Breaking News in the Industry: July 10, 2018

external theft, organized retail crime methods

Nearly $50M in counterfeit brands seized as fakes continue to target fashion

Adidas, Apple, Burberry, Calvin Klein, Chanel, Coach, Diesel, Dolce & Gabbana, Fendi, Gucci, Louis Vuitton, Nike, Rolex, and Yves St. Laurent wares were among the nearly 200,000 counterfeit goods seized by U.S. Immigration and Customs Enforcement (“ICE”) this past week in Laredo, Texas. The products – China-made garments and accessories that would have been worth more than $42.9 million had the products been authentic – were in the process of being “clandestinely smuggled into Mexico,” according to an ICE representative, in the second of two similar busts by the U.S. government in the past three months.

Brands routinely devote significant resources to brand enforcement efforts and litigation in order to crack down on the trade in counterfeit goods – those that utilize a trademark that is “identical with, or substantially indistinguishable from” a genuine registered trademark and that is used on the same class of goods as the registered mark. Yet, the fashion industry routinely finds itself to be one of the prime targets of increasingly sophisticated (and often identical) fakes, including ones that often bear “identical packaging and even “holograms,” which many brands utilize as an anti-counterfeiting measure, says John Houston, the executive chairman of Australia-based product security firm, YPB Group.

While information regarding the prevalence of and dangers associated with counterfeit goods, the volume of fakes sold is at a high thanks to the ease with which consumers can intentionally purchase counterfeit goods (potentially in response to fashion’s marked penchant for limited-edition goods), or be duped into buying them, online, where largely China-based entities can easily set up huge networks of counterfeit-selling sites in an almost completely risk-free manner due to their ability to hide behind layers of fictitious identities and contact information.

Such growth comes with no apparent end in sight. According to a 2017 report commissioned by the International Trademark Association (“INTA”) and the International Chamber of Commerce (“ICC”), the global economic value of counterfeiting and piracy could reach $2.3 trillion by 2022, up from $1.7 trillion in 2015. Research & Markets’ 2018 Global Brand Counterfeiting Report echoed this prediction, characterizing the counterfeit market as “booming rapidly,” and stating that “globalization of trade and communication has offered unparalleled opportunities for organized crimes to engage in illicit trade and counterfeiting so as to increase their economic influence” and will continue to do so.

One area where change is underway is locale. Production of counterfeit goods – which is currently centralized in China, which is responsible for approximately 75 percent of all fakes – appears to be shifting. According to the INTA / ICC report, North Korea, Myanmar and Vietnam are emerging as key counterfeit production havens as China begins to take “steps to crack down on the production of counterfeits.” That production, however, is not stopping. In fact, it is, per Research & Markets’ report, only “growing more and more in scope and magnitude.”    [Source: The Fashion Law]

Judge tosses lawsuit over retailer’s limited guarantee

A U.S. federal court dismissed a lawsuit against L.L. Bean regarding changes to its longtime guarantee, which the retailer restricted early this year by moving from a liberal lifetime guarantee to a one-year return policy that requires proof of purchase. U.S. District Judge Robert W. Gettleman of the Northern District of Illinois, in dismissing the case, sided with L.L. Bean, which argued that the plaintiff, Victor Bondi, didn’t suffer any injury from the new policy and therefore needed no redress, according to court documents. Bondi had argued, as do plaintiffs in three other lawsuits against the retailer, that he purchased items from L.L. Bean under the old warranty, so that the change violated their bargain. The change, however, doesn’t apply to any item purchased before it was announced.    [Source: RetailDIVE]

Trio sentenced in massive identity theft case

Just after 11:30 p.m. Oct. 25, Jeanne Macias Mendoza pushed her shopping cart up to the cashier at the Save Mart in Ripon and wrote a check to pay for more than $200 worth of groceries. And with that simple act began the unraveling of a three-person team of Stockton identity thieves who had been making a living stealing mail, credit cards and packages, and writing bad checks on accounts that did not belong to them. The unraveling began late that night because an alert cashier became suspicious when the store’s check-cashing device rejected Mendoza’s check. Mendoza then walked out of the store arguing with Lom Van Nguyen, one of her cohorts. The store manager followed outside and snapped a photo with the license number of the rented U-Haul pickup they had departed in. And after shooting the photo, the manager placed a call to Ripon police, who located and arrested the trio. San Joaquin County District Attorney Tori Verber Salazar announced the sentences for the 43-year-old Mendoza, the 41-year-old Nguyen, and a third accomplice, Kimi Matsuno, 45.

