Black Market Billions: How Organized Retail Crime Funds Global Terrorists (Gal Zentner's Library) (14 page)

In 2008, retailer Victoria’s Secret reported an 80% increase, or $2.7 million, in store theft from the previous year,
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largely because of a crime ring that spanned the country from California to Connecticut. According to a report filed by the FBI, thieves used the typical boosting method by stealing bras in bulk, often clearing out an entire shelf. In the span of four minutes, security and price tags were removed and merchandise was placed in foil bags, a common method boosters use to avoid setting off security systems. Once these boosters were out of the store, they sold the merchandise on eBay and to third parties such as George Tutaya of Rego Park, New York. He was charged with 18 counts of criminal possession of stolen property after he sold more than $80,000 worth of bras on eBay.
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He claimed he got the merchandise from the same ring that was stealing the bras. Instead of going through a direct source or person, Tutaya went to a warehouse near New York City that housed mostly stolen merchandise from Victoria’s Secret. “Unless stores start putting GPS tracking devices on their merchandise, it becomes virtually impossible to find out exactly where this merchandise is going and if it is being sold to legitimate retailers or other criminals who are using the proceeds of the sales to fund something sinister,” Biggs tells me.

Similar to Keskes’ case, Tutaya’s scheme was uncovered when the FBI was tipped off via an online service that tracks criminal activity.
However, if this service hadn’t been tracking purchases on eBay, Tutaya would have gotten away with profits of more than $200,000.

A Hotbed of Stolen Merchandise: Flea Markets

Another way contraband merchandise is disseminated is through flea markets and thrift shops. On any given Sunday, most major cities in the U.S. host one or more flea markets. Vendors sell merchandise ranging from rare vintage finds to bulk socks, hair clips, beauty products, and various knickknacks at bargain basement prices. Marketed as places where people can get a deal on merchandise that might cost them twice as much at a regular store, flea markets are hotbeds of resold items. The Aqueduct Flea Market in Queens had close to 500 vendors before the city shut it down in January of 2011—an increase of 100 vendors from 2009.
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The best sellers were discounted makeup, Blu-ray DVDs, discounted jewelry, and ladies’ clothing. However, it was discovered that expired medications such as Robitussin, Claritin, and children’s medicines were being sold at heavy discounts and illegally, according to Federal Drug Administration regulations.
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Nabbing the Bad Guys: Classifying Organized Retail Crime as a Felony

With all that we know about the prevalence of ORC, why does this crime continue to rise? ORC increased by 8% in 2009 over 2008. With the economy in one of the worst slumps in U.S. history, 92% of retailers reported their companies were victims of ORC.
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Retail theft is a high-profit, low-risk crime. Frank Muscato, another member of the organized retail crime division at Walgreens, says, “Ninety-nine percent of the time, people who are a part of ORC are engaged
in much worse crime and realize this is a good way of funding it,” explains Muscato. “They [people involved in the rings] have the understanding that if they are caught, they will only be picked up on a shoplifting charge, which is a misdemeanor and will result in a minimal jail sentence or a warning. For a professional criminal, that is music to their ears!”
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The problem, according to Jerry Biggs from Walgreens, comes from the way in which law enforcement perceives the crime of boosting versus shoplifting, which are two different things. He identifies and blames mainstream media for putting a lighter spin on the act of stealing from stores. Instead of being depicted as a hard-core crime in movies, TV shows, and other forms of entertainment, it’s portrayed as being not that big of a deal.

“When you have starlets like Winona Ryder stealing from luxury department stores, her story gets glamorized in the newspapers and magazines. It only makes our jobs more difficult when it comes to convincing law enforcement and loss prevention executives in stores to take this problem seriously. When criminals perceive their crime isn’t going to be taken seriously by the retailer they are stealing from and law enforcement, they are going to have more of an incentive to engage in that crime,” Biggs tells me.
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Joe LaRocca of the NRF points out that 72% of the retailers surveyed for his study stated that their internal investigations identified ORC syndicates that were exporting merchandise not only across state lines but also overseas. In addition, 28% of the criminal groups under investigation have connections to street gangs with international connections.
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“Organized retail crime rings have realized that tough economic times present new business opportunities by stealing valuable items from retailers and turning around to sell the merchandise to consumers looking for bargains,” says LaRocca. “And unknown to the consumer, they are funding things like human trafficking, corruption, and, in the case of the Neira case, which involved
the three businessmen in Miami, they are funding terrorist groups like the Hezbollah.”
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Insurance Companies: The Missing Link

The USA Patriot Improvement and Reauthorization Act, passed in 2006, increased prison terms for people who are convicted of stealing cargo. It also established a national tracking system of cargo theft data through the Unified Crime Reporting System used by the FBI. But chief security officers of trucking and shipping companies are the first to acknowledge that even with the new provisions to the Patriot Act, cargo crime, especially with the downturn in the economy, still remains rampant.

As an addendum to the Act, organizations such as the NICB are trying to further bridge this gap by partnering and creating cross-border information-sharing databases, with companies such as ISO, a database software company owned by Verisk Analytics. However, compiling so much information from so many different sources has proven difficult and, most importantly, cost-prohibitive. Law enforcement efforts to install tracking devices, as well as to establish systems to screen cargo containers and trailers being imported and exported into and out of the U.S., are cost-prohibitive as well. Parvonis Research estimated that losses reach further than just stolen merchandise and include insurance claims, investigation costs, and consumer costs, all of which are estimated to climb to $50 billion annually.
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Apart from losses, cargo theft also poses a threat to national security. The problem is not just lack of knowledge about products being smuggled out of the country and the potential for weapons of mass destruction to be smuggled in, but what the stolen merchandise funds after it leaves the country. Furthermore, most of the products developed to help curb cargo theft are mostly for recovery, not prevention.

