Johnny Grobman, Others Sentenced in Baby Formula Fraud Case

Three Florida residents are headed to prison for the next 18 years in what federal prosecutors described as a $100 million fraud scheme that involved “cheat[ing] U.S. manufacturers of infant formula, eye-care products, and other FDA-regulated items.”

Johnny Grobman, 48, Raoul Doekhie, 53, and Sherida Nabi, 57, all of whom are described as being from South Florida, “secured deep price discounts for infant formula and other items by lying to the U.S. manufacturers of the products,” the U.S. Department of Justice said in a press release.  Each profited into the tens of millions of dollars, the DOJ said.

The scheme, which lasted from 2013 to 2018, involved assertions that the defendants were shipping the products to a country on the coast of South America, the DOJ wrote.  The feds explained that the case involved the so-called “gray market” — which is “the diversion and re-sale of certain goods that were not intended for distribution in the United States.”

Here is how they said the scheme played out:

Doekhie and Nabi (who are married) told the manufacturers that they were purchasing the products to ship overseas, to Suriname, often in connection with purported government procurement contracts they held in Suriname. In fact, the defendants did not have government procurement contracts and never intended to export the products to Suriname. Instead, Grobman and others sold the products in the United States for millions of dollars, which the three defendants later split among themselves.

The defendants hid their activity from the U.S. manufacturers of the FDA-regulated products in one of three ways. The first was to send “dummy” shipments abroad. The dummy shipments did not contain the products purchased from the manufacturers, but they did generate documentation to prove that an export occurred. The second method was to “U-turn” the products: The products were shipped abroad, generating export documentation. As soon as they arrived overseas, they were shipped back to the United States. The third method was to create fraudulent export shipping documentation showing that the products were exported when they actually never left the country.

Prosecutors put the scheme bluntly in a sentencing memorandum reviewed by Law&Crime.

“For 12 years+, the Defendants worked hard at defrauding U.S. businesses both large and small,” the memo indicated.  “The truth, in the form of an honest truck driver or a well-hidden GPS device, was their primary obstacle. And for 12 years+, they mostly succeeded.”

The sentencing memorandum said the scheme unraveled when, in 2017, “a small organic food company discovered the Defendants’ fraud after a carrier reported that goods intended for Suriname were instead being delivered to a U.S. customer’s warehouse.”

According to the sentencing memo, an email chain between two of the defendants indicated how tenuous — yet financially fruitful — the scheme really was.

“We have worked 12 years+ with minimal issues, we should be fortunate about it,” defendant Grobman allegedly said to defendant Nabi in an email cited by prosecutors in the sentencing request. “I understand…