It is a true story, which I read a few days ago in the Wall Street
Journal. (I am a regular reader of the WSJ).

The guy was selling those donutsm falsely advertising them as "low
fat", not "low carb".

Despite Best Efforts,
Doughnut Makers
Must Fry, Fry Again
Low-Fat Version of the Treat
Proves Hard to Roll Out;
Mr. Ligon Lands in Hole

By SHIRLEY LEUNG
Staff Reporter of THE WALL STREET JOURNAL

Robert Ligon, a 68-year-old health-food executive, is scheduled to
begin serving 15 months in a federal prison Tuesday. His crime:
willfully mislabeling doughnuts as low-fat.

Exhibit A: The label on his company's "carob coated" doughnut said it
had three grams of fat and 135 calories. But an analysis by the Food
and Drug Administration showed that the doughnut, glazed with
chocolate, contained a sinfully indulgent 18 grams of fat and 530
calories.

Mr. Ligon's three-year-long nationwide doughnut caper -- which
involved selling mislabeled doughnuts, cinnamon rolls and cookies to
diet centers -- began to crumble when customers complained to the FDA
about how tasty his products were.

"If it sounds too good to be true, it probably is," says Jim Dahl,
assistant director of the Office of Criminal Investigation for the
FDA. The skinny on low-fat doughnuts, he says: "Science can do a lot
of things, but we're not quite there yet."

The low-fat doughnut is the Holy Grail of the food industry. Food
companies have been able to take most of the fat out of everything
from cheese to Twinkies. But no one has succeeded in designing a
marketable doughnut that dips below the federal low-fat threshold of
three grams per serving. Doughnuts typically range from eight grams of
fat for a glazed French cruller to more than double that for a
cake-like doughnut.
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Perhaps no other bakery good is so dependent on fat. After the batter
is shaped into rings and dropped into hot oil, the deep-frying process
preserves the shape, gives the doughnut a crust and pushes out
moisture, allowing for the absorption of fat. The fat itself is
responsible for most of its flavor. A doughnut contains as much as 25%
fat; the bulk of that is the oil absorbed during frying, according to
the American Institute of Baking, a research and teaching outfit
funded by the baking industry.

The low-fat doughnut, declares Len Heflich, an industry executive at
the American Bakers Association, is "not possible."

That hasn't stopped almost everyone in the approximately $3 billion
doughnut industry from trying. In the late 1980s, Dunkin' Donuts
briefly offered a cholesterol-free doughnut that contained no eggs and
no milk. It went nowhere. During the 1990s, Entenmann's Bakery offered
a doughnut with 25% less fat but poor sales forced the company to
shelve it. Krispy Kreme Doughnuts Inc. has explored low-fat or
low-calorie options but has yet to roll one out. Some bakeries sell
"baked doughnuts" that are low in fat, but doughnut-makers say that's
cheating: If it's baked, it's a cake.

Scientists are also trying to put the doughnut on a diet. U.S. Patent
No. 6,001,399 claims that replacing sugar with polydextrose -- a
low-calorie synthetic sweetener commonly found in ice cream and frozen
foods -- can reduce the doughnut's absorption of frying fats by 25% to
30%. U.S. Patent No. 4,937,086 says that injecting
polyvinylpyrrolidone -- which normally keeps pills in packed form --
into the doughnut batter reduces fat by 30% without a "pasty or greasy
taste."

In an article entitled "Development of Low Oil-Uptake Donuts"
published in 2001 in the Journal of Food Science, scientists at the
USDA Agricultural Research Service wrote that adding rice flour to the
traditional wheat-flour-base doughnut mix lowered fat by 64%. Fred
Shih, a chemist who helped author the study, says the doughnut that
resulted was tasty, but he doesn't expect to see it on grocer shelves
anytime soon.

"It worked in a lab," he says, but "it may not be so easily converted
into commercial operation." (One kink: short shelf life.)

Despite its no-cholesterol-doughnut flop, Dunkin' Donuts, the nation's
largest doughnut chain, continues to push ahead in the quest for a
low-fat doughnut. The company's doughnut technologists have all but
ruled out tinkering with its closely held, 26-ingredient batter, which
contains little fat. The chain, a unit of London-based Allied Domecq
PLC, has tried frying dough in a fat substitute but feared its
digestive side effects would leave a bad taste.

