By Scott McLean, Florence Davey-Attlee, Kocha Olarn and Tim Lister, CNN
Updated: Fri, 29 Oct 2021 18:55:21 GMT
Trash bags stuffed full of used medical gloves, some visibly soiled, some even blood-stained, litter the floor of a warehouse on the outskirts of Bangkok.
Nearby is a plastic bowl, filled with blue dye and a few gloves. Thai officials say migrant laborers had been trying to make the gloves look new again, when Thai health authorities raided the facility in December.
There are many more warehouses just like it still in operation today in Thailand -- trying to cash in on the demand for medical-grade nitrile gloves, which exploded with the coronavirus pandemic. And they're boxing up millions of these sub-standard gloves for export to the United States, and countries around the world amid a global shortage that will take years to ease.
A months-long CNN investigation has found that tens of millions of counterfeit and second-hand nitrile gloves have reached the United States, according to import records and distributors who bought the gloves -- and that's just the tip of the iceberg. Criminal investigations are underway by the authorities in the US and Thailand.
Experts describe an industry riddled with fraud, with one of them -- Douglas Stein -- telling CNN that nitrile gloves are the "most dangerous commodity on Earth right now."
"There's an enormous amount of bad product coming in," Stein says, "an endless stream of filthy, second-hand and substandard gloves coming into the US of which federal authorities, it seems, are only now beginning to understand the enormous scale."
Yet, despite the potential risk to frontline healthcare workers and patients, US authorities have struggled to get a handle on the illicit trade -- in part because import regulations for protective medical equipment were temporarily suspended at the height of the pandemic -- and remain suspended today.
In February and March this year one US company warned two federal agencies -- Customs and Border Protection and the Food and Drug Administration -- that it had received shipments filled with substandard and visibly soiled gloves from one company in Thailand.
And yet the Thai company managed to ship tens of millions more gloves in the following months, some arriving as recently as July.
The FDA told CNN it could not comment on individual cases but said it has taken "a number of steps to find and stop those selling unapproved products by leveraging our experience investigating, examining and reviewing medical products, both at the border and within domestic commerce."
A surge in demand
In early 2020, demand for personal protective equipment (PPE) shot through the roof as the coronavirus pandemic took hold around the world. And prices for nitrile gloves stayed high. Medical grade nitrile gloves are commonly used by doctors and healthcare professionals in patient examinations. The FDA bans powdered latex from being used in healthcare, while lower-quality vinyl gloves are more common in industrial settings and food handling.
The gloves, produced almost entirely in south and east Asia, rely on a finite supply of natural rubber, highly-specialized factories and niche manufacturing expertise. Ramping up supply couldn't happen quickly and production from trusted, established brands was spoken for years in advance.
Governments and hospital systems scrambled to get what they needed -- and dozens of shady companies looking to turn a quick profit saw an opportunity.
Late last year Tarek Kirschen, a Miami-based businessman, ordered about $2 million of gloves from a Thai-based company called Paddy the Room, which he then sold to a US distributor.
"We start getting phone calls from clients completely upset, and you know, yelling and screaming at us saying, 'Hey, you screwed us,'" he recalls.
Kirschen got to see the product for himself when a second container arrived in Miami.
"These were reused gloves. They were washed, recycled," he told CNN. "Some of them were dirty. Some of them had bloodstains. Some of them had markers on them with dates from two years ago... I couldn't believe my eyes."
Kirschen says he refunded the money to his customers, put the gloves in a landfill and alerted the FDA in February 2021.
He says none of the gloves he ordered were used in medical settings, but a CNN analysis of import records show that other US distributors acquired nearly 200 million gloves from Paddy the Room during the pandemic.
It's unclear what happened to those gloves after they entered the country.
CNN attempted to reach all of the importers. The vast majority did not respond but two did say the shipments were substandard and the gloves weren't even nitrile. One company, Uweport, told CNN they were unable to re-sell them to medical companies, as planned. Instead, they were sold at a lower price to distributors that supply American food processing plants, hotels and restaurants.
