Breaking News in the Industry: March 1, 2017

No jail, no restitution in $160K credit fraud

Two women arrested in the midst of a months-long, high-end shopping spree, using stolen credit cards, won’t spend a day in jail, a Salem, Massachusetts, Superior Court judge has decided.  Ylka Acosta, 49, of New Milford, Conn., pleaded guilty to a string of charges that include money laundering, credit card fraud, conspiracy and attempted larceny. Co-defendant Carolin Leonardo, 35, of Central Falls, R.I., is expected to plead guilty to the same charges next week.

The two, according to prosecutor Phil Mallard, are responsible for an estimated loss of more than $160,000 over a 10-month period, from stores all over Massachusetts and New Hampshire, by using stolen credit card numbers printed on forged credit and debit cards.
They targeted high-end stores including Gucci, Ferragamo, Burberry, Barney’s, Saks Fifth Avenue and Bloomingdales, as well as multiple BJ’s Wholesale Club locations, where they purchased some of the most expensive televisions sold there. They also started purchasing Rolex watches from various Long’s Jewelers locations — a move that led to their arrests in February 2015 by Peabody police.

Following a conference earlier this week, Judge Timothy Feeley concluded, however, that not only do the women not have to pay restitution but they will receive suspended jail terms of 2 1/2 years, to be served only if they violate the terms of their probation. Mallard, who spent months compiling the financial records of the fraudulent purchases, had asked Feeley to sentence Acosta to three to four years in state prison, noting her prior history of similar crimes in Arkansas and West Virginia. He told Lang he doesn’t understand how the two women can avoid any jail time. “I just don’t understand that,” he told the judge. “Especially if it’s not the first time.” Court-appointed lawyers for the pair, however, convinced Feeley that the two were not the ringleaders, but acted more as “runners” for a larger organization. And they suggested that the women did not profit from the scheme.

After the hearing, Acosta walked out of court with Leonardo, who had posted not only Acosta’s $5,000 bail in the case but her own, which was originally set at $10,000 and later reduced.   Leonardo was wearing Gucci loafers and carrying a leather Burberry bag as she waited at the clerk’s office to get back the bail she had posted for Acosta. She’ll be back in Salem Superior Court next Wednesday for her own change of plea hearing. [For more: Newburyport News]

Smart teddy bears for kids suffer a contentious data breach

CloudPets stuffed animals, a popular smart teddy bear that can send and receive voice-recorded messages, is believed to have been targeted in a massive data breach recently. However, the producer of the stuffed animals, Spiral Toys and CEO Mark Myers are firmly denying that the alleged hacking took place.

Instead it was Troy Hunt, a security researcher who tracks data breaches that announced the incident on Monday. Hunt posted to his blog Monday, that hackers appeared to have accessed CloudPets’ database and stolen users’ email addresses and passwords, before trying to ransom the information in January. As a result, over two million voice recordings stored through the company website were potentially leaked to hackers.

CloudPets is alleged to have stored the information insecurely, by using a “publicly exposed online MongoDB database that required no authentication to access”, virtually allowing anyone to potentially view and steal the information. While it is noted that the exposed passwords were encrypted using bcrypt algorithm, which would ordinarily make them difficult to crack, unfortunately CloudPets did not require users to follow any specific guidelines when creating passwords. Thus, Mr. Hunt was able to “brute force” hack many of the passwords by simply checking the most common passwords, such as “123456” and even “password”.

Another researcher, Victor Gevers of the GDI foundation, actually discovered the exposed database back in December, and repeatedly attempted to warn CloudPets of the pending danger, as did Mr. Hunt. CloudPets denies ever receiving these warnings and insists “no evidence has been found showing hackers have broken into customer account.”  “The incident underscores the danger with connected devices, including toys, and how data passing through them can be exposed,” he added.   [For more: TechHive]

LP Worldwide: Samsung heir indicted for bribery, embezzlement

The heir to the Samsung empire and four other top executives from the world’s biggest smartphone maker were indicted yesterday on multiple charges including bribery and embezzlement, South Korean prosecutors said. “Special prosecutors today indicted Samsung Electronics vice chairman Lee Jae-Yong… for bribery, embezzlement, hiding of assets overseas… and perjury,” said Lee Kyu-Chul, spokesman for the team probing the corruption and power abuse scandal that has seen President Park Geun-Hye impeached. Lee was arrested earlier this month and the laying of formal charges against him and his colleagues makes them almost certain to face trial, casting new uncertainty over South Korea’s biggest firm as it seeks to recover from a humiliating recall.

