Product Extortion – Insight and advice from our specialist consultant
When extortionists threaten food producers and retail chains with the contamination of products, companies are faced with a difficult situation that, if they get it wrong, can seriously damage their brand. Product extortion and malicious product tampering (MPT) is a crime that mainly occurs in industrialised nations. What is behind this phenomenon, how do perpetrators proceed and what should be considered in crisis management? Since Germany has the highest number of product extortion cases worldwide, we would like to share our experience gained in German-speaking countries – but of course this also happens around the world.
The perpetrators and their motivation
Often, product extortion involves a lone male perpetrator with no previous criminal experience. Extortionists come from very different social classes, from unskilled workers to academics and even business people. They are usually more intelligent than perpetrators of, for example, robbery. They are often heavily indebted and product extortion is seen as the last resort to solve their problems in a single stroke. The perpetrator is almost never employed by the company that is being targeted. Even if greed is the motive in well over 90% of cases, sometimes other motives also play a role. We have seen cases where there were ransom demands, but where the perpetrator was actually interested in exercising power and experiencing a thrill. Alternatively, they may have a political agenda. For example, if the target company produces meat products, a product extortion by militant animal rights activists posing as criminal offenders could also be used to damage the business.
The phases of a product extortion
From the perpetrator’s perspective, the product extortion process takes place in several phases. It is important for the crisis management teams to know the specifics of the individual phases.
Phase 1 – Decision making, research and preparation of the crime
In product extortion, the perpetrator acts, as much as possible, secretly and from a distance – mostly “homework”. The offender can direct his extortion against a food producer or a retail company. No pattern can be established as to why an offender chooses a particular company – even if well-known brands are often selected.
In this phase, the perpetrator considers how to contact the victim company, how to reinforce his threat, how to hide his identity, whether he is really using poison or foreign objects such as glass splinters, and how to obtain the ransom.
Serial extortions have increased in recent years. The perpetrator’s rationale is that hopefully at least one company will react and start communicating or be willing to pay. In one case in which we responded to, the perpetrator simultaneously attempted to extort more than 30 different food producers across Europe, using identical extortion letters. He only changed the address and name of the target CEO.
Phase 2 – Contacting the victim company
The most common means of contact are by regular post and e-mail. Usually these contain the ransom demand and payment details. In the case of postal deliveries, the perpetrator sometimes adds proof of his seriousness – by sending a sample of poison or an already contaminated product. He may even state that he has already placed a contaminated product in a supermarket and mention the place of deposit. Alternatively, he may only threaten the contamination and try to build up additional pressure by issuing a deadline.
A sample of the poison provided by the perpetrator should be analysed by a laboratory on behalf of the company affected. Such an examination will provide information on the concentration and lethality of the substance and can help decide if a recall is necessary. We have repeatedly seen cases where the “poisonous substance” sent out was found to be harmless after laboratory testing, despite statements to the contrary by the extortionist. This testing can also be used as evidence to provide to authorities to prevent an unnecessary recall.
It is interesting to note that more than 50% of the offenders do not come back after this initial contact, in other words they stop the attack. Presumably, they get remorse or “cold feet” after sending the first letter. Therefore, a prompt response is usually not the right way, because a hesitant offender can be encouraged by a response to continue with the extortion attempt. However, this can lead to conflicts of interest vis-à-vis the police who, for investigative and tactical reasons, want to persuade the company to communicate with the perpetrator.
Phase 3 – Reinforcement of threat and negotiation
In this phase the perpetrator repeats or underpins his demand – sometimes with deadlines. Threats range from sending out poison samples, to claiming that a contaminated product was put into circulation or informing the media as punishment for failing to respond to the first letter. To place a contaminated product on a shelf, however, the perpetrator must leave his anonymity and go to a supermarket – with the respective risk of discovery. If he informs the media, he takes away a powerful means of pressure against the company.
The ongoing communication usually takes place via emails, where the perpetrator uses various methods to prevent traceability. The perpetrator becomes much more aggressive in his wording than during the first contact. We have experience of one case where the extortionist made personal threats to employees and showed he had their home addresses in an attempt to frighten them.
Even if the company has no intention to pay, the negotiation process is used to frustrate the offender and to gain time – also for the police investigation.
But even in this phase there is still a high rate of perpetrators ceasing their extortion attempt, which in our experience is around 20-30%.
Phase 4 – Ransom payment
It is extremely rare for a product extortion case to reach this stage. Whilst in the past, victim companies pretended to agree to the ransom payment with cash to enable the police to apprehend the extortionist while he collected the ransom, this is no longer a real option when using crypto currencies. This is because the perpetrator no longer has to reveal his identity in order to receive ransom money and so the police has nearly no chance to trace the extortionist.
It is very rare that the ransom is paid, even rarer for it to be paid and made public. The disclosure of a ransom payment would create a high risk of copycats for the targeted company. However, there is a risk that the perpetrator will carry out his threat out of frustration at not fulfilling his demand – even if he knows that he will not receive any money.
