Filippo Antonio De Cecco, maxi-fraud on the origin of wheat. Chieti’s GIP has the floor

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The investigation into Filippo Antonio De Cecco for fraud in trade on the origin of wheat used in pasta lands before the preliminary investigation judge of the Court of Chieti. On Friday, 9.4.21, GIP Luca De Ninis, who was called to decide on the AssoConsum association’s battle against the motion to dismiss made by Deputy Prosecutor Giuseppe Falasca, postponed his decision. From the Spaghetti Western all’abruzzese to #VanghePulite?

Background

Filippo Antonio De Cecco ordered his wingmen to falsify the origin of nearly 5,000 tons of low-quality wheat from French to ‘Apulian’. (1) Had 30 thousand tons of North Dakota wheat purchased, of far less identity and value than the ‘Italy, Arizona and California‘ origins claimed in labels and advertisements. He agreed to the use of semolina of unknown origin, in defiance of advertisements about ‘selecting the best grains‘ and the ‘De Cecco method‘ for milling them. (2)

However, Chieti prosecutor Giuseppe Falasca tries to close the investigation that reveals–based on documents acquired–the biggest fraud of the century, in the agribusiness sector, by value and volume of counterfeit goods. It overlooks the false statements made by the ‘black knight’ to the Antitrust Authority and the crime of association that even a second-year law student would catch at a glance, including repeated fraud, false accounting statements. Add to that the serious threats suffered by the whistleblower at the hands of unknown persons. (2) But a consumer association objects.

Preliminary Investigation Judge Luca De Ninis is now expected to rule on the matter on 9.4.21. Thanks to Neapolitan lawyer Miriam Chianese of AssoConsum, who filed an opposition against the clumsy attempt to cover up the case. No one, however, has yet addressed the ‘suspicious’ relations, an understatement, between Filippo Antonio De Cecco and Giovanni Legnini. The former vice-president of the CSM who in intercepted conversations with Luca Palamara declared that he ‘succeeded‘ in putting men he trusted at the top of the Tribunal and the Prosecutor’s Office. (3)

Following are some details of an affair emblematic of, among other things, the ills of Italian justice.

De Cecco, the best defense is the public prosecution

The motion to dismiss 30.11.2020 acknowledges that ‘it appears from the investigations carried out by the NAS Carabinieri that the 4,575 of French wheat was used for the production of the batch of pasta (…) under investigation’. Much more turns out-as already demonstrated (1,2)-without the prosecution representative mentioning it. But the p.m. Joseph Falasca goes further with the bold theorem that follows.

‘Well, if in the part about the product’s advertisement it states that the pasta contained in the package is made with “the best durum wheats; we select the best Italian, Californian and Arizona durum wheats for gluten quality, wholesomeness, protein content, organoleptic characteristics…..” Conversely, in the legally required communication about the origin of the product, it reads, “durum wheat semolina pasta may contain soy – country of origin of wheat: EU and non-EU countries – country of milling: Italy.”

Two observations are necessary at this point: first, the use of French wheat is included in the use of EU grains attested on pasta packages. Second, the advertising wording on the packages is not at all at odds with the dutiful indication of the grain’s origin. In fact, the sourcing of grains from EU and non-EU countries is perfectly consistent with the advertised use of even the best Italian grains from California and Arizona. Ultimately (…) the communication conveyed by the pasta package is perfectly consistent with the grains used to produce the food.’

Trade fraud, decriminalization?