At its product laboratory in Braintree, Mass., on a recent morning,
researchers in white lab coats tasted and prodded their latest
prototype: a chewier-than-average doughnut that is not fried, but made
on a machine that resembles a waffle maker. The result weighs in at
150 calories -- half the amount of its full-fat cousin -- and fewer
than three grams of fat. Still, this doughnut fails to meet Dunkin's
standards of texture, taste and something called "mouth feel."

"We would love to be able to offer a great-tasting doughnut that is
low-fat," says Joe Scafido, chief menu and concept officer for Allied
Domecq's quick-service restaurants, "but I'm not sure we're going to
get there."

The criminal files on doughnut-related fraud thickened in the 1990s
after new federal laws required more-detailed labeling of food. The
FDA's Office of Criminal Investigation says that about a quarter of
its cases involve food, most related to tampering. About 20% of those
food cases are related to "misbranding" of food, such as false labels
or misstated country of origin.

Mr. Ligon, who is scheduled to begin his sentence Tuesday, was not the
first doughnut derelict. In 2000, Vernon Patterson, president of
Genesis II Foods Inc., an Illinois bakery, pleaded guilty to one count
of mail fraud for passing off three varieties of doughnuts as
low-fat. According to federal court records, customers helped build
the case against Mr. Patterson by raising questions about his
suspiciously tasty low-fat treats. Mr. Patterson served one year and
one day in a federal prison.

The doughnut ring of Mr. Ligon, a former weight-loss-center
franchisee, began in 1995, the FDA says. That's when he started a
weight-loss product company, Nutrisource Inc., to sell protein shakes,
nutritional bars and baked goods to diet centers. According to Rudy
Hejny, the FDA agent in charge of the investigation, Mr. Ligon bought
full-fat doughnuts from Cloverhill Bakery, a Chicago company, and
repackaged them as diet doughnuts. It was a lucrative operation:
Mr. Ligon would buy doughnuts for 25 cents to 33 cents each and then
resell the mislabeled versions for a dollar each.

Customer complaints to the FDA started rolling in, questioning whether
these were in fact low-fat doughnuts. So did one from a packaging
company Mr. Ligon hired to label and distribute the doughnuts. Key
evidence: One of its employees gained weight after eating Mr. Ligon's
doughnuts.

The FDA launched an investigation in 1997, tracking down Mr. Ligon's
customers and former business partners in a previous
weight-loss-product company. Investigators learned that this wasn't
Mr. Ligon's first brush with improperly labeled doughnuts. One of his
former customers, the owner of a weight-loss center, had grown
suspicious after briefly placing one of his doughnuts on a napkin to
answer the phone.

"She saw a grease ring," says Mr. Hejny. The customer had the doughnut
independently tested and discovered it was not low-fat. No legal
action was taken.

In the summer of 1997, the FDA, armed with search warrants, raided
Mr. Ligon's office and packaging facilities in Kentucky and Illinois,
seizing 18,720 doughnuts, along with cinnamon rolls and
labels. Mr. Ligon shut down the business, but the FDA pursued a
criminal case.

In 2001, a U.S. District Court grand jury in Chicago indicted
Mr. Ligon on mail fraud for his role in carrying out a scheme that
involved shipping falsely labeled goods. In September, Mr. Ligon
pleaded guilty to one count of mail fraud. At the time of sentencing,
the government calculated he attempted to sell several hundred
thousand dollars' worth of mislabeled doughnuts and cinnamon rolls.

"Mr. Ligon abused the trust people put on these labels," says Stuart
Fullerton, the assistant U.S. attorney who prosecuted the case. "It's
kind of cruel on his part to do this."

Reached on his mobile phone, Mr. Ligon says he didn't intentionally
break the law and never heard a single complaint about his
doughnuts. "Everybody wanted the product and were very upset they
couldn't get the product," he says. Asked if he felt the punishment
fit the crime, he says: "I feel like I've been singled out."

For all his troubles, Mr. Ligon says he doesn't even eat
doughnuts. That works out fine. Most federal prisons, says a
spokeswoman, don't serve doughnuts.

Write to Shirley Leung at shirley.leung@wsj.com3

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