The Gray Market: Another Retail Facilitator of ORC

By profiting from goods sold through the “gray market,” thieves circumvent law enforcement. Unlike the black market, where illegal goods are channeled through illegal means, the gray market allows regulated product from a legal source to be sold to an unauthorized marketplace or channel.
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Walk through a tourist area of any major city, and you will notice electronics stores that have TVs, DVD players, and computers all drastically underpriced. According to an NYPD source, most of those stores are selling gray market products. Products intended for a specific market are diverted and sold to a different, unauthorized marketplace through an intermediary. These diverters include shell or fake companies, fake Internet sites, or shady wholesalers and distributors that are supposed to be selling overseas but that end up selling it in the U.S. Gray market activity, while regulated by state governments
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and the Tariff Act of 1930,
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is not legal. However, law enforcement finds it difficult to act against such illegitimate sales. In one instance, Biggs tracked an ORC ring operating out of New York that posed as a shell warehouse selling stolen merchandise right back to Walgreens in addition to the smaller city-based unlicensed drugstores. “The ring in this case didn’t immediately own up to the fact that they were selling hot merchandise, and that’s what makes it is impossible to trace,” says Biggs. “Sometimes they were going to steal something specific and got stuck with a different load and wanted to get it off their hands. Other times they obtained the merchandise illegally and pretended like they don’t know where it was coming from.” Medical merchandise, such as diabetes test strips, bandages, and, of course, over-the-counter pharmaceuticals, were some of the top-selling goods. In another case Biggs was investigating, he found that the ORC ring made nearly $12 million by selling test strips. But top brands across all categories remain huge sellers.

Laws Have Been Passed, But Are They Helping?

In February of 2009, the Combating Organized Retail Crime Act of 2009, also known as S. 470, was introduced to Congress in an effort to curb the illegal activity taking place in flea markets, pawn stores, and online marketplaces such as Craigslist and eBay. Several other bills, including the E-fencing Enforcement Act of 2009 and the Organized Retail Crime Prevention and Enforcement Act of 2009, were introduced to Congress, but all have yet to pass. S. 470 calls upon law enforcement to crack down on thieves who steal, sell, or transport more than $5,000 in stolen merchandise over a 12-month period. Although that aspect of the bill could be very effective for regulating one-shot criminals, it doesn’t take into consideration that professional ORC members often steal well below that amount as individuals. In Maria’s case, her ring was stealing between $500,000 and $600,000 retail value each year; however, she would steal well under $500 worth of goods every time she would hit a store. In addition, with the economic downturn, RILA estimates that the level of retail crime rose despite partial economic recovery in 2010. Sixty-five percent of retailers surveyed saw an increase in ORC, and 74% saw an increase in stolen items being found in online marketplaces.
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Clearly there is nothing “white collar” about ORC, although the proceeds fund high-profile criminal activities. While the likes of Bernie Madoff won’t be coming to a flea market near you to sell stolen items, the mind-set of retail crime rings isn’t much different from Madoff. Both fund a fix or try to make money so that they can fund their version of the American Dream. But this is to the detriment of hundreds of thousands of people and costs retailers as well as state and local governments billions.

5. Profile of a Booster and a Fence

In most organizations, from The Coca-Cola Company to an ant farm to a beehive, it’s the underlings, the worker bees, who make the organizations run at maximum efficiency. It is no different for an organized retail crime ring. Boosters (the people who steal merchandise from stores) and fences (those who purchase the items and sell them on the black and gray markets) have varying degrees of importance within the ORC. A person’s importance is based on his level of experience, how long he has been associated with the organization, and his skill set.

For someone like Maria, the former MS-13 member who traveled all over the Midwest and the West Coast, boosting was a means to an end. She was recruited to work for her boss, an MS-13 kingpin, when she was just 16. Now, at 35, she’s been doing this for almost 20 years and has recruited others. She had plans to continue working for the MS-13 prior to getting arrested.

“This is something I know very well and, most importantly, make money doing it,” she said in an interview tape obtained by the Walgreens organized retail crime division. “For as long as I’ve been working the same route, nothing changes. We have lifted the same merchandise, over the same amount of time, and when we get caught it’s the same punishment. As boosters, the question isn’t ‘Why do we do this?’ it’s ‘Why wouldn’t we still do this?’”

Maria was from East Los Angeles and quickly got swept up in gang life. Like many women who are part of an ORC ring affiliated with a gang, Maria, along with four other women, started stealing
from stores such as Walgreens and Target and sold stolen merchandise to support her drug habit and others in the gang.

According to Jerry Biggs of Walgreens, there are three different levels of boosters and fences. This distinction is important for legal reasons. Level 1 boosters and fences are often categorized as “petty thieves” (what Maria started out as). When caught, they are charged with a misdemeanor and are released, regardless of whether they are stealing to fund their drug habits, to ease their emotional issues, or if they are working for a larger organization.

A Level 1 booster fits everyone’s image of a typical shoplifter—an emotionally needy starlet, the little old lady across the hall, the neighborhood heroin addict. The person usually has a drug, gambling, or alcohol addiction and steals to fund fixes. The Level 1 booster may commit theft on his own or in a group of other potential addicts.

“I did it for the drugs,” says Nick Jojola, a scruffy skateboarder who for years was the bane of the Albuquerque Police Department’s existence. He managed an ORC ring that consisted of 20 people much older than he was (and who also were drug addicts). At just 15, he was the youngest Level 1 booster to be convicted in Albuquerque.

Jojola was, for the most part, like any typical teenager growing up in New Mexico. On the weekends, you could find him at the Los Altos skate park doing tricks on his board and hanging out with a crew of eight other guys who called themselves “Feey Town.”