The cases of Mendoza and Matsuno were resolved with plea agreements. Mendoza received a seven-year sentence she is already serving at the Central California Women’s Facility in Chowchilla. Matsuno, still at the County Jail, will serve five years in state prison. Nguyen’s case was tried over four weeks. A jury convicted him and a judge sentenced him to 10 years, 8 months behind bars. Nguyen’s sentence, according to officials, is unusually long for a person convicted of identity theft — so lengthy, in fact, that Kevin Rho of the Postal Inspection Service said he was “surprised.” “It’s not a typical sentence for these types of property crimes,” added Rho, assistant inspector in his agency’s San Francisco division. “It was a very nice collaboration that got us this result.”

Verber Salazar called it “the most successful prosecution of identity theft in San Joaquin County’s history, with the largest sentence that we’ve received.” She added, “This was a substantial case that was organized, planned, disciplined to carry out a substantial amount of fraud to a number of our victims here in San Joaquin County and Sacramento County.” Ripon police were able to search the U-Haul after arresting its occupants in October because Nguyen was on searchable probation. Police Chief Ed Ormonde said the pickup contained “tons of stuff,” including 1,100 pieces of mail stolen from 400 victims, some from as far away as Southern California and one of them a high school student. Elk Grove was home to the largest number of victims.   [Source: Recordnet]

Suspect accused of stealing $160K in diamonds from jewelry store ordered held on no bail

A 67-year-old man accused of stealing two diamonds worth close to $160,000 from a jewelry store in June was ordered held at Cook County Jail in Illinois with no bail on Saturday. Tamaz Hubel, charged with felony theft, was arrested June 24 at Miami International Airport, as he was about to board a flight to France.

More than two weeks earlier, Hubel arrived at a Jewelers Row store in Chicago and told an employee he was buying diamonds for a Russian boss, according to a police report. While the salesperson wasn’t looking, Hubel took two diamonds — a 4-carat diamond worth $132,722 and a 2-carat diamond worth $26,339 — and replaced them with empty wrappers, a police report said.  The store didn’t uncover the theft for four days. Hubel, whose last known address was in Florida, has an arrest record for four similar crimes in New York and Belgium, the Tribune reported last month. Diamond industry trade groups and publications have also issued warnings about him in the past.

After Hubel was extradited to Chicago to face the new charges, Judge Stephanie Miller on Saturday ordered him held with no bail during a hearing at the Leighton Criminal Court Building. Hubel will be back in court on Monday, Cook County state’s attorney’s office spokesman Robert Foley said on Saturday.   [Source: Chicago Tribune]

More than 50 people report credit card fraud from skimming device scam

More than 50 people have reported credit card fraud in the Salt Lake valley in Utah this week. West Jordan Police Sgt. J.C. Holt said investigators believe someone may be installing skimming devices to steal credit card information. He said the most common places they see the devices are at gas stations and ATMs. “They’re very subtle. They’re made to look like something you’d put your credit card into to pay for something,” said Holt.

Skimming devices come in various shapes and sizes, but many are made to look like card readers that slip over the legitimate card reader. “I’m told these devices slide over existing devices, almost like a sleeve. You can even pull on it to see if it lifts a little bit,” Holt said. He also said to keep a close eye on your bank accounts and check with your bank if you have any suspicious activity on your account. If you suspect you may be the victim of credit card fraud, contact your area law enforcement agency.    [Source: KUTV2 News]

Pet retailer puts fraudsters in the dog house with AI

Using artificial intelligence and machine learning-powered technology to identify and stop fraudulent orders, PetSmart saved $12 million last year — $4 million in order costs, $8 million in labor, shipping, fines and other costs, reports ZDNet. Since February 2018, the company has already saved $1.5 million.

PetSmart wanted to move fraud prevention in-house and turned to a tool that aggregates transactions and outcomes and determines the fraud risks of customers to identify nefarious transactions. As the tool’s algorithm becomes familiar with a seller’s business, it learns and improves. Preventing fraud also protects the company’s brand and reputation, because customers could associate fraudulent charges with a failure by PetSmart to protect them, according to ZDNet. Tackling fraud in the confines of a business can have rippling effects in industry and society. Information gathered by PetSmart’s fraud prevention program helped uncover a multi-state fraud ring, close the murder case of an NYPD officer, and further a human trafficking ring investigation, report ZDNet.   [Source: RetailDIVE]

 

 

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