The false declaration of origin of wheat grain-which on the front of the label is referred to with graphic emphasis to Italy, Arizona and California, also claimed in thumping television advertisements and on the web – would thus be exculpated by the indication on the back ‘EU – non-EU grain origin‘, i.e. ‘Origin Planet Earth’, according to the p.m. Joseph Falasca. Which evidently ignores Regulation (EU) no. 1169/11, in requiring that optional label information-just like mandatory information-must be truthful, clear to the average consumer, and unambiguous. With express prohibition of misleading consumers about the essential characteristics of food products, including origin and provenance. (4)

The defense theorem formulated (paradoxically) by the Chieti deputy prosecutor, should it ever come to fruition, would lead to the decriminalization of the crime of trade fraud in all cases in which a false declaration of origin or provenance was accompanied by a ‘disclaimer‘ on the back label. So much for Italian and European case law on food fraud, unfair trade practices and indications of origin and provenance. As well as in defiance of Regulation (EU) no. 2018/775, already in effect at the time of the facts, which requires specifying the different origin or provenance of raw materials in the same field of view and with equal visibility to any discordant geographic reference. (5)

1.2 million euros of disvalue, ‘a residual and negligible part‘?

‘The conduct ascribed to the suspects appears even more destitute of criminal relevance if the fact is observed from a substantive perspective. There would remain–in fact–expendable elements in an accusatory key where the vaunted best grains from Italy, California and Arizona mentioned in the product’s advertisement constituted a residual and negligible part of the factors used in the production of the pasta: that is, if the final product consisted for its major part of French wheat’ (Giuseppe Falasca, request to dismiss criminal proceedings against Filippo Antonio De Cecco, 11/30/20).

Would the falsification of Made in Italy not have ‘criminal relevance‘ since it would be ‘a residual and negligible part‘ of the overall wheat consumption of a large industry? It is ‘only’ 5 thousand tons of French wheat (for 1.4 million), plus 30 thousand tons of North Dakota wheat (for 8.6 million), which in turn has nothing to do with Arizona and California. Filippo Antonio De Cecco, with these by no means residual nor negligible operations, has saved more than 1.2 million euros in raw material costs. Added to which is the fraud in indicating California wheat that has never been used in recent years, as evidenced by the fact that there is not even coding for it in De Cecco’s warehouse management software.

Italian consumers’ interest in knowing the origin and provenance of food raw materials is growing steadily, as evidenced by every report on consumption in Italy (6.7). The Italian government itself-in recognizing this interest as essential, based on special market analysis conducted by the CREA (Council for Agricultural Research and Analysis of Agricultural Economics)-notified the European Commission and introduced the requirement that the origin of wheat used to produce pasta be indicated on the label Made in Italy. (8) And it is precisely because of consumers’ preference for pasta made with Italian wheat that De Cecco himself listed Italy first, in extolling the three origins (often false, as it turns out) of the grains used.

Filippo Antonio De Cecco, the dud to the Antitrust Authority.

Emails between De Cecco executives and officials, acquired in these criminal proceedings, also show how Filippo Antonio De Cecco also threw a veritable dud at the Antitrust Authority (Autorità Garante per la Concorrenza e il Mercato, AGCM). He claimed to use only the ‘best Italian, Californian and Arizona durum wheats‘ and negotiated corresponding changes to be made on the labels, in order to obtain closure of the investigation against him. (9) But at the same time he continued to use North Dakota wheat (20 percent in the mix) and negotiated new supplies from France and Spain. The commitments proposed by the Black Knight to the Antitrust Authority on 10/28/10 and signed 12/20/19 are therefore based on false statements. Some insights:

– on 9/24/19 Mario Aruffo, De Cecco’s purchasing manager, asked assistant logistics manager Paolo D’Innocenzo for the freight cost of the cargo, from the port of Les Sable d’Olonne (France) to that of Ortona, to continue the 4-5,000 tons of French wheat negotiation,

– on 9/26/19 Aruffo updated President Filippo Antonio De Cecco on the progress of the negotiations for French wheat, with scheduled delivery in January 2020, enclosing the results of the analyses already discussed between them, to ask whether to continue the negotiations. Aruffo reported that French wheat with 14 percent protein would cost 292 euros/t (with arrival in Fara San Martino), while Apulian wheat with 14 percent protein would cost 297 euros/t, ‘with uncertainties for quotations next January.’

