Fake booze: ‘It’s scary and the public needs to be warned’

The undercover agents – who have dispensation to drink on duty because of their roles – are banned from drinking spirits because of the health risks.

“This is quite scary and the public needs to be warned,” Sheppard says.

He says many alleged drink-spiking incidents may be a result of consuming bootlegged spirits bought in good faith over the bar at supposedly legitimate clubs.

In 2021, there was a spate of suspected drink spiking in Prahran, but toxicology tests did not show traces of illicit drugs.

All were originally investigated by police as incidents of drink spiking, but this theory was ruled out after testing found no illicit substances.

“Drink spiking is not wholly attributable to drugs and can involve illicit liquor,” says Sheppard.

He also says some violent and drunk males may have consumed as little as two to three drinks of the toxic spirits “and then behave totally out of character”.

He estimates that one syndicate under investigation produces legitimate (and taxable) alcohol through the front door while making five times the amount of counterfeit product that leaves through the backdoor.

Police have spent nearly two years gathering intelligence on the syndicates and have formed a partnership with the ATO Illicit Alcohol Team.

They have identified shelf companies, potential mafia and outlaw bikie identities connected with the illicit spirits, as well as third-party unlicensed distillers that take the bootleg alcohol and blend it with water and liquor flavouring to mimic known brands.

An ATO spokesperson said the bootleggers included apparently legitimate companies that were “well-established in the alcohol supply chain”. However, intelligence also indicates that organised crime is increasing its presence in illicit alcohol activities.

“The ATO is obviously concerned about the tax leakage and the unfair impact on businesses that do the right thing, as well as the broader community threats, including the health and safety risks inherent in the consumption of illegally manufactured alcohol.”

Denatured alcohol has a foul-tasting product added as an alert that it is unfit for human consumption, but some of the syndicates try to filter out the toxins and smell with varying success.

One law enforcement estimate is that about 2.4 million bottles of fake booze enter the market each year.

The Tax Office spokesperson said the rorts include “unlicensed manufacture, including using base spirit containing harmful denaturants; deliberate underreporting by alcohol manufacturers and distributors; intentional product misclassification to facilitate smuggling; and product diversion away from approved destruction, concessional usage or export into the Australian consumer market”.

This week, police and ATO officers conducted their first Victorian bootleg raid, seizing alcohol that will be tested at the National Measurement Institute, with the results sent to forensic experts to report on the likely health impacts.

“Victoria Police’s State Liquor Unit executed a search warrant at a residence in Robinvale on Wednesday,” a police spokesperson confirmed. “Laptops, mobile phones and documents were seized along with a large number of tanks, drums and bottles. These items will now be analysed.

“A 44-year-old male is expected to be interviewed at a later date. The warrant was executed as part of a State Liquor Unit ongoing investigation into illicit alcohol at licensed venues across Victoria.”

The distillery had been operating for a time without a liquor licence.

A litre of near-pure distilled alcohol attracts about $100 in excise, while industrial alcohol is nearly tax-free.

In the retail market, a litre of denatured alcohol sells for as little as $10, while 95 per cent pure alcohol sells for about $250.

Just as organised crime moved into the illicit tobacco industry because the legal product is heavily taxed, it is moving onto bootlegged booze to avoid the high exercise.

Sheppard says some of the smaller clubs may not be aware they’re selling the substitute booze, but the larger venues should be aware when they’re offered heavily discounted spirits and the price doesn’t cover the excise.

“I can’t see how they don’t know,” he says.

Sheppard says the manufacturers and distributors could be liable for crimes against the person as well as tax and licensing offences if a drinker suffers health complications.

He says the bootleg booze is also being sold in the retail market “with dodgy labels from fake companies”.

“We know illicit alcohol can cause liver damage, blindness and ultimately death”.

The Liquor Unit

The State Liquor Unit is responsible for monitoring Victoria’s licensed premises. It uses its own officers, acting as patrons, to see how the clubs are run.

They are on the lookout for intoxicated patrons being served, drunks and underage drinkers. The $2000 fine and one demerit point for such an offence may seem trivial, but it is big business that leads to court battles with high-powered (and highly paid) barristers.

If a venue is proven to have broken these rules, its licensing fee is tripled for three years.

“A club that pays $40,000 per year will end up being charged $120,000 a year, which is why we end up in court to fight them. Thankfully the police department backs us in these cases,” says Sheppard.

In one case a venue spent more than $100,000 to contest a $2000 fine.

It is also a matter of public record that police are involved in a protracted and expensive battle with the owners of the Prahran nightclub Love Machine.

In 2022, police lodged a report with the Liquor Commission recommending the venue be closed, listing hundreds of incidents including gunfire, a stabbing, fights, alleged sexual assaults, and a 2019 double murder after a drive-by shooting outside the club.

The State Liquor Unit looks for patrons with red eyes who are slurring their words and are unsteady on their feet. But they need more than that. They need to prove that staff in the pub or club saw, or should have been able to see, the intoxicated patron.

“If there is someone asleep with vomit on them, we have to know that they are not in a dark corner but somewhere where staff can see or should see them,” says Sheppard.

The undercover police, like many other patrons, sit and communicate via text. But they aren’t setting up Tinder dates – they’re reporting to their team on the outside, likely regarding breaches of the law.

Usually, it is just a case of sitting and watching, but sometimes the problem comes to them.

Two were sitting in a bar when a drug dealer offered them some gear. He was arrested in possession of 25 ecstasy tablets and five grams of powders – a little like going fishing when a tuna jumps into the boat.

Sheppard says COVID impacted pubs and clubs, with experienced licensees, crowd controllers and bar staff leaving the industry. “We are issuing more penalty notices than ever before.”

One area notoriously difficult to control is karaoke bars. Sheppard says the big clubs have more than 50 booths, with some rented for between $2000 and $10,000 a night.

Some include their own bathroom and showers (who would have thought singing My Way with gusto would require a refreshing shower at its completion?).

More concerning is the use of hostesses who can be hired to join a group in a booth.

Sheppard says some are trafficked sex workers whose passports are seized until they pay off alleged debts.

He says on one raid, police were assured the hostesses were in Australia on working visas.

“It was unbelievably hot, and the air-conditioning unit wasn’t working. I asked one of the women what her job was on the visa, and she said ‘air-conditioning mechanic’. I said why don’t you fix that one, and she said, ‘What’s that?’”

One of the unit’s sergeants is a ginger-haired bloke who would just stand around looking vague during a raid as the owners would chat among themselves.

“He is fluent in Cantonese and Mandarin,” says Sheppard. “It was amazing what he heard.”

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