Fraudster who conned supermarkets with free range egg scam jailed
Sainsbury’s and Tesco among stores caught out by wholesaler who passed off battery produce as organic
Caged battery hens Keith Owen’s lucrative trade in eggs laid by battery hens was uncovered by inspectors who found evidence of wire marks on the shells – a tell-tale sign of birds reared in a cage. Photograph: Viktor Drachev/AFP/Getty Images
For those who made the conscious decision to spend more on free range or organic eggs, it was worth paying a premium to know the hens that laid them had been kept in ethical conditions.
But those people who ended up paying over the odds for Keith Owen’s eggs may feel a little less warm inside after it emerged the 44-year-old egg wholesaler had scammed all the major supermarkets and numerous small shops by passing off about 100m battery farmed eggs as free range or organic.
Owen, a married father-of-two from Bromsgrove in Worcestershire, was jailed for three years today and forced to surrender the £3m profit he had made by “dishonestly and systematically” mis-describing eggs over a two-year period. The fraud abused “well-intentioned public trust” by scamming innocent customers who had paid extra to ensure better animal welfare, Worcester crown court heard.
Defra, which brought the prosecution, said it was the biggest case of its kind it had ever investigated.
Owen ran Heart of England Eggs Unlimited, an egg-packing business that supplied bigger packing companies, which, in turn, provided the vast majority of eggs to the well-known supermarkets, including Sainsbury’s, Morrisons and Tesco, as well as smaller retailers.
Last week he pleaded guilty to three charges of fraudulent accounting which involved him altering records to disguise the fact he was buying eggs laid by caged hens and selling them for a vast profit after “mis-describing” them in paperwork.
His barrister, John Kelsey-Fry QC, suggested his client was not alone in creating what he described as “mischief” in the egg industry.
“It’s not the case that all those to whom Mr Owen supplied eggs were concerned to ensure the provenance of the eggs was as described,” said Kelsey-Fry, adding it would be “inappropriate” to elaborate.
Passing sentence, the judge said Owen had made very substantial profits at the expense of “real-life victims” who believed they were buying premium eggs.
Describing Owen as the firm’s guiding mind, the judge told the managing director: “Imprisonment there must be, because the offences are plainly so serious that only a sentence of imprisonment will suffice. This was all a carefully planned and executed fraud by false accounting. By greed, you have corrupted and destroyed the once-legitimate business which you have known all your life.”
At the time of the fraud, between 2004 and 2006, farmers could expect a price of about 90p for a dozen organic eggs, 70p for free range and 35p for cage eggs. As a “middle man” wholesaler, Owen would normally make a few pence profit per dozen. But by passing off cage eggs as free range, he could make an extra 35p for every 12 eggs he sold. In a market where demand outstripped supply, he seized the opportunity to make a lot of money.
Richard Jones, a Defra official who investigated the case, said today that Owen was such a significant player in the free range egg market that after he closed down his business two years ago, a number of supermarkets, including Somerfield, had to start sourcing free range eggs from abroad.
The court heard that Owen did not only buy in cheap battery hen eggs in order to dupe customers further down the line, he also bought in huge quantities of so-called “industrial eggs”. These do not meet the quality requirements for sale to the public; instead they can be used only in processed foods once liquefied.
Murmurings began circulating in the egg industry in 2004 that there were vastly more British free range and organic eggs being sold in shops than could ever possibly be laid in UK farms.
At the same time, investigators from the Egg Marketing Inspectorate (EMI) noticed during routine checks that eggs coming from Heart of England were not at all they were purported to be. Because all eggs look the same to the naked eye, the law requires that each egg is stamped with a unique number indicating where, and in what conditions, it was laid. Paperwork indicating origin and type must accompany the eggs all along the supply chain.
But when inspectors checked a selection of Owen’s allegedly free range eggs using a strong ultraviolet light, the shells bore wire marks – a tell-tale sign that they had been laid not on a bed of straw, or even artificial turf, as farming regulations stipulate, but in a metal cage.
There were also complaints from lorry drivers who arrived at Owen’s farms to drop off consignments of caged eggs and then pick up free range or organic eggs. A number of drivers reported to their trade union that they were made to wait hours to pick up their deliveries and suspected the eggs they delivered were being relabelled and sold back to them that day.
All of Owen’s major contracts were to supply British eggs, bearing the British Lion hallmark. But investigators from Defra discovered that he was regularly buying eggs from the continent and passing them off as homegrown.
He used another of his companies, Owens Eggs, to disguise the accounting fraud. Owens Eggs was a legitimate business selling organic eggs laid in a barn on the same site as the Heart of England business. He laundered money by selling organic eggs from Owens Eggs to Heart of England at a hugely inflated price – £10-£40 a dozen at a time when others were selling a dozen for no more than £1.
Investigators found Owen had not only falsified records with real suppliers but also invented firms that had supposedly provided him with premium eggs. He was banned from being a company director for seven years.
A Sainsbury’s spokesman said: “We have the highest standards of quality for all our products, and the eggs we sell are either Woodland eggs or Lion Mark eggs from non-caged flocks. So we were naturally very angry and concerned to learn that we and other retailers were the victims of this fraud.
“We purchased the eggs from a long-term supplier in good faith and it is important to note that at no point did we have any contact with Mr Owen or Heart of England Unlimited.”
The British Free Range Egg Producers Association said: “As a result of this case, the British Egg Industry Council with the ‘Lion’, have introduced a raft of measures, one of which is the stamping of all eggs since January 2010. Consumers can therefore now be reassured that eggs cannot be tampered with as in this case.”
How you tell the difference between a free range and cage egg
Although all eggs look the same in the box, with the right equipment it is possible to tell how and where they were laid. When a hen lays an egg, the shell is wet for a short period of time and it picks up the marks of the surface on to which it was laid. When inspectors from the Egg Marketing Inspectorate carry out routine inspections, they shine a special ultra-violet light underneath a random selection of eggs and look for tell-tale marks on the shell – be it the wire marks of a cage, artificial turf or straw. If the eggs are labelled free range, yet bear the criss-cross of wires on their shell, the producers have some awkward questions to answer.
•30m eggs eaten in the UK every day
•53% of eggs sold in Britain in 2008 were from caged hens, compared to 43% free range
•By 2012, battery farming hens will be banned in accordance with EU law