– 2.10.19 the purchasing director updated the president on the French wheat negotiation. The price had risen to 309 euros per ton, explained Aruffo, who therefore also awaited Spanish wheat quotations,

– on 17.10.19 Stefano D’Alessio transmitted to Aruffo the contract, duly signed by Filippo Antonio De Cecco, with French seller Cavac and broker GTrade System Suisse SA,

– on 1/30/20 Aruffo informed the president that North Dakota grain would only be sufficient until the end of the following week and the French grain ship was delayed due to bad weather. He therefore proposed to vary the grain mixture with protein >15%. Moving from what was then in use (70 percent Arizona, 20 percent North Dakota and 10 percent domestic) to a transitional solution (80 percent Arizona, 20 percent domestic), pending reevaluation of a new blend upon arrival of French wheat and subsequent analysis. Filippo Antonio De Cecco, through presidential secretary Luisa Kaush, gave approval,

– on 10.2.20 the purchasing director communicated on behalf of President Filippo Antonio De Cecco that French wheat arriving in Ortona on 13.2.20 was to be registered as if it were Apulian.

In addition to the mockery to antitrust, the harm to consumers. Fake labels

‘On October 28, 2019, De Cecco submitted a proposal for commitments, which in their final version are attached to this measure and form an integral part of it. They are concerned with the following measures:

(i) in the new pasta package, the words “De Cecco Method,” “recipe for over 130 years,” and “Made in Italy,” as well as the Italian tricolor flag will be removed from the front, and the following wording will be inserted, also on the front, “The best Italian, Californian and Arizona grains” within 4 months of the closing of the preliminary phase of the proceedings;

(ii) as for the website, De Cecco will give greater emphasis in the section on the “De Cecco method” to the fact that grains selected in Italy and the rest of the world are used. Specifically, in the chapter “The Grain Selection” to the phrase “the best grains” he will add the words “Italian, Californian and Arizona.” To the sentence “Our experts select raw materials by touching the quality of the hard grains” will add the words “Italian, Californian and Arizona” below. The practitioner pointed out that the submitted commitments ensure both the information balance between the front and back of the package and the transparency of the information provided to the consumer.(AGCM, 20.12.20, De Cecco measure, points 16, 17)

Thetransparency of information‘ emphasized by the ‘professional,’ unfortunately, has never been there since the initiation of the antitrust proceedings. And the mockery to the Competition and Market Authority was accompanied by the damage to consumers who bought millions of packages of pasta loudly presented as ‘Italy, Arizona and California‘ but which contained 10 percent Italian and/or French wheat. A residual and negligible part, to use the p.m.’s lexicon.

False accounting?

On 13.2.20 , purchasing clerk Stefano D’Alessio issued a purchase order to Cavac (Positive Agriculture, Societè Cooperative Agricole à capital variable), for 4,575 tons of ‘Apulian’ wheat arriving from Northwest France. This formalized the passive cycle procedure, which involves the entry of goods on a purchase order, the recording of the passive invoice (if in line with goods entry) and the subsequent payment for the supply. Wheat commodity coding meets the need to have proper general, analytical and warehouse accounting. As well as responding to proper application of the management rules stipulated in De Cecco’s internal procedures.

In accounting, grain raw material coding is necessary to control what goes into the warehouse silos, compare it with the supplier’s invoice, and make payment. At the management level, the coding of the raw material grain is necessary to provide the general accounting with the valuation of the ending inventory (month, semester, year) and to make the physical inventory for the period (month, semester, year), referring to individual product codes and their average prices, in view of the preparation of the consolidated financial statements. These activities should follow strict internal procedures, in accordance with Law 231/01, and are subject to mandatory external audit by the auditing firm Ernest & Young. And it is evident how the falsification of the grain code, from French to Apulian, invalidates the monthly closings (February to December 2020), the budget being approved, and the half-yearly approved by the Board of Directors. (10)

Food safety, traceability, seizure

Food safety has been completely neglected, by the investigating judiciary and unfortunately also by the Latina NAS, which first registered the complaint. The falsification of traceability documents-demonstrated from the outset in the discrepancy between the commercial and loading documents-violates a cardinal requirement of the General Food Law (EC Reg. 178/02, Article 18) and should have resulted in the immediate seizure of products placed on the market. All the more so since these are bodies of crime. But no one in this dark age has had the courage to fulfill their duty. We hope the Judge for Preliminary Investigation will now provide it.

