A fraud investigation into two iconic Italian delicacies — Parma ham and Prosciutto di San Daniele — is rapidly spiraling into the ultimate accountability test of the EU’s multibillion-euro gourmet food industry.

The case raises critical questions well beyond Italy’s borders about whether the EU is effectively policing its cherished system of legal protections for the Continent’s most celebrated foods.

Makers of products ranging from Scotch whisky to Parmesan cheese depend on Brussels’ so-called geographical indications to command massive premiums over their competitors. If producers of Parma ham, one of the most famous brands, broke the rules, the whole edifice of EU oversight over luxury labels will come into question.

“Parma ham is one of the archetypal geographical indications out there, along with Champagne,” said Graham Dutfield, professor of international governance at the U.K.’s University of Leeds. “This [scandal in Italy] shows how strictly you have to enforce this regime.”

After months of investigations, prosecutors pieced together a picture of how breeders and owners of slaughterhouses imported high-quality pig sperm from outside Italy to breed leaner swine — in flagrant defiance of EU rules on the protected status of the famous hams, that say the male pigs must be of purely Italian bloodstock. In short, leaner meat means getting more ham out of each pig and boosting profit. Earlier this year, dozens of officers from Italy’s specialist food police stormed 30 farms and slaughterhouses in the northern provinces of Udine and Turin to collect hundreds of DNA samples from the prize pigs used to produce the hams.

If the allegations are true, they will rock one of the most hallowed pillars of EU food policy: geographical indications, known in the business as GIs. Brussels has an entire unit dedicated to these protections for sacrosanct, storied foodstuffs ranging from Cognac to Roquefort cheese. The delicacies must be produced in a specific locale, often using artisanal know-how gleaned over centuries.

Geographically protected foods usually sell for twice the price of immediate competitors, and Parma ham alone is an industry generating €750 million per year, producing some 79 million packs in 2015.

Leading agricultural powerhouses France and Italy are all too conscious of the massive financial boost their economies derive from the cachet of these designations, and the protection of regional labels often becomes one of the most hotly contested elements of EU trade negotiations.

Geographical protections also give traditional producers enormous legal firepower to shoot down any competitors they see as spurious imitations: The consortium controlling Parma ham was at the heart of a landmark European Court of Justice case in 2003. It defeated U.K. supermarket Asda for selling a Parma ham that was not sliced in an Italian region approved under the EU rules.

Playing by the rules

The effectiveness of Europe’s lucrative GIs is based on the fundamental premise that producers play by the rules.

In the case of Italian ham, that is now in serious doubt.

Investigators say the scam was set up to inseminate pigs using genetically enhanced semen from a breed called Danish Duroc. The Danish parentage would increase ham makers’ income by making the pigs leaner and creating bigger litters. That is strictly against the EU rules that dictate that the “raw material” must hail from one of 10 Italian regions.

“Certainly there is a fraud since sperm from male Danish Duroc has been used by certain breeders to make a Protected Designation of Origin ham,” said Vincenzo Pacileo, the lead prosecutor in Turin working on the case, adding that the number of breeders and farms involved still has to be determined.

Italy, with a cornucopia of regional specialities from the Alps to Sicily, makes the biggest profit margins from specialist food production processes of any EU country. It is also the EU’s biggest seller of GI-protected food products.

The last thing it needs is a scandal that imperils its intravenous shot of brand-based euros.

The scandal also has some similarities to the Volkswagen crisis, where the car industry was accused of becoming too close to testing authorities. In this case, the ham producers have close ties to the certifying authorities. Both the Parma ham consortium and Prosciutto di San Daniele consortium hold stakes in the control bodies overseeing them.

The European Commission’s agriculture and food safety officials are watching the developments closely and coordinating with national authorities. If the European Commission judges that Italy has been too weak in policing the alleged ham fraud, it will have to take enforcement action against Rome.

“Enforcement of product specifications is an essential part of quality policy to ensure fair competition and protect consumers from being misled,” a Commission spokesperson said.

