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Michael Hiltzik / GOLDEN STATE

Getting to Bottom of Hot Sauce Knockoffs

April 18, 2005|Michael Hiltzik

David Tran is a Vietnamese refugee and a successful American entrepreneur, but the best evidence that his business is one more cog in the vast machinery of global commerce -- licit and illicit -- comes from what we might call the Great Hot Sauce Counterfeiting Caper.

No one is ever surprised to hear about Chinese factories assiduously knocking off Rolex watches or Windows software. In this case, however, the counterfeiters' target is the Vietnamese-style Sriracha chili sauce manufactured by Tran's Huy Fong Foods Inc. in a former Wham-O factory in Rosemead.

Huy Fong says the product, which comes in squeeze bottles with a rooster on the label and consequently is known by fans as "rooster" sauce, is the leading such Asian condiment in the U.S. Made from locally harvested jalapenos, it's certainly potent: My tongue is still tingling from a drop I tasted for inspiration just before sitting at the computer to write these words.

Why an international ring of counterfeiters would zero in on a product that retails for less than $3 a bottle is only one question posed by the hot sauce caper. Among the others is why the perpetrators would stash their bogus wares in a City of Industry parking lot, there to be spotted by a security guard, and why they would use a personal check to pay a disposal company to incinerate the evidence--a blunder that led sheriff's deputies to the door of the alleged ringleader, warrants in hand.

But let's backtrack just a bit.

Tran, 55, fled his native Vietnam in 1978 aboard a Taiwanese freighter called the Huy Fong (hence the name of his company). He arrived in Los Angeles in 1980 with several relatives, rented a factory in Chinatown, and resumed the former family business of making chilies into hot sauce.

Today Huy Fong employs about 35 workers in Rosemead, according to Tran's son, William, a company executive. Its Sriracha and other Asian food products are shipped to ethnic markets and major supermarket chains all over the country.

About a year ago, disquieting signs emerged that something had gone awry in Huy Fong's distribution chain. Consumers back East were complaining that the rooster sauce was no longer as good as it used to

be.

"Most people thought that we'd watered it down or were using non-fresh ingredients," William Tran says. The company asked customers to return the offending product, at which point it discovered subtle but unmistakable differences in the packaging, along with distinct shortcomings in the contents.

The company eventually filed lawsuits seeking injunctions and money damages against several ethnic grocers caught selling the bogus sauces, as well as the distributors they said had sold them the knockoffs. (The defendants have generally pleaded that they weren't aware the goods were fake.)

But Huy Fong's efforts to trace the goods to the source were stymied until one day in January, when the company got a call from a guard at an industrial complex in the City of Industry. Ten pallets of goods marked with Huy Fong's address had been sitting in the parking lot for days, said the guard, who suggested that someone retrieve them.

Mystified, Tran dispatched an employee to investigate. He discovered scores of cases of foods with Huy Fong labels. Some were double-boxed -- the products themselves were in cartons nearly identical to Huy Fong packages, right down to the "Made in USA" labels, but these were inside other cartons marked "Made in China." Some boxes had broken open, their contents fouled with mold. Most disquieting, the bogus goods included not only the company's top-selling Sriracha sauce, but the rest of its product line.

Tran visited the lot the next day to find two men dumping the cartons into a dumpster belonging to a local carting company. They were working so hastily that the ground and one of the men had become "covered with chili sauce," he recalled.

The carting company later told Tran's lawyers that it had been hired to incinerate some 13 tons of the contraband, which its client had described merely as "municipal solid waste." The client, apparently no expert in covering his tracks, wrote out a check in payment. He returned later the same day with cash and asked for the check back, but by then the disposal firm had made a copy, which it turned over to Huy Fong. The check, conveniently, bore the name of its signer, one Yak Szeto, the operator of an electronics warehouse in Rosemead. ("It usually isn't that easy," observes Huy Fong's intellectual property lawyer, Rod S. Berman.)

A few days later, Los Angeles County sheriff's deputies raided the warehouse and arrested Szeto. He was charged in connection with possession of counterfeits (a reference not to the hot sauce but to knockoff printer cartridges found on the premises, which made for a simpler criminal case). Court records show that Szeto, whose attorney did not return a phone call, pleaded guilty and was sentenced to 90 days in jail.

For its part, Huy Fong is still trying to trace the original counterfeiters. Berman says his investigators are beating the bushes in China, but he

adds ruefully, "China's a big country."

Perhaps more to the point, after 23 years practicing intellectual property law, he's still surprised at the lengths counterfeiters will go to make a buck. "You'd think that if you're going to subject yourself to the penalties for counterfeiting, it doesn't make sense to concentrate on such low-priced items." But he's seen counterfeits from abroad of trinkets and toys that sell for even less than rooster sauce.

"It's amazing how cheaply things can be made and shipped here from China," he says.

"You have to be constantly vigilant."

Golden State appears every Monday and Thursday. You can reach Michael Hiltzik at golden.state@latimes.com and read his previous columns at latimes.com/hiltzik.

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