Crime Rings Hit More Retailers

MICHAEL GARRY

WASHINGTON — More retailers from all walks of retailing say they are being victimized by organized crime rings that target high-demand goods such as Similac infant formula and Prilosec antacid, according to the latest analysis of this issue by the National Retail Federation here.

NRF's 2008 Organized Retail Crime report, released last week, said that 85% of retail companies in a recent survey were a victim of organized retail crime (ORC) in the past 12 months, up from 79% in 2007. The survey elicited responses from 114 senior loss prevention executives representing supermarkets, drug stores, mass merchants, home improvement chains, apparel stores, department stores and specialty outlets.

“This is a concern, because it shows the problem is becoming more widespread and hitting a more diverse group of retailers,” said Joseph LaRocca, NRF's vice president of loss prevention, in a conference call last week with reporters. According to the Federal Bureau of Investigation, ORC accounts for as much as $30 billion in retail losses annually; retailers believe that half of external theft is caused by organized crime groups, NRF said.

LaRocca noted that NRF does not regard the difficult economy to be a “driving force” behind the growth in ORC.

The report also said that 66% of respondents have seen an increase in ORC over the past 12 months, a little less than the 71% who said that last year. In addition, 68% said they have identified or recovered stolen merchandise and/or gift cards from a fence location, up from 61% last year.

Organized retail crime rings sell stolen retail merchandise in a variety of ways, such as at flea markets and swap meets and to pawn shops and third-party liquidators, sometimes trying to get a refund from the stores where the goods were stolen. Much of the loot is also sold online through third-party auction sites that allow anonymity and a greater return. The NRF report revealed that 63% of retail respondents experienced at increase in “e-fencing” activity in the past 12 months.

LaRocca attributed the growth of ORC to “the financial rewards being so great vs. the [relatively low] risk of getting caught.” First-time offenders may only be prosecuted for a misdemeanor, “so the penalties are minimal compared with drug offenses or violent felonies,” he said.

ORC groups have been observed starting in one area and then “branching off like terror cells and starting franchises elsewhere,” said LaRocca. Crackdowns on ORC in urban areas are pushing “boosters” — individuals who do the shoplifting in stores — into suburban areas. “Smaller communities with upscale malls and brand-name goods are being targeted,” he said.

Retailers have been trying to counter the growth of ORC in a number of ways, such as deploying more surveillance cameras in stores and forming special teams to conduct investigations and work with law enforcement, LaRocca said. The NRF survey found the average retailer spends about $230,000 per year on labor costs associated with combating ORC. More than half (54%) of loss prevention executives surveyed said their top management understands the seriousness of the issue.

LaRocca cited a large increase in the number of incidents reported to LERPnet (Law Enforcement Retail Partnership Network), a year-old national database that enables retailers to share information on retail crime with each other and with law enforcement. Sixty retailers are participating in LERPnet, including such food retailers as Kroger, Safeway, Wal-Mart, Supervalu, Publix and Meijer.

NRF has also established an Investigator's Network that enables retail loss prevention personnel to work with law enforcement. NRF's Joint Organized Retail Crime Task Force educates the industry and law enforcement on ORC trends.

“We're trying to help law enforcement distinguish between Johnny who steals occasionally and sophisticated gangs who are repeat offenders and can be violent,” said LaRocca. Some ORC activity has been linked to terrorist groups in the Middle East, he added.

NRF pointed out some large ORC arrests that have occurred this year. In Florida, law enforcement officials uncovered a theft ring responsible for between $60 million and $100 million in stolen goods, mostly health, beauty and cosmetic products and over-the-counter medicines.

In New Jersey, FBI and other law enforcement officials announced indictments against one of the Gambino crime family's highest-ranking members and 22 other members for crimes that included “ticket-switching” — putting lower-value bar codes on expensive products. One of the suspects had obtained employment at a retailer in order to create false bar-code labels and use fraudulent credit cards, said NRF.

A number of states have passed or proposed legislation making ORC a felony. “This shows lawmakers understand that this is a major problem that needs to be addressed,” he said. States that passed laws in 2007 include Arizona, Delaware, Florida, Louisiana, Nevada, North Carolina, Oregon, Texas and Utah.

LaRocca said he is not discouraged that retailer and law enforcement efforts have not yet reversed the growth of ORC. “We're seeing some very large cases emerge, so we've started a good trend,” he said.