The 48-year-old has effectively been at the helm of the conglomerate since his father suffered a heart attack in 2014. Among other allegations, Lee is accused of paying nearly USD 40 million in bribes to a confidante of President Park’s to secure policy favors. Lee — who is also accused of concealing stolen assets — has denied all charges. His colleagues face similar charges except for the perjury count. The scandal centers on Choi Soon-Sil, who is accused of using her close ties with Park to force local firms to “donate” nearly USD 70 million to non-profit foundations, which Choi allegedly used for personal gain. Samsung was the single biggest donor to the foundations. It is also accused of separately giving millions of euros to Choi to bankroll her daughter’s equestrian training in Germany. Lee’s arrest marked the first for a Samsung chief and dealt a huge blow to the electronics giant’s corporate image. [For more: ET Retail]

How Millennials are driving changes for retail stores

When you’re in the market for a particular product, where do you go to make the purchase?  “I do most of my shopping online,” said Brianna Evans, in town from Syracuse, New York. Another passerby said, “more in store, but I’d say I’m the outlier, in terms of my age group.”  We’re talking about Millennials, a new generation of consumers, changing the face of retail.

Experts say they’re buyers without brand loyalty, less interested in cruising their local department store. Young consumers we spoke to answered fairly consistently, anywhere from two to three, maybe four times a year. Shopping habits that could contribute to the so-called “death of the department store,” where sales have fallen nearly $75 billion over the past two decades and despite record holiday spending, saw decline this past year.

So, what’s behind the decision to skip the traditional big box store? “It’s less about the product, more about the uniqueness of the experience,” said Dr. Wayne Williams, a professor of Business at the Community College of Philadelphia. He says younger buyers prefer a boutique-like experience and are willing to seek out unique products and design. “You don’t want to walk around with what everyone has on, you want to be unique, different,” explained Evans.

Dr. Williams says they often reject the department store approach, in favor of an atmosphere that’s more interactive and social; where they can try out products, maybe even sip a latte. And if department stores can tap into that preference, he believes it could make the difference. “If brick and mortar stores can figure out a way to capture that energy that we need in terms of how we socialize, they’ll be able to stick around.”  [For more: CBS Local]

The border tax is a major retail wild card analyst says

Oppenheimer analyst Brian Nagel doesn’t believe the House Republican’s proposed border adjustment tax, or BAT, will happen, because of the power of the consumer. “If [BAT] passed, retailers would have to pass on higher prices to consumers,” Nagel said Friday in an interview with CNBC’s “Power Lunch.” He’s labeled the border adjustment tax as the biggest “wild card” for retail this year. A consumer goods price hike wouldn’t play out as smoothly as House Republicans might expect, Nagel said, as consumers are going to have a difficult time making up the difference.

If people would “try to understand the math” involved with BAT, Nagel said, it makes more sense why “it just won’t happen.” Nagel used J.C. Penney as an example of a company that would have a hard time making sales with more expensive items. Home Depot, though, wouldn’t struggle as much because those shoppers are likely less price sensitive, he said. Penney’s, which reported a disappointing same-store sales drop on Friday, also announced plans to shutter up to 140 stores over the next few months, as well as two distribution centers, according to its earnings release. The company’s stock was down nearly 4 percent in mid afternoon trading Friday. Other retail names rallied Friday, including Foot Locker, Nordstrom, Kohl’s and Gap, amid reports that President Donald Trump’s administration might not be so quick to adopt BAT. Jan Rogers Kniffen, a retail analyst and a CNBC contributor, said he thinks a border tax will be passed, one way or another. “I think we’re going to have some form of a revenue raiser,” Kniffen said on “Power Lunch.” “Where are [Republicans] going to get it? A cross-border tax.”

The CEO of J. Rogers Kniffen Worldwide Enterprises said his odds on there being a tax reform bill passed in 2017 are up to 80 percent, based on conversations he’s had with accounting firms. And when the taxes are adjusted, the retail rally in the market will reverse, he said. “The vampire will rise from the grave,” Kniffen said. The border adjustment tax being the vampire. [For more: CNBC]

Why are CCTV cameras important for your business?

$50 billion. This is the staggering cost of employee theft to companies each year in the US. There are many things that can be done to slow this number down, but here are eight reasons why CCTV is a necessity:
Preventing Workplace Crime – Lacking surveillance cameras is one of the most common reasons contributing to unethical workplace practices. It is well understood that people will be less likely to act unethically if they know they are being watched. Beyond internal theft, this should also help reduce sexual harassment and time wasting activities by employees.
To Provide Evidence – This one is obvious but with CCTV it will be easy to prove alleged crimes when there is clear video evidence provided.
Real Time Visuals – CCTV feeds can be easily live streamed, so even if you are not working at the office, you can keep an eye out for unwanted behavior and monitor employees from home or on the road.
Introducing Good Behavior – When employees know they are being recorded, it is far more likely that they will demonstrate good behavior and avoid participating in anything that might make them look bad. Thus CCTV may even boost worker productivity.
Helping Cops – When crimes happen on company property, CCTV will help aid in identifying the offenders, as police can share the footage with local media to help solve crimes.
Fighting False Allegations – Employees falsely accusing co-workers of crimes can be quickly identified with the cameras. If an accused employee maintains innocence, he or she can ask for CCTV footage to help prove innocence.
Protecting Finances – Catching workplace crime quickly and preventing future crime will further help reduce the rates at which these crimes occur. In turn, company finances will be well protected.
Confident Customers – Shoppers will be more confident at your business when they know cameras are monitoring everyone (an effective deterrent), and thus any potential criminal act will provide immediate evidence.  [For more: The Business Zone]

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