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Caught in the Nation's Largest Food Fraud, Groeb Farms Files for Bankruptcy

Caught in the Nation's Largest Food Fraud, Groeb Farms Files for Bankruptcy

Photograph by Hilxia Szabo/Gallery Stock

In February, the Department of Justice announced that Groeb Farms, among the nation’s biggest honey suppliers, was involved in the nation’s biggest food fraud. On Oct. 1, Groeb Farms filed for bankruptcy.

The honey laundering case, which I wrote about last month, involved a German company in Chicago, ALW, that was illegally importing cheap (and sometimes adulterated) Chinese honey. The honey itself isn’t illegal; mislabeling it to avoid paying high tariffs is. Two ALW executives pleaded guilty to fraud.

Groeb Farms had been one of ALW’s best customers, and after being caught in a sting that Homeland Security agents called Project Honeygate, the Michigan-based honey processor entered into a deferred prosecution agreement and paid a $2 million fine. It was also required to dispose of any Chinese honey it had in its inventory. Apparently that proved expensive: Groeb had to buy new honey just as prices were rising.

Amid its financial troubles, Groeb fell behind on payments on a 2012 bank loan. And U.S. honey producers and distributors that claimed they were harmed by Groeb’s actions filed several lawsuits this spring that were potentially very costly. The bankruptcy filing halts their progress.

Groeb now says it has a plan that involves a Texas private equity firm taking control and the forgiveness of some $27 million worth of debt. It says it will continue supplying honey to food manufacturers and food service companies as it reorganizes.

Berfield is a writer for Bloomberg Businessweek in New York. Follow her on Twitter @susanberfield.

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