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Big Bust


Federal officials announced one of the biggest counterfeit busts in years yesterday, charging 29 people with importing approximately USD $700 million worth of illicit luxury goods in over 950 separate shipments.  Unlike street raids, which target low-level retailers and hardly cause a ripple in the flow of counterfeits to consumers, this coordinated action targeted major suppliers who collaborated to circumvent customs inspections.

Three separate complaints detailed the alleged activities of the smashed smuggling rings, including:

  • Providing false descriptions of merchandise to crooked customs brokers, who act as the conduit between U.S. Customs & Border Protection and importers, in order to conceal counterfeits or avoid paying duties on expensive merchandise (e.g. labeling containers of counterfeits as children's toys or shower curtains);
  • Fraudulently obtaining permits to transfer merchandise between ports of entry and bonded facilities to await clearance -- and then delivering merchandise to their own or customers' warehouses instead;
  • Keeping "dummy" containers of innocuous merchandise (like those toys) ready for customs inspection;
  • Stealing the ID numbers of legitimate importers in order to disguise counterfeits;
  • Falsely avoiding inspection by claiming that merchandise was simply passing through the U.S. and was destined for Canada or Mexico;
  • Bribing Immigration and Customs Enforcement agents (who were working undercover) to file false paperwork or to release goods; and, of course,
  • Money laundering.

The entry points for illicit merchandise spanned the nation:  Newark, NJ; Houston, TX; Long Beach, CA; Staten Island, NY; and New York's John F. Kennedy Airport.  The list of luxury brands involved is even more extensive, including Coach, Chanel, Louis Vuitton, Rolex, Balenciaga, Nike, North Face, Gucci, Fendi, True Religion, Seven for All Mankind, Kate Spade, Timberland, and A Bathing Ape in categories ranging from shoes and sunglasses to watches and handbags.  (Any company left out should count its blessings -- and then worry that its brand is no longer "in.")

As apparent from the WWD photo, New York officials wasted no time in processing the first batch of defendants -- or parading them in front of the waiting press.  And no doubt some of the Homeland Security folks responsible for coordinating the investigations enjoyed a hard-earned beer after wrapping up the sting.  It's all up to the prosecutors and the courts now. 

Still, one wonders:  Why are there so many apparently simple ways of avoiding customs enforcement?  Just how porous are U.S. borders, anyway? 

Perp walk in New York

And, of course, will souvenir-seeking New York tourists who would otherwise buy counterfeits by the bag go home empty-handed this Fourth of July? 

Thanks to my sharply dressed and national security-minded Fordham law student, James Creedon, for forwarding the press release.