Loss prevention has traditionally focused on shortage reduction through an emphasis on internal theft, external shoplifting, and operational controls. Resources to prevent these losses have been spent on developing programs and controls to stop loss from within the company.
More recently, retailers have identified the growing threat of organized retail crime (ORC). Loss prevention departments are beginning to shift resources in order to investigate and resolve these more complex cases that are causing a large percentage of their overall external theft shortage. Loss prevention professionals currently responsible for handling cases of organized retail crime have realized the difficulty in investigating groups of criminals who operate by boosting merchandise from multiple retailers.
ORC investigators rely on incidents that occur at their specific retailer in order to gather necessary evidence to present to law enforcement for resolution. Investigators may believe that a group has stopped their boosting activity and a case may become cold without progressing because they have not been seen in that particular retailer. In reality, these criminals are boosting merchandise at many retailers, which make them difficult to track and apprehend. A more effective way to attack this increasing theft trend is to bring together retailers and law enforcement resources in order to share theft trends and case details.
Today’s reality is that these organized criminals boost merchandise from any retailer who sells product that can be easily resold to a fencing operation. While flea markets, pawn shops, and makeshift stores have provided common places for the traditional booster of the past, Internet sales, or e-fencing, now allows an anonymous worldwide sales outlet.
E-fencing is now a national outlet for the increasingly sophisticated organized retail crime rings. Because of the easy ability to resell boosted merchandise, boosters work with lists that include everything from electronics to baby formula and low-end apparel to high-end designer clothing. It is common to find a wide array of merchandise in their vehicles or in homes for resell.
Organized criminals commit crimes at all retailers, and for that reason, companies can–and should–work together in order to connect the dots for case identification and resolution. Combining evidence and investigative resources will produce more rapid case closure, increased criminal charges, restitution, and extended sentencing, all of which are needed in order to reduce shortage and take criminals out of circulation.
It is important to note that there are retailers who have realized the benefits of sharing intelligence and working together tactically in order to more efficiently track and take down these organized retail crime rings. These retailers have been successful in reducing their companies’ losses due to an understanding and support of cross-retail investigations sharing in order to cripple the ORT enterprise.
Many retailers report that operational losses account for over 50 percent of their shortage while internal and external theft combined accounts for the remaining 50 percent of loss. Based on increases in organized retail crime cases investigated by retailers, the FBI, and other theft task forces, it is believed that this is an increasing criminal enterprise.
Organized retail crime costs the retail industry nearly $30 billion per year. According to a 2015 survey by the National Retail Federation (NRF), almost 97% of retailers report being victims of ORC activity within the last year.
ORC activity has been reported across all sectors of retail nationwide. In many closed cases, boosters were found to have been hitting multiple retailers for different types of product lines depending on what was hot for resale to traditional fence locations and e-fence locations.
Organized retail crime is making a significant negative impact on shortage results. Retailers realizing the magnitude of the problem impacting their bottom line are responding by creating departments within the LP pyramid in order to specifically identify and eliminate these theft rings.
Economic and Community Impact
Organized retail crime losses contribute more negative impact than just company profits. Retailers pass losses to consumers in the form of higher prices. Companies must make their product pricing decisions based on many factors. One such factor is projected overall loss the company will incur over the year and what appropriate price will recover those lost profits. An increase in cost to the consumer is the most likely answer to recover those losses.
In addition to increased prices, ORC rings make desirable products unavailable to honest consumers. When these crime rings boost large quantities of merchandise from a store, the honest consumer is left with no option to purchase the product, thus impacting their shopping experience and negatively impacting sales for the retailer. In many cases, the impacted retailer has no idea that the merchandise was stolen and replenishment does not arrive until a cycle inventory is completed later that year. Thus, every time a customer returns to attempt to purchase a particular product, the store will not have it in stock; the inventory system believes that it is still in the store when in fact it is being sold through a fence location instead.
