoked or suspended. The large number of Eastern European migrant agricultural workers now living in some rural areas such as Lincolnshire and Cambridgeshire, has seen local shop shelves become full of foreign alcohol. Arguably, retailers in these areas are potentially exposed given that they may respond to the market and be stocking unfamiliar brands from Lithuania, Siberia and the Ukraine amongst others. It may be more difficult to spot the counterfeit brands in these circumstances.
One of six Boston storeowners taken to court after the first raids saw his licence suspended rather than revoked because he was not offering the vodka for sale, having become suspicious about its origins. He was simply offered the alcohol at the shop door by an Eastern European man who sold 31 bottles of vodka at a wholesale price. The bottles seemed genuine as they even had official duty stamps on them. He became suspicious after the man ran away after receiving payment and so kept them back from sale.
It is suspected that wholesalers have even been approached by the counterfeiters. Given their recent success, HMRC is now considering a UK-wide operation once a full evaluation of the pilot has been undertaken.
Associated Health Problems
One of the main concerns is that nobody knows exactly what you will find in the ‘hooch’ that is supplied, or how safe it is. In some cases, fake vodka was found to contain isopropyl alcohol, a chemical found in cleaning fluids. A consultant at Lincoln County Hospital has reported a disturbing increase in the number of casualties with symptoms associated with fake alcohol. Often, they have bought alcohol from corner shops, friends or even car boot sales. Signs of methanol poisoning such as dizziness, blurred vision and severe abdominal pains are being reported. In severe cases this can lead to kidney failure, liver failure and permanent blindness.
Distribution of Counterfeit Alcohol
The discoveries made and intelligence received would suggest that counterfeit alcohol is being made and distributed by organised gangs on an industrial scale. It is feared that some gangs are spreading out their distribution and sales networks to disguise their wider activities that often spread across Europe and beyond. The spread has the effect of making the public think that they are a small local gang rather than being serious international fraudsters.
Counterfeit alcohol tends to be rebottled wine, where cheaper wine is poured into a more expensive bottle. Alternatively, fake alcohol made in illegal factories such as those in Boston and Manchester above is distributed.
The rogue sellers are known to operate in a variety of ways. The alcohol often finds its way into off-licences from the backs of vans across the country. They post flyers and even e-mail prospective purchasers.
Precautions for Traders
One shop owner in Boston was sold five cases of vodka on the doorstep. The product was counterfeit and was also found to contain isopropyl alcohol! Pay particular attention to your suppliers. Conduct due diligence on your suppliers and trade with trusted sources. If someone comes into your shop and sells alcohol from the back of a car and then runs to the car and drives away without any kind of receipt being provided then generally it is a bad idea to sell or even keep the goods.
- Keep records of the due diligence undertaken and all purchase records.
- If you are offered alcohol at a price that looks too good to be true then that will most likely be the case.
- Regular checks of stock should be made and if possible pay close attention to the bottles before a purchase is made. Fake alcohol can be spotted by checking the labels. If there are spelling mistakes on them and they are not straight on the bottle then these are warning signs. Look at the bottles. Do they look different compared with other bottles? Are different bottles in the batch not filled to the same level? A smell of nail varnish from an opened bottle is also a giveaway.
Pitfalls of Trading With the ’Bootleggers’
Retailers will therefore need to be alert as to who they are trading with and the stocks that they hold. Similarly, practitioners will need to be prepared for the ‘basket’ of legislation that may be relevant should they be required to defend retailers. If a retailer sells, offers or exposes for sale counterfeit goods bearing a trademark, or even possesses such goods with a view to doing so then an offence is committed under the Trade Marks Act 1994. The offence is made out if the trademark in question is registered or has a reputation in the UK that would be unfairly taken advantage of and is treated in such a way to be of detriment to its character. This is an either way offence with up to 10 years in custody on indictment. To enforce this Trade Descriptions Act 1968 gives Trading Standards Officers a range of powers to enforce trading legislation within their area including the power to make test purchases, the power to enter premises and inspect goods along with the power to seize goods and documentation.
Trading Standards also oversee product safety which will be another factor, given the health issues that are associated with this illegal trade. The General Product Safety Regulations 2008 require retailers and distributors to act with due care to help ensure that products they supply are safe. If they have information that leads them to know or presume products are dangerous then the products should not be supplied. Retailers will be expected to keep and if necessary provide documentation to trace the origin of unsafe products, such as documentation required to support Inland Revenue and VAT requirements.
Trading Standards will work with the local Police in these matters and also in conjunction with HMRC who will likely take an interest in the duty offences under the Customs and Excise Management Act 1979.
This heady mix of possible offences could well be as intoxicating as the ‘hooch’ that will bring the authorities knocking at the door.
If you would like more information on this topic or an initial discussion with no obligation please call one of our partners: Sarah Wallace on 0207 421 3883 or 07808 899657, or Paul Haycock on 0114 274 4275.