The other company, US Liberty LLC had a very similar experience with Paddy the Room. It says it was also bilked by a different Vietnemese company which sent them "gloves with holes, with stains, ripped, and in different shades and colours," company President Firas Jarrar told CNN.
Stein, who has been buying PPE from Asia for decades, has been tracking the countless frauds and scams across Southeast Asia since the pandemic began.
"It's ridiculously nefarious at every link in the chain," he told CNN.
Stein, who has built up a following of buyers and sellers on LinkedIn, often finds himself counseling people who lost millions of dollars to nitrile glove fraud and trying to talk people out of signing deals that are clearly too good to be true. He says the discounts on offer are often impossibly steep.
Louis Ziskin is one US entrepreneur who was tempted to buy. "We saw dollar signs. We also saw we had legitimate medical customers who were literally begging for this stuff," he told CNN.
His company, AirQueen, went ahead with a $2.7 million order from Paddy the Room, via a third party also based in Asia. All paid 100% up front.
Ziskin is an ex-convict who spent more than a decade behind bars after he was caught smuggling the drug ecstasy into the US in 2000.
But in the last decade he's become a successful tech entrepreneur, whose business has even been profiled in Forbes magazine.
But then he stepped into the murky world of nitrile gloves.
An independent inspection carried out at a Los Angeles warehouse and verified by CNN confirmed that most of the gloves he bought were not nitrile, but lower-grade latex or vinyl, and many were very obviously soiled and second-hand.
Ziskin says there was no way he could pass them off to hospitals in good conscience.
"It's a total safety issue... to me the fact that these companies were never blacklisted is shocking," he told CNN.
Perhaps that is because the scam is an elaborate one. Paddy the Room sent Ziskin pristine independent inspection reports purporting to show the gloves in the shipment were high quality. The documents though, were fake. The inspection company whose report had been falsified confirmed to CNN that the reports were forgeries.
Like Kirschen, Ziskin raised the alarm with US authorities shortly after he received his shipment of bad gloves early this year, contacting both the FDA and the CBP. Yet, import records showed the warnings seemed to make no difference. Since Ziskin's written warning to the CBP in February, 28 containers totaling more than 80 million gloves shipped by Paddy the Room entered the US.
The flow of sub-standard gloves into the US was also made easier by the FDA's temporary suspension of import regulations.
"There was just no other answer. There was no way to meet the demand," explained Stein. "But that opened the floodgates for all the nefarious behavior."
In a statement, the FDA told CNN that companies were only allowed to import under the relaxed rules "as long as the gloves conform to the consensus standards and labeling cited in the guidance and where the gloves do not create an undue risk."
But few physical checks are made on gloves or any other items arriving into American ports, and any medical gloves that were fraudulent or even contaminated would likely not be discovered until they arrived at their destination.
In August, the FDA did finally send out an alert to all its port staff that shipments from Paddy the Room should be subject to detention without physical examination.
That was five months after Kirschen and Ziskin raised the alarm.
The FDA would not comment on its investigation into Paddy the Room, but Department of Homeland Security (DHS) officials confirmed there is an ongoing criminal investigation into the company.
The CBP told CNN it had seized some 40 million counterfeit face masks and hundreds of thousands of other PPE items. It says it has seized some shipments of gloves, but it has not tracked the volume of seizures.
CNN asked the DHS if the system had failed given the number of second-hand gloves making it into the American supply chain.
"I don't know that that's the right way to phrase the question," said DHS Special Agent with Homeland Security Investigations Mike Rose. "I think all of us would love to get to a point that not a single counterfeit dangerous good entered the US -- and I think we're working towards that."
Last spring, at the outset of the pandemic, the DHS launched what it called Operation Stolen Promise to crack down specifically on counterfeit PPE, which Rose says has now made more than 2,000 seizures of Covid-related treatments and PPE.
"I think DHS has been a model around the world for how best to coordinate efforts among different agencies to really stop the import, the transactions and all the other surrounding criminal activity around Covid," Rose said.
The Thai FDA has struggled to keep up with the fraudulent trade in nitrile gloves.
