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Some numbers are staggering although I find them hard to believe. What made me laugh is that a legitimate US business (Sam's Club) was selling fake bags. That's a riot, lol!
link to the article
Busted!
NEW YORK ?
In one of the biggest counterfeit busts in years, a 19-month
investigation reached its climax on Tuesday as federal officials
conducted early-morning raids throughout the metropolitan area,
arresting 29 people, seizing more than $230 million in merchandise and
ultimately dismantling three operations believed to have imported more
than $700 million in fake products over the last 24 months.
Raids
conducted at warehouse facilities in Queens and Brooklyn turned up
hundreds of thousands of pieces of counterfeit apparel and accessories
bearing the logos of the fashion industry's most recognized brands,
including Cartier, Coach, Gucci, Louis Vuitton, Rolex, Nike, Prada and
Chanel.
Most of the fake merchandise was destined for the
warren of stalls in and around Canal Street and lower Broadway,
officials said.
"Today's arrests represent our intolerance for
criminals who seek to circumvent the legal customs process to smuggle
contraband onto our streets," said Julie L. Myers, assistant secretary
of Homeland Security for Immigration and Customs Enforcement, in a
statement. "Counterfeiting has risen to the level of an economic
pandemic costing the legitimate U.S. economy more than $200 billion
annually. Targeting these illicit networks will remain one of the most
important crimes we pursue."
On Tuesday afternoon, the first
batch of 13 of the 29 accused were processed at a federal building in
lower Manhattan, before being handcuffed and marched out in a line in
front of a waiting press corps. Officials from Immigration and Customs
Enforcement followed up the perp walk with a brief presentation and
display of the types of counterfeit goods found at the warehouse
facilities, adding the task of emptying them out likely would continue
well into the night. Timberland shoes; Prada sunglasses; Rolex watches;
handbags from Chanel, Louis Vuitton, Burberry and Kate Spade; a range
of Nike footwear, and True Religion jeans were a few of the scores of
brands and counterfeit products presented. Officials also reported
having found more than $1 million in cash.
ICE and Customs &
Border Protection, both divisions of the Department of Homeland
Security, coordinated the investigations and used undercover officers
and numerous informants to collect evidence that showed several
independent customs brokers were involved in facilitating the entry of
counterfeit goods into the market. Kevin Delli-Colli, ICE's acting
special agent in charge of New York, described the sting as the
department's most successful operation to date.
"It's certainly
the largest [intellectual property rights] case we've had since
inception in March 2003, but it's by no means an isolated case?.Today
was the culmination of 19 months of work," an ICE spokesman said. "We
looked at the infrastructure for the conspiracy and eviscerated it in
one fell swoop."
In three separate complaints, federal
authorities charged 29 defendants with conspiracy to smuggle more than
950 shipments of fake merchandise into the U.S. valued at more than
$700 million. Other charges included counterfeiting and money
laundering. Court documents filed in U.S. District Court in Brooklyn
show that importers and freight handlers at warehouses employed a
series of strategies to circumvent customs altogether or to mislead
customs officials.
To bring goods into the country, importers
work with customs brokers, which are private companies and individuals
who are licensed by U.S. Customs to conduct business on behalf of the
importers. The broker provides Customs with the documentation that
allows goods to officially enter the U.S. If U.S. Customs decides to
examine containers, the broker must bring them from their
customs-bonded facility to an examination site. Investigations found
that customs brokers involved in these cases were actively assisting
importers of counterfeit goods and charging fees for their services.
The
first case charges 18 defendants with employing two strategies to move
more than 900 shipments of merchandise into the country. The importers
and warehouse officials often would label a container of counterfeit
goods as children's toys or picture frames ? essentially anything with
a lower duty ? on official documents. In other cases, the importers and
brokers would steal identities, using the ID numbers of legitimate
importers in order to get the goods into the country and disguise their
destination. If Customs made a request to examine a container, the
warehouses were prepared with containers of stand-in product.
"Often,
the ?dummy' freights were containers of children's toys (or whatever
was fraudulently listed on the documents supporting the entry) that
were stored at the defendants' warehouses for the purpose of deceiving
Customs when they asked to inspect the containers that were being
smuggled in the United States," said a special agent in court documents.
Another
scheme employed by the defendants was to file an application with
Customs for a "transport and export bond." The bond allowed containers
to enter the U.S. only so they could be moved through the country to
Canada. However, the goods never made it to Canada.
Documents
obtained during the investigations showed that the vast majority of
goods came from China. Delli-Colli said the U.S. government was working
with its trade officials in China to identify the Chinese manufacturers
of the goods. "ICE is always trying to identify the source?.We are
working with our customs attaché in China on this," he said.
The
government's case against 18 defendants was particularly active.
Records indicated that between June 2005 and the present day, the ring
had smuggled more than 900 40-foot containers into the U.S., 100 of
which were seized. The value of the goods seized in those 100
containers was estimated at more than $650 million.
Customs
brokers, also referred to as freight forwarders, were raking in
sizeable amounts of money by cooperating with importers of counterfeit
goods. According to the court filings, one forwarder received between
$25,000 and $30,000 for each smuggled shipment. The documents said a
Customs-bonded warehouse located near John F. Kennedy International
Airport smuggled in goods arriving via air freight. Employees of the
warehouse would load the cargo onto trucks without entering the cargo
into computer systems or before it had officially cleared Customs. The
defendants in the case said they received $2 per kilogram of cargo they
moved through the warehouse without obtaining Customs clearance.
The
amount of counterfeit product one container can hold also can be
substantial. One container seized at JFK on June 30 was found to have
fake goods amounting to 7,500 Rolex watches, 4,512 Coach bags, 1,440
Louis Vuitton handbags, 1,540 Nike sneakers and smaller amounts of fake
products with labels such as Marc Jacobs, Jimmy Choo, Balenciaga, Chloé
and Christina Dior.
