April 13, 2011 -- Infant formula has become such a hot commodity among sophisticated theft rings that it's been called "liquid gold."
The scale of baby formula shoplifting is so vast that it has become an interstate problem, drawn in the FBI and Immigration and Customs Enforcement, and forced chain stores to install elaborate anti-theft devices. Federal legislation has even been introduced that would make stealing baby formula subject to federal racketeering laws.
It is a problem on both coasts and hits small stores as well big chains.
"Grocery chains will tell you that formula is targeted so often that in some cases they have locked it up, moved it behind the cash register, strategically put it on the floor and in some cases, they put a limited supply on the shelves," said Joe LaRocca of the National Retail Federation.
Ed Paczkowski's family has run a grocery store in South Amboy, N.J., for 82 years. His office overlooks the baby formula aisle.
"We've had it stolen quite a few times," Paczkowski, 73, said. He even watched a theft last month.
"I saw a guy by the formula...all of a sudden I see him take two big cans...I saw him jiggle around where he put them in his coat...then he came back and took two more," Paczkowski said.
On a grander scale, the "Hernandez Group" reportedly operated an organized retail theft ring for four years in California and Oregon, stealing $2.5 million in infant formula from Safeway stores until police busted the ring in December 2010, according to court documents.
The FBI defines organized retail theft as a theft ring that crosses state lines and involves the trafficking of at least $5,000 worth of goods. Last year, $15 billion to $30 billion were lost by retail stores from organized retail theft, according to the NRF.
In each type of store, different products are targets of theft rings. Hardware stores find it's usually power tools and drill bits that are lifted, while clothing stores have a hard time hanging on to their denim, and drug stores see razor blades and diabetic strips walking out of their stores.
"In the big spectrum of retail crime, infant formula is one of the top items," LaRocca said.
Baby Formula Targeted By Retail Theft Rings
The baby food powder has become a formula for organized crime because it sells at prices ranging from $15 to $30 a can, a relatively expensive item that can give theft rings a good profit.
"The criminal groups are looking for products they can steal and they know based on market conditions, they can flip those products quickly and in a secondary market make 30 to 80 cents on the dollar depending on where they liquidate the money," LaRocca said.
Drug dealers sometimes use the powdered formula to dilute heroin and methamphetamine or to stretch the product when supplies run low.
However, experts say that more often than not, formula is stolen because of its high market demand among consumers rather than drug dealers.
"The black market mirrors the legitimate market. Things needed by legitimate customers often fuel what these groups steal," said Rhett Asher from the Food Marketing Institute.
There are other dangers in formula theft besides the economic loss to stores. Baby formula, which has a shelf life, can end up in rodent infested, hot warehouses. Thieves might even fudge expiration dates to resell the formula.
"Improper storage conditions can potentially affect the nutrient content or physical appearance of infant formula, which could impact the product's nutritional value and safety as well as potentially threaten an infant's health," said Robert Rankin of the International Formula Council.
Rankin and others are calling for national legislation that targets organized retail theft and in particular the theft of infant formula. In March, a group of Senate Democrats introduced legislation to crack down on the the theft of infant formula, prescription drugs and medical devices. Legislation would make the theft of formula a violation of federal racketeering laws.
Several federal agencies are already targeting the theft of formula through their own task forces. ICE's Homeland Security Investigations unit launched a pilot program targeting organized retail theft rings in 2009.
Feds Carry Out "Operation Milk Money"
"Operation Milk Money" has been one of their most successful busts to date. In January of this year, the unit arrested nine people in conjunction with a baby formula theft ring involving a Union City, N.J., grocery store called Los Hermanos run by three brothers.
From September 2010 to December 2010, the Siyam brothers allegedly arranged for the delivery of stolen baby formula to their store. People living in North Carolina and Pennsylvania stole formula throughout the South and then it was bought and resold by the Siyam brothers, U.S. attorneys allege.
Prosecutors allege that the Siyams earned at least $135,000 in profits from the formula.