When its agents first raided Paddy the Room last December, they found piles of garbage bags filled with loose gloves -- of different colors, materials and quality. Workers at the warehouse were stuffing the old gloves into new, counterfeit Sri Trang boxes branded SriTrang -- a well-known and legitimate gloves producer in Thailand. SriTrang told CNN it does not do business with Paddy the Room.
Ziskin ended up with thousands of boxes of those counterfeit SriTrang gloves -- most bearing the company logo in Thai.
According to Doug Stein, the PPE expert, gloves shipped to the US would never be put in boxes labeled in a foreign language. That alone should have set off alarm bells, he said.
The Thai FDA arrested the owner of the warehouse but was unable to bring charges against the tenant -- a Hong Kong resident, according to the Thai FDA.
But the raid didn't close down Paddy the Room. The Deputy Secretary-General of the Thai FDA Supattra Boonserm told CNN that months later her agency raided a similar facility.
"They just moved to another location, to another warehouse," she said. "And why is that? Because the demand for gloves is still high. There are still customers waiting out there," she told CNN.
Paddy the Room and its partner company have not responded to CNN's requests for comment.
The Thai FDA says it has carried out at least 10 raids in recent months and seized substandard and used gloves being repackaged into counterfeit nitrile boxes. Some raids find workers scrubbing used gloves by hand in wash bowls and dyeing them with food coloring.
"It may be too slow to dry them hanging up, so they would put them into a dryer, literally a laundry dryer," Boonserm explained. She suspects many used gloves are collected from China or Indonesia and shipped to Thailand to be washed, dried and re-packed.
"In simple terms, it's fraud," Boonserm says.
"Under this outbreak situation, the demand is enormous both from hospitals and the general public. The volume of illegal gloves we have found is enormous."
Doug Stein says given the scale of the illicit trade, he thinks it likely that some gloves have ended up in a medical setting. But it's unclear if any of these fraudulent, re-used gloves have harmed any US health-care worker or patient.
Boonserm says her agency thinks there is a network of corrupt individuals and companies in Thailand working together to make a profit from the global clamor for nitrile gloves. One of those companies is SkyMed, a brand run by a former Thai military officer. Boxes bearing the SkyMed label were found in the raid of Paddy the Room in December.
"SkyMed, is for sure fake," Boonserm says.
According to Boonserm, the company has an import license to bring in medical gloves made in Vietnam, but records show SkyMed has never imported medical gloves to Thailand, nor does the company manufacture its own gloves.
SkyMed did not respond to repeated requests for comment for this story.
The extent of fraud in the medical glove industry has driven many international buyers to drastic measures to recoup their money.
Louis Ziskin decided to go to Thailand in an effort to recover his company's lost $2.7 million, but things quickly went wrong.
Ziskin and several others were arrested and charged with assault and kidnapping after a confrontation in a Bangkok restaurant.
Ziskin says he wasn't there and strenuously denied the charges.
"I'm going to see this through to the very end," he vowed. "Am I going to get my money back for the company? Most likely not. Are we bringing a light to this to where hopefully, the United States can get up off the bench and stop it? Yeah. If that's what justice is, then that's what my hope is."
After Thai police missed their deadline to submit evidence in the case, Ziskin was allowed to leave Thailand and flew home to Los Angeles. Thai police tell CNN the investigation is not closed.
Others connected to the incident are still facing trial in Thailand. All have denied the charges against them.
On July 27, the US Department of Homeland Security (DHS) cleared out Ziskin's LA warehouse, seizing 70,000 boxes as evidence in their investigation into Paddy the Room, about five months after he first blew the whistle.
The great unknown is how many million more sub-standard nitrile gloves may be stacked in warehouses at US ports.
Doug Stein believes the fraud may amount to billions of dollars.
"It just became this dark, dark underground," he says, "where fear meets greed."
Correction: This story has been updated to correct Mike Rose's title.
Update: Thai authorities have indicted Paddy the Room and are investigating SkyMed in the wake of CNN's report. Read the followup story here, including a response from SkyMed.