A Midlands businessman was jailed for three years today after admitting making a fortune by fraudulently passing off battery farm eggs as free range or organic.

Around 100m mislabelled eggs sold by Keith Owen ended up on the shelves of supermarkets including Sainsbury's and Tesco. That the fraud was able to carry on for two years while he made a £3m profit raises questions for the food industry about the provenance of goods.

Owen, 44, from Bromsgrove, in Worcestershire, ran Heart of England Eggs Unlimited, which supplied eggs to major packing companies that in turn supplied them to supermarkets and smaller retailers.

He pleaded guilty at Worcester crown court to three charges of fraudulent accounting, relating to altering his records to disguise the fact he was buying in eggs laid by caged hens and selling them on for a profit after relabelling or "misdescribing" them in paperwork.

Prosecutors said Owen had "dishonestly and systematically passed off millions of battery farm eggs as free range/organic eggs".

Amanda Pinto QC said: "The victims of Keith Owen's false accounting were not only the direct customers of Heart of England, but also the public, as well as the legitimate egg producers.

"The ultimate customer, a member of the public buying these eggs, would have received inferior eggs – sometimes even eggs not fit for sale to the public – or eggs produced by hens kept without the stringent welfare schemes from which they were said to benefit."

Owen's barrister, John Kelsey-Fry QC, suggested his client was far from the only one creating what he described as "mischief" in the egg industry.

"It's not the case that all those who Mr Owen supplied eggs were concerned to ensure that the provenance of the eggs was as described," he said, adding it would be "inappropriate" to elaborate.

At the time of Owen's fraud, between 2004 and 2006, farmers could expect to receive a price of around 90p per dozen for organic eggs, 70p for free range and 35p for cage eggs. As a "middleman" wholesaler, Owen would normally make a few pence profit per dozen, but by passing off cage eggs as free range he could make an extra 35p profit for every 12 eggs he sold.

The court heard that Owen not only bought in cheap battery hen eggs, he also bought in huge quantities of so-called "industrial eggs". These do not meet the quality requirements for sale to the public, and instead are meant to be used only in processed foods.

The fraud came to light in 2004 when allegations began circulating in the egg industry that there were vastly more British free range and organic eggs being sold in shops than could ever possibly be laid in UK farms. At the same time, investigators from the Egg Marketing Inspectorate noticed during routine checks that eggs coming from Heart of England were not at all what they purported to be.

Because all eggs look the same to the naked eye, the law requires that each egg is stamped with a unique number indicating where the egg was laid and in what conditions. Paperwork must accompany eggs transported through the supply chain to indicate their origin and type.

When inspectors checked a selection of Owen's allegedly free range eggs using ultraviolet light, the shells bore telltale wire marks – a sure sign that they had been laid not on a bed of straw or even Astroturf, as farming regulations stipulate, but in a metal cage.

There were also complaints from lorry drivers who arrived at Owen's farms to drop off consignments of caged eggs and then to pick up free range or organic eggs. A number of drivers reported to their trade union that they were made to wait hours to pick up their deliveries and suspected that the same eggs they had delivered were being relabelled and then sold back to them the same day.

All of Owen's major contracts were to supply British eggs bearing the British Lion hallmark. But investigators from the Department for the Environment, Food and Rural Affairs discovered that he was regularly buying eggs from the continent and passing them off as home-grown.

He used another of his companies, Owens Eggs, to disguise the accounting fraud. Owens Eggs was a legitimate business selling organic eggs laid in a barn, on the same site as the Heart of England egg-packing business. Owen tried to mask the fraud by selling organic eggs from Owens Eggs to Heart of England at an extremely inflated price – £10-£40 per dozen at a time when other producers were selling a dozen for no more than £1.

Owen agreed under a confiscation order to surrender £3m of the profit he made from selling the misdescribed eggs, and will not be allowed to be a company director for seven years.