Another negative impact of organized retail crime is that state governments lose out on needed sales tax revenues. When fewer products are sold through retailers who legitimately report and pay taxes, less money is contributed to fund government activity to improve our communities. When ORT rings use refund fraud as their mode of operation, this decrease in taxes is doubled. When merchandise is returned to a store fraudulently, not only do local, state, and government programs lose out from the taxes that would have been collected on the original sale, but they also lose a second time because that return pulls sales revenue from the store.
Currently the benefits for criminals to commit organized retail crime far outweigh the negatives. The financial benefits for being involved in ORT at this time are too great for criminals to ignore. Individual boosters report profits of over $100,000 a year in providing fence operators with merchandise for resell.
When boosters are caught in a store for shoplifting, they generally only have small amounts of product on them and will likely be charged with a misdemeanor shoplift for that one incident of theft. What is often overlooked by law enforcement and even some LP investigators is that, in many cases, the shoplift incident where the arrest occurred may have been the fifth or sixth location that the booster committed a theft that day. The rest of the merchandise may be sitting in their vehicle in the parking lot.
If the correct questions are not asked by LP professionals or law enforcement officers, or if a vehicle is not searched, then the scope of the activity will not be uncovered. In the case where a booster is only charged for theft from one location, the penalties are minor and little or no jail time will be served.
If an investigation does lead to the arrest of an ORC ring and those individuals are charged for the full amount of loss they were responsible for at that one particular retailer, the group will see slightly more jail time, but still insignificant punishment.
However, if a joint investigation by multiple retailers leads to the arrest of an ORT ring in which a much larger dollar loss is proven and multiple counts of theft are charged affecting multiple retailers, then punishment can increase significantly. This will lead to the temporary elimination of the theft ring. Taking these groups out of circulation keeps needed merchandise in the store for sale to legitimate customers. However, once the individuals are released, they may return to target different retailers or products that were not part of the original investigation and prosecution.
Federal legislation has been proposed to fund training for law enforcement, to support a national retail theft database, to request additional support for fighting and prosecuting related crimes, and to increase penalties for those convicted of organized retail crime activity.
A 2006 investigation led by the Mervyns Special Investigations Unit (SIU) identified an organized retail crime ring that impacted multiple retailers simultaneously.
Mervyns had seen a consistent trend in Levi’s shortage over the previous five years. Little impact was made when developing operational controls and store-level security measures. An analysis of Levi’s shortage throughout Mervyns was conducted by the newly developed Special Investigations Unit. A Levi’s Inventory Count Update Report was created in order to identify stores adjusting counts due to missing product within their stores. The report identified large Levi’s shortages within multiple markets.
Surveillance conducted on Levi’s product within selected stores by the Special Investigations Unit uncovered multiple booster groups removing large quantities of Levis from numerous store locations. A booster subject would select multiple pairs of Levi’s while a lookout watched for camera movement and loss prevention personnel. If there was no noticeable camera movement or LP identified, then the booster would conceal Levis within the fitting room, using booster socks to conceal the merchandise under their pants.
Additionally, booster bags with foil lining were used at some locations. Cell phones were used to communicate throughout the store and both subjects would be met by a third party waiting in a vehicle outside.
Photo alert bulletins were sent out to all Mervyns’ loss prevention personnel. This generated response that investigations had been opened on similar groups with the same mode of operation throughout the states of Washington, Oregon, California, and Arizona by individual stores who had witnessed similar activity. Further investigation identified multiple booster cells working different geographical locations.
The Special Investigations Unit conducted mobile surveillance on the subjects and identified multiple retailers were victimized by the thieves with boosted product ranging from Levis to high-end merchandise.
The lead investigator on the case for Mervyns sent photo alert bulletins to all nearby retailers potentially impacted by the thefts. This resulted in multiple booster arrests and the identification of a total of 14 South American booster subjects using fake Puerto Rican IDs and multiple identities in order to mislead authorities. Most of the subjects had been arrested multiple times using different identities, which allowed them to be cited and released from responding law enforcement agencies if arrested.