#CleanSpades

Dario Dongo

Notes

(1) Dario Dongo. Spaghetti westerns in the Abruzzese style. Filippo Antonio De Cecco’s film, premiere. GIFT (Great Italian Food Trade). 1.2.21, https://www.greatitalianfoodtrade.it/mercati/spaghetti-western-all-abruzzese-il-film-di-filippo-antonio-de-cecco-in-anteprima

(2) Dario Dongo. Spaghetti westerns in the Abruzzese style. Mr. De Cecco’s pastatrac. GIFT (Great Italian Food Trade). 26.2.21, https://www.greatitalianfoodtrade.it/consum-attori/spaghetti-western-all-abruzzese-il-pastatrac-del-signor-de-cecco

(3) See article in footnote 2, paragraphs ‘Filippo Antonio De Cecco and Giovanni Legnini, a valuable link‘ and ‘Declared influences on Abruzzi’s justice system’.

(4) Reg. EU 1169/11, so called Food Information Regulation, articles 36.1 and 7.1.a

(5) Dario Dongo, Alessandra Mei. Primary ingredient origin, reg. EU 2018/775, European Commission guidelines. GIFT (Great Italian Food Trade). 18.1.20, https://www.greatitalianfoodtrade.it/etichette/origine-ingrediente-primario-reg-ue-2018-775-linee-guida-commissione-europea

(6) Marta Strinati. Coop 2020 report, Italians at the table in Covid-19 era. GIFT(Great Italian Food Trade). 10.9.20, https://www.greatitalianfoodtrade.it/consum-attori/rapporto-coop-2020-gli-italiani-a-tavola-in-era-covid-19
(7) Marta Strinati. Food consumption. The photograph of the Imagine Observatory. GIFT (Great Italian Food Trade). 15.2.21, https://www.greatitalianfoodtrade.it/mercati/consumi-alimentari-la-fotografia-dell-osservatorio-immagino

(8) Dario Dongo. Origin of wheat in pasta, Italian decree notified to Brussels. GIFT (Great Italian Food Trade). 2.6.17, https://www.greatitalianfoodtrade.it/etichette/origine-del-grano-nella-pasta-il-decreto-italiano-notificato-a-bruxelles

(9) Dario Dongo, Martina Novelli. Antitrust, Made in Italy pasta and wheat origin, notes on scourges. GIFT(Great Italian Food Trade). 11.2.20, https://www.greatitalianfoodtrade.it/idee/antitrust-pasta-made-in-italy-e-origine-del-grano-note-sui-flagelli

(10) The physical inventory, in addition to the elements prescribed by the Civil Code, must indicate the amount of assets grouped into categories similar in nature and value, and the value assigned to each group (Presidential Decree 600/1973, Article 15). The Institute of Certified Public Accountants, in this regard, clarifies the obligations of Ernst & Young in such a case. Ascertaining the correct valuation of inventories. When verifying the valuation of inventories, the auditor must verify the determination of cost and its comparison with the market price. Verification of the accrual of costs and revenues recognized in the period, compared with inventories. The auditor should aim to verify that, for inventories at the close of the fiscal year, the respective cost inferred from purchase invoices has been accounted for. In this case, wheat purchased from a French cooperative through a Swiss broker and registered as Apulian, valued at €1.2 million, falsified the value of the ending inventories of all Apulian wheat purchased in 2020, falsifying the final inventory figures entered on the balance sheet. April 2020 quotations, for example, showed Apulian wheat at 307.50 euros/mt while French wheat was at 270 euros/mt (see https://www.informatoreagrario.it/filie re-produttive/seminativi/prezzi-grano-duro-aprile-2020/). Filippo Antonio De Cecco and Mario Aruffo had, in short, ‘a nice convenience‘, except to deny commitments with Antitrust, deceive consumers and alter accounting records