The smuggling operations were not confined
to the East Coast. With the majority of goods being manufactured in
Asia, most reached the U.S. via the Ports of Los Angeles and Long
Beach. However, the bonded-warehouse system allows those containers to
be shipped to the East Coast via rail, road and air without officially
entering the country.
"Targeting these illicit networks will remain one of the most important crimes we pursue."
Julie L. Myers, Homeland Security for Immigration and Customs Enforcement
Investigationsalso took ICE officials to Laredo, Tex., a major entry point for trucks
from Mexico. The defendants in the complaint also planned to use
transport and export bonds to allow containers to enter the U.S. from
Mexico without being inspected, claiming the shipments were bound for
Canada. Approximately seven containers entered the U.S. through Mexico
in this manner. Five of those containers were seized and contained
goods with a value of more than $11.4 million.
While the sheer
volume of confiscated goods was cause for celebration, brand owners
were even more pleased with the government's decision to target not
just importers, but the individuals and companies that knowingly helped
circumvent customs and allowed the goods to enter the consumer market.
Barbara
Kolsun, senior vice president and general counsel for Seven For All
Mankind, applauded the government for targeting the distributors, many
of whom are believed to be national suppliers of counterfeit goods.
Seven For All Mankind was among the brands found during the seizures.
"I
understand this is a major raid and that the people who have been
arrested may have been major suppliers to the Broadway buildings," said
Kolsun, referring to a stretch of Broadway that runs between 24th and
34th Streets, where entire buildings have been illegally subdivided
into virtual malls of counterfeit merchandise. "Those buildings are a
major source of counterfeit goods to the city and a major source of
distribution to the rest of the country. Tenants of those buildings
ship products to people all over the country."
The Broadway
buildings have been a focus of the Mayor's Office of Midtown
Enforcement in recent years. The city has raided many such buildings
and cleared out the counterfeit vendors that operate out of
closet-sized stalls. The city also has taken the additional step of
issuing fire-safety violations that effectively shutter the building to
all activity. Ultimately, it's a tactic that puts considerable pressure
on landlords and is meant to encourage them to take responsibility for
the actions of their tenants.
"You can chase the street vendors
away, but they're not the problem," said Kolsun. "Finding higher-level
distributors is really what we're after because we dry up the source of
the supply that way."
Street-level raids often pick up on
Broadway and in Chinatown around Christmas and are often considered
more of a show of force rather than having any significant impact.
Those in the apparel industry who work on counterfeiting operations
said this operation had serious teeth.
Kevin Dougherty,
president of private investigators Counter-Tech Investigations Inc.,
was involved in the raids and works with many of the brands found
during the raids.
"A lot of the investigations that we were
conducting paralleled the federal investigations," said Dougherty. "We
took a step to the side as a result, but the case is extremely
significant because of the people they dropped the net on."
Dougherty
was present for a raid in Queens and said more than $875,000 worth of
merchandise had been discovered, predominantly luxury handbags and Nike
footwear.
Heather McDonald, a partner with Baker & Hostetler
in New York, which also represents a number of the brands involved,
said the significance stemmed from the range of defendants.
"It's
a very significant case because it involves a spectrum of people along
the continuum of counterfeiters," said McDonald. "Anytime the
government does an operation of this scale, it's just a great thing all
around. It shows a commitment to go after large-scale counterfeiting
operations."
Counterfeit goods ? both made in China and exported
and sold in China ? are a major problem in fashion, but it is a problem
that is affecting all industrial sectors, from electronics to
pharmaceuticals. Surveys conducted with industry and public authorities
indicate that "there is a notable expansion from luxury to everyday
products," John Dryden, deputy director at the Paris-based Organization
for Economic Cooperation & Development, told a conference on the
issue in Geneva in January. Customs statistics indicate infringements
throughout the product groupings. Textile products are the most common,
with 30 percent of the total, followed by machinery and equipment at 17
percent. The economic cooperation and development official said the
customs suggests "counterfeiting and piracy are taking place in
virtually all economies."
Based on customs seizures, estimates
of the amount of counterfeit goods traded internationally reach $176
billion, he said, not including the large number of fakes produced and
consumed within economies. An analysis from the economic cooperation
group's 30 member countries show that close to 60 percent of all
seizures originated in China, Thailand, Hong Kong, South Korea and
Malaysia, Dryden noted.
Meanwhile, a U.S. Trade Representative
Office study released in April found that, while there was "increasing
attention from foreign governments, the media and China's central and
local governments, the Silk [Street] Market in Beijing remains possibly
the world's most notorious market for counterfeit goods."
Other
"hot spots" in Beijing continue to be the Chaoyang, Tianyi and Yaxiu
Markets, according to the report, which cited "local protectionism" as
an underlying factor. The survey also found rampant counterfeiting of
apparel, footwear and accessories in other provinces, including Fujian
and Guangdong, which the USTR studied for the first time. The report
cited improvements in intellectual property rights enforcement in some
regions, including Shanghai. U.S. trade officials said in the report
that the fashion industry has cited Beijing's Silk Street Market, a
shopping mall that opened last year, as "perhaps the single biggest
symbol of China's [intellectual property] enforcement problems."
Luxury
and fashion brands have become much more aggressive in recent years in
battling counterfeits. In a recent case, Fendi sued the Sam's Club
division of Wal-Mart Stores Inc. for selling fake Fendi bags and
leather goods in five states. Earlier this month, Sam's Club agreed to
pay the Italian luxury firm a confidential amount to settle the dispute
and dismiss the action, which had charged the retailer with selling
"significant quantities" of counterfeit items valued "in the millions
of dollars."
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