Name: How a Family of Scammers Made Millions Off Fake 5-Hour Energy
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How a Family of Scammers Made Millions Off Fake 5-Hour Energy

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Counterfeit energy drinks were lightning in a bottle for Adriana and Joseph Shayota, netting them a million dollars a month until the feds closed in. But they had one chance to clear their name: President Donald Trump.The view from Adriana and Joseph Shayota’s 7,300-square-foot ranch-style home in El Cajon, California, was once that of a small empire. Below the rolling hillside town and roughly 28 miles from the edge of their infinity swimming pool stood the Shayota goldmine — an unassuming gray and white warehouse near the U.S.-Mexico border with a small sign that read “Baja Exporting” in medical-blue type. Starting in 2010, the mostly windowless compound was the manufacturing and distribution hub for a burgeoning million-dollar-a-month business venture: the sale of counterfeit .By every account, Joseph, a 68-year-old first-generation Chaldean immigrant, was quite dapper. His eight-car garage was filled with three Range Rovers, two Mercedes, a Ferrari and a Bentley. According to court records, Joseph had a gambling problem and spent his days in casinos or hanging out in cigar shops. For a time, he also had an affair with a young woman who was living in an apartment that was listed under Adriana’s name. Unlike her husband, 49-year-old Adriana, a Catholic with Mexican ancestry, worked in the distribution office every day, according to Geoffrey Potter, a lawyer with and lead prosecutor of the case against the Shayotas. “She masterminded getting this stuff out there,” he says.Prior to their 5-Hour Energy scheme, the road to counterfeiting royalty was, for the Southern California-based couple, paved with other, less-spurious scams. In early 2009, the Shayotas, along with their co-conspirator Walid Jamil and other members of their family, resold counterfeit Equal, Splenda, Truvia, , , Mars candy and Welch’s and Mott’s products.Their budding arrangement cast Jamil as the head of the distribution side of the business while the Shayotas put up the capital. Their distribution factory, Midwest Wholesale, was based outside of Detroit. But that all changed a year later in 2010 when the Michigan Department of Agriculture received complaints of a rat infestation inside Shayota HQ. The rodents were attracted by knockoff rice that was then poured by hand into counterfeit Uncle Ben’s boxes. Still, no criminal or civil charges were brought.Soon after the incident, the decision was made to move the operation to San Diego — closer to the Shayotas’ home and conveniently near the border. Ironically, the 5-Hour Energy operation began as a legitimate one. In late 2009, under the name Baja Exporting, the Shayotas entered into an agreement with Living Essentials, the parent company for 5-Hour Energy supplements. Baja Exporting was authorized to distribute 5-Hour Energy in Mexico, which they received at a 40 percent discounted rate so that they could help introduce the to an untapped market.But a few months passed, and the Shayotas — who’d purchased more than 350,000 bottles of 5-Hour Energy with Spanish labels — hadn’t sold a single one. Potter tells me he doesn’t think the family ever had any intention of selling the products in Mexico; court filings suggest that Joseph tried to divert the product into the U.S. marketplace but failed because retailers didn’t want bottles with Spanish-language packaging. That’s when the Shayotas conspired to relabel the bottles — removing the actual lot numbers and expiration dates — and sell them at a price 15 percent lower than what Living Essentials charged in the U.S.The sale of relabeled bottles was merely the beginning. After the last of the Spanish stock was sold in late 2011, the Shayotas’ San Diego distribution center was turned into a factory. Using undocumented workers with no licenses to handle food or drink — “They had no sanitation training, no place for people to even wash their hands,” says Potter — the Shayotas began cooking up their own energy concoction.Once they had their cocktail, the contents of which were never consistent, the Shayotas looked to a plastics manufacturer in Guadalajara for blank plastic bottles and caps imprinted with the trademarked “Running Man” 5-Hour Energy logo. In a few short months, the operation was well underway. “If I took the counterfeit bottle and the authentic bottle, you’d have at best a 50/50 chance at figuring out which one was real and which one was fake,” Potter tells me.Adriana was the sole proprietary name on Baja Exports, and per Potter, she helped administer the entire operation. To that end, she purchased equipment such as a steam tunnel machine to place counterfeit 5-Hour Energy labels on bottles and an inkjet printer for lot numbers and expiration dates. To disguise the purchase orders and invoices for the counterfeit 5-Hour Energy bottles, the Shayotas used code words. The liquid content was often referred to as “juice blend,” “spices” and “michelada” — the name for a popular Mexican drink made with beer, lime juice, spices, tomato juice and chili peppers.From May to October 2012, the counterfeit blend of 5-Hour Energy drinks polluted the entire 5-Hour Energy market, which at the time was selling 9 million bottles a week in the U.S. “[The Shayotas] were producing a million and a half counterfeit bottles a month,” says Potter. It was also around that time that an authorized 5-Hour Energy salesman couldn’t understand why a good account of his was no longer buying product from him. Frustrated, he purchased a box and took it back to Living Essentials to prove that someone had taken over his territory. “Then they knew,” says Potter. “Living Essentials sent the counterfeit product to a lab and were able to confirm that the ingredients weren’t theirs and the coloring [of the liquid] was wrong.” The art of the counterfeiter, Potter explains, “is to imitate the packaging, not what’s in it.”From there, a national investigative team quickly shopped around at hundreds of stores who were selling the counterfeit version. One by one, they moved higher up the chain of command until they began to realize that some of the master wholesalers were in on the whole thing. “They knew,” says Potter. “Adriana would get together with the wholesale vendors biweekly with trash bags full of cash, and they’d divide it up like a Netflix movie.”In a matter of weeks, federal investigators had built their case and were ready to charge the Shayotas with conspiracy to traffic in counterfeit goods and conspiracy to commit criminal copyright infringement.According to Potter, counterfeiting cases are rarely — if ever — prosecuted in the federal court system. “A lot of counterfeiting cases are prosecuted at the state level as misdemeanors or low-level felonies,” he says. “A number of years ago, I looked at the number of people that had actually served time in prison in a particular year in the federal system for counterfeiting and found that you were twice as likely to die of being struck by lightning.”In part, the lack of federal prosecution of counterfeiters is because most counterfeit goods are manufactured in China, India or Pakistan and then brought into the U.S. And since it’s virtually impossible to extradite someone to serve time for counterfeiting products, federal prosecutors don’t waste their time building these sort of cases.But the Shayotas are American citizens and their factory was based inside the country. Additionally, Living Essentials, having lost millions of dollars, had an axe to grind. Coupled with the sort of funding and resources to take a case like this to court, the company was insistent on making sure the perpetrators were punished. As such, in November 2012, the Shayotas along with their fellow conspirators — a total of 11 others — were indicted for their scam.It helped too that the case quickly made national headlines because it happened to coincide with a potential public health crisis. In 2012, the reported that the FDA was investigating 92 reports of adverse reactions to 5-Hour Energy shots since 2009, including 13 deaths and 33 hospitalizations. “I don’t really want to talk about the health effects,” says Potter, who claims that there was never any substantial evidence linking the counterfeit products to illness. “But if you got sick, you wouldn’t necessarily know what it was from. Because it doesn’t happen immediately, it’s not like stepping on glass.”In all, the Shayotas had helped sell 3.7 million bottles of fake energy drinks, which at the estimated retail price of $2.99 a bottle came out to a total take of a little more than $11 million. By the end of 2012, the federal investigators had seized enough equipment, records and counterfeit goods that the case against everyone involved was effectively wrapped in a bow. As a result, everyone save for the Shayotas pled guilty — and the case was billed as the first criminal prosecution of a counterfeit food or beverage in the country.In a matter of months, a jury found them guilty too. Joseph was sentenced to 86 months in prison. Prosecutors sought a six-and-a-half-year sentence for Adriana, but the judge, citing Adriana’s “minor role,” gave her a shorter 26-month term. “She portrayed herself as being an innocent spouse lured into this,” says Potter. “Which is just not true. She was in the office, working, every day.” (In fact, in November 2012 when the investigative team was closing in, it was Adriana who transferred $2 million out of the company account to a second account in Mexico.)Today, though, it’s pretty much a moot point. Last month — a little over a year after Joseph and Adriana were incarcerated — Adriana was granted her freedom as part of Donald Trump’s final late-night pardoning spree. (Jamil was freed in April 2020 under a compassionate release order due to the pandemic.)According to the , there were nearly three dozen letters from family and friends attesting to Adriana’s generosity. Amongst those who wrote letters was Marco Garmo, a former San Diego sheriff’s captain who himself is waiting to be sentenced for selling illegal guns last year. The statement from the White House noted that the commutation was supported by Chula Vista Councilman John McCann and others in the community, suggesting that Adriana “mentored those who wanted to improve their lives and demonstrated an extraordinary commitment to rehabilitation.” Potter, however, disagrees: “That logic is absurd. She wasn’t in prison long enough to be helpful to anybody.”He adds that he has no idea why Adriana was granted a pardon. His concern, though, has little to do with her specifically. Instead, he’s worried about how the commutation might weaken the government’s hand in using prison time as a deterrent for future counterfeit crimes. “[Adriana] counterfeited almost four million bottles of 5-Hour Energy and did it in an unlicensed, unsanitary facility and then foisted these counterfeits on hundreds of thousands of unsuspecting people,” Potter says. “Frankly, it could have been a national health crisis.”

Counterfeit energy drinks were lightning in a bottle for Adriana and Joseph Shayota, netting them a million dollars a month until the feds closed in. But they had one chance to clear their name: President Donald Trump.The view from Adriana and Joseph Shayota’s 7,300-square-foot ranch-style home in El Cajon, California, was once that of a small empire. Below the rolling hillside town and roughly 28 miles from the edge of their infinity swimming pool stood the Shayota goldmine — an unassuming gray and white warehouse near the U.S.-Mexico border with a small sign that read “Baja Exporting” in...

How a Family of Scammers Made Millions Off Fake 5-Hour Energy

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