Crisis management – Planning for extortion
Since food companies often must be prepared for product recalls due to legal requirements, a certain crisis management structure is usually in place, which can be used as a basis during a product extortion. While product recalls due to accidental product contamination occur almost daily worldwide, companies affected by product extortion usually have no previous experience in this area. This gap in experience and knowledge is closed by expert crisis response consultants, who are available to advise affected companies.
The crisis management team (CMT) operates at the strategic level and aims to isolate the incident from the rest of the company. The CMT decides which strategy to adopt towards the perpetrator and internal as well as external actors.
Crisis response during a product extortion
The assessment of the perpetrator’s potential danger and whether he is able or willing to carry out the threat, as well as the danger for consumers, are core questions that the crisis team deals with. The crisis adviser supports here with their experience and helps to anticipate the offender’s next steps, the reactions of various stakeholders, and presents options for action. In the initial phase, however, it is also important to preserve evidence and prevent further damage. This includes keeping the case confidential for the time being.
In order to assess the extortionist’s threat level and credibility, various factors are evaluated, such as the perpetrator’s motivation, his intention, his ability (to contaminate a product, among others) and the resulting risk for consumers. This helps to understand what makes the perpetrator tick.
In many countries there are strict legal obligations regarding the recall of products. We recommend that specialist lawyers are consulted at an early stage, also within the context of risk assessment. The review and usability of existing recall plans should also be initiated by the crisis management team.
The company finds itself in the conflicting position between confidential case management, transparency and warning the public; between rapid communication and the time-consuming verification, collection and evaluation of information. “When is the right moment to communicate?” is only one of many questions.
Even if it is decided to continue to treat the case confidentially, internal and external crisis communication should be prepared. This is because the perpetrator can inform the media – or information from within the company or from the authorities can leak. Media monitoring should be activated at an early stage and should also include social media.
The planned communication should be coordinated with the authorities to avoid contradictory communication. A great deal of tact and sensitivity is required, as consumers are very responsive when it comes to food, especially when it concerns infant or baby food. If a case is in the media, consumer enquiries must be answered quickly and numerous press interviews must be held. There is also a risk of copycats and free riders.
Another risk is that consumers call and claim to have been harmed by the consumption of the product. Is this really the case or is it to take advantage of the company’s predicament and obtain a financial advantage? We sometimes see the latter when product extortion is made public.
The police are an important stakeholder with two main interests: to prevent threats for the public and to ensure criminal prosecution. What we often experience is that affected companies immediately inform the police without first assessing the situation. And often the crime is reported to the nearest police station, which then forwards the case to the relevant specialist unit through the chain of command, thus unnecessarily increasing the number of people who know about the blackmail.
But authorities have their place and can provide important contributions to the identification of perpetrators. It is important that the companies concerned are confident in their dealings with the authorities, openly address conflicts of interest and do not allow themselves to be taken out of the loop. The response consultants will also provide advice in this respect.
In addition to the investigating police, food safety authorities are a further party during product extortion cases. They are particularly crucial when it comes to the question of product recall, but they may have a different view on that to the targeted company.
If a perpetrator operates across borders or the company delivers internationally, the number of stakeholders increases considerably.
Prevention and crisis preparedness
A company cannot avoid becoming the target of a product extortion – because this decision is made by the perpetrator alone during phase 1. However, companies can prepare for such an event as part of their crisis management. This includes suitable crisis management manuals, CMT exercises and a prepared crisis communication as well as 24/7 access to prompt external support by crisis response consultants. With the help of security management in supply chains and at production sites, it is not possible to prevent the company from receiving an extortion letter. However, it can minimize the risk of an offender physically contaminating a product before it is delivered to the retail outlet.
Although product extortion is an extremely unsuccessful crime, it is surprising that perpetrators keep trying – and thus tie up company resources, inflict high costs and threaten the reputation of the food company. As always, preparation is the key to minimising the impact and having access to specialists in this niche area will help greatly in managing an extortion attempt.
Pascal Michel, Managing Director, SmartRiskSolutions
Pascal Michel is Managing Director and co-owner of SmartRiskSolutions GmbH, which specialises in security and crisis management. He is a former member of a German government security organisation and has been working as a response consultant since 2008. For many years, the international team of SmartRiskSolutions has been active worldwide advising in cases of product extortions, cyber extortions, kidnappings and other crisis situations. SmartRiskSolutions supports RQA Group internationally advising on MPT cases. RQA Group is active worldwide for customers of SmartRiskSolutions in product recalls. For more details go to www.smartrisksolutions.de
RQA Group is a specialist product recall, crisis management and business continuity consultancy whose clients include major international food and consumer products manufacturers as well as insurance companies and law firms . More information on RQA’s Extortion & MPT services and how we can help you prepare for such an event can be found here.