Boosted on buttermilk

The rulebook on how to make Parma ham and Prosciutto di San Daniele is detailed, to say the least.

Take the pigs’ diet. In the case of Parma ham, the pigs are allowed to gulp down six liters of buttermilk per day until they reach 80 kilograms and 15 liters a day after that. Their sties must be fitted with modern insulation and ventilation systems.

The most complex rules concern the blood lineage of the sow. Any boar used must be listed in the breeders’ bible: the Italian herd book. Some breeds such as the Spotted Poland and Belgian Landrace are specifically banned. Certain Danish Duroc breeds are also on the blacklist.

Maurizio Conti, an Italian lawyer defending three pig breeders and slaughterhouses under investigation, insisted the case centered around compliance with these breeding rules and that there was no question that public health had been put at risk: “It’s just a matter of complying with genetic lines permitted under the GI regulation,” he said. 

Gianluca Fregolent, head of the antifraud department at the Italian agricultural ministry in the regions affected by the scandal, explained why there would be such a strong motivation to use the Scandinavian sperm, and why that triggered such a backlash.   

“The Danish lineage is among the best performing ones: You feed them like an Italian pig but get out more piglets and leaner meat, which leads to more income … When law abiding breeders discovered significant income differences between themselves and those using Danish lineage, they decided to speak out.”

On March 10, the Danish Pig Research Centre, a world leader in genetic research for pigs, contacted the Italian agriculture ministry to ask about the extent of the fraud and whether its origins stemmed from sperm supplied by the Danish firm Dan Avl. The Italian authorities responded April 13, stating only that “the investigation didn’t involve any public health concerns,” said Christian Fink Hansen, director of the Danish Pig Research Centre.

Fink Hansen added that it is “imperative that our top-of-the-class genetic materials … are not misused or used for other purposes than intended.” He stressed that Denmark would strongly condemn and distance itself “from any business, that misuses our brand and/or doesn’t operate within the law.”

Who will watch the watchmen?

One of the highest profile figures under investigation is Francesco Ciani, the head of the North East Quality Institute, the control body certifying the producers allowed to use the San Daniele name. Prosecutors have accused him of fraud and breaking fair competition laws.

In a case of revolving doors, Ciani was previously director general of the San Daniele consortium, the very body he is now tasked with regulating. Shareholder documentation obtained by POLITICO also shows that the majority shareholder in both the certification bodies servicing Parma ham and Prosciutto di San Daniele are the producers themselves.

Ciani and the North East Quality Institute did not respond to multiple requests for comment. The Italian agriculture ministry defended the regulatory agencies and said there is no conflict of interest since the law allows the consortiums to be shareholders of their controlling bodies.

“There is no revolving door policy here nor conflict of interest, which should be proven in the exact moment where an inspector grants a certification,” said Stefano Vaccari, the national head of the anti-fraud department of the agriculture ministry. 

Both consortiums representing the producers of the hams declined to comment on the ongoing fraud investigations. A spokesperson for the Parma consortium said it was likely that actually some of ham producers were effectively being cheated by peers who were using the Danish sperm. The spokesperson also said there was no conflict of interest from their financial stakes in the control bodies.

“The Istituto Parma Qualità is an independent body. Yes, the Consortium is part of the board but this does not mean there is a conflict of interest,” said Chiara Iasiuolo, a spokesperson for the Parma Consortium.

A spokesperson from the San Daniele Consortium also declined to comment on the alleged conflict of interest and the investigation into Ciani.

Researchers, including Dutfield at the University of Leeds said ensuring the level of independence between the owner of the trademark or label and the producers is essential when trying to avoid any potential conflict of interest that might arise. He also said that increased demand for goods with protected status can prompt industries to take short cuts.

“A successful GI is one where there is a high price and good demand. But the high demand can also give rise to corruption,” Dutfield said. “There is no real formal system of examination. Europeans have to put their faith in national governments.”

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