Multiple retailers participated in the identification and sharing of information in this case, including Sears, Kohl’s, JCPenney, Robinson May, Macy’s, and Levi Strauss & Co. With the information sharing of all participating retailers and with the evidence gathered by the Mervyns SIU team, it was confirmed that this ORC ring had been aggressively active since 2001.
One arrested booster gave investigators information on the main fence operation operating as a retail business in Los Angeles inside the garment district. Further mobile and stationary surveillance on the fence location revealed the already identified boosters exchanging large amounts of stolen merchandise for cash.
With the assistance of the FBI Interstate Theft Task Force, search warrants were executed on three separate locations in the Los Angeles area, which resulted in the recovery of 3,865 pairs of Levis totaling $177,790. Additionally, several duffel bags full of stolen high-end merchandise belonging to other retailers were also recovered.
During the course of the search warrant, thousands of dollars’ worth of brand-name merchandise from multiple retailers was found in back storage rooms. Unfortunately, no proof of thefts from these retailers was available in order to seize this merchandise.
Intelligence on additional boosters and fencing locations was also obtained during the search warrants. Based on the evidence uncovered throughout the course of the investigation and information provided by boosters and informants, it is estimated that Mervyns alone had incurred a loss of $1 million dollars for every year the ORC ring was in operation.
Connecting Retailers and Law Enforcement
Law enforcement has a wide variety of task forces or special departments that investigate property theft cases depending on location and governing body. In many cases, law enforcement resources are used by retailers only after a case has been put together and the majority of the needed evidence to prosecute has been obtained. As a result, retailers can provide assistance to one another by becoming involved in cross-retail investigations sharing. This will allow for cases to be put together more quickly when multiple retailers are involved in a case.
Often, the pieces of evidence needed to complete an investigation can be found across different retail case files, waiting for someone to connect the dots. In addition, having joint retail documentation and evidence adds credibility to cases for prosecution. It allows for a strong case presentation to a law enforcement agency that will be able to assist in the final stages of the case being closed.
A company’s policies on information sharing must always be considered in relation to case details. However, general case information such as the mode of operation, subject descriptions, and pictures should be considered by retailers when attempting to identify and locate theft rings that are causing large amounts of loss.
Good resources are available for cross-retail investigations sharing. Many counties and states across the country have organizations that meet monthly or quarterly where law enforcement and retailers get together to discuss thefts and criminal trends. These “crime stoppers” or “property theft” associations are beneficial places to educate law enforcement and share case details in order to solicit support for cases by both law enforcement and other retailers in attendance.
The National Retail Federation (NRF) Investigators Network meets specifically to discuss current investigations and trends across the nation from all retailers. The NRF Investigators Network consists of over 500 loss prevention professionals nationwide with meetings in every region of the country. Federal, state, and local law enforcement professionals attend these meetings on a regular basis. Additionally, trainers from Wicklander-Zulawski have attended some meetings in order to teach the interrogation of organized retail crime suspects in the field. This is an excellent way to meet other investigators while sharing case information for case development.
In addition to the above suggestions, the easiest way to work together is by simply picking up the phone and talking to other LP professionals. Sharing information via email in an alert bulletin that can be passed along to investigators in the field is also a great way to work together. This is a quick and easy way to get information out to those responsible for investigating this type of activity within their company. It also increases the probability that your subject will be seen by other investigators and evidence can be obtained in order to bring your case to resolution.
Retailers are identifying and appropriately responding to this growing threat of organized retail crime. There is a great opportunity to work together in order to connect suspects and evidence across multiple retailers for a more in-depth and complete investigation that is necessary to put these criminals out of business. Connecting retailers is the most effective way to combat organized retail crime and reduce the shortage impact from this theft enterprise.
This article was originally published in 2006 and was updated February 25, 2016.