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ORGANIZED CRIME

Retailers combat growing number of professional shoplifters

By Joel Groover

A recent shipment of King Kong DVDs flies off the shelf at a Wal-Mart. A table of Juicy Couture handbags all but vanishes from a Nordstrom. Normally, this is a great thing. It means shoppers cracked open their wallets and snapped these hit products right up.

Unfortunately, there can be an unhappier explanation too, one that has become increasingly common: It’s possible that yet another store has just suffered a brazen hit by a ruthless ring of professional shoplifters. These are no ordinary, now-and-then stealers, sticky-fingered schoolkids, kleptomaniacs or movie star/celebrity compulsives. The key word here is “professional.”

“They are so organized they know the rollout schedules better than the store managers,” said Liz Martinez, a security consultant and the author of The Retail Manager’s Guide to Crime & Loss Prevention. “When the new stuff comes in, they’re right in the door and will clean you out on the first day.”

This crime wave now costs U.S. retailers alone somewhere between $15 billion and $34 billion a year, says Joseph LaRocca, vice president of loss prevention for the Washington, D.C.-based National Retail Federation, which conducted a survey on the topic this year among loss-prevention managers. Using major interstates to hit four or five malls in a single day, a few skilled thieves can rack up an astonishing hoard of stolen goods, often funneled to fence operations that sponsor fraud, drug dealing, robberies and other crimes. Some of these mobsters, LaRocca says, even bankroll terrorists.

“We’re talking hundreds of thousands, even millions of dollars,” LaRocca said. “These groups will go into the mall and steal several thousand dollars worth of merchandise from each store they target. They could easily walk away with $10,000 or $20,000 from that one center, then get in their vehicle and go up to the next one.”

The NRF survey found that 81 percent of the respondents’ companies had been victims of organized crime. Some 93 percent say the problem is getting worse. Meanwhile, the FBI’s 2004 Uniform Crime Report, an analysis of statistics culled from 17,000 law enforcement agencies, points to a marked rise in shoplifting. “Most of the crimes within the larceny/theft statistic have decreased since the year 2000,” said Eric Ives, head of the FBI’s Major Theft Unit, Criminal Investigative Division. “Shoplifting has increased 11.7 percent.”

Organized retail crime is so pervasive and insidious it amounts to an all-out assault on the retail industry, writes Read Hayes, co-director of The University of Florida’s Loss Prevention Research Team, in a 59-page study titled Organized Retail Crime: Describing a Major Problem. In addition to running aggressive shoplifting rings and sophisticated credit card and check scams, for example, the crooks hit factories, cargo trucks and distribution centers. Customer-friendly return policies often enable them to take that loot back into stores and swap it for cash — plus sales tax — without providing personal identification or presenting a receipt. “Stolen or tainted goods are even repackaged and sold, along with first-quality goods, back to retailers by dishonest wholesalers,” Hayes wrote in his report.

The phenomenon of organized shoplifting — often called boosting — has plagued malls in one form or another for decades. Over the past several years, however, the crooks have modernized. “There has been a change in the [level of] organization,” said David Levenberg, vice president of security and loss prevention at General Growth Properties and the chairman of ICSC’s Subcommittee on Security. “They have become more formalized and more technologically astute.”

Levenberg once watched a ring hit a Minneapolis mall. The heist was coldly calculated, not unlike something out of a Hollywood thriller. “When we drove into the parking lot, I saw a Chevy Caprice with Illinois license plates,” he recalled. “Out of this car came six people. I pointed and said to my wife, ‘There is something wrong with those folks.’ ”

As his wife shopped, Levenberg leaned against a railing and watched two of the thieves stroll into Eddie Bauer. “All of a sudden they whipped out a big shopping bag. One rolled the clothes from the rack and handed them to the other, who stuffed them into the bag. Within seconds they had this large bag completely full,” Levenberg said. “The amazing thing was that as one of them left the store it was like a choreographed event: She walked out and a guy walked by and took the bag from her going in the other direction.”

Levenberg alerted mall security. “As soon as these guys started noticing the security people, they took their outer shirts off in order to have different-colored shirts on,” he said. “They were very well coordinated.” When the thieves tried to drive off 30 minutes later, police stopped the Caprice and found $6,000 worth of stolen goods.

Organized retail thieves hail from all parts of the globe, Martinez says, but certain boosting rings from Central and South America and Eastern Europe, which sometimes work on commission for U.S.-based racketeers with Middle East origins, are particularly active. The typical ring will use four or more people to hit a store, each with a distinct job, such as distracting store employees, stuffing boxes or bags with merchandise or acting as a lookout or driver. These “independent contractors,” as they are called, may have met for the first time hours earlier at a local motel, Martinez says. Most know little about the larger criminal enterprise. “They are working totally new, and so if they get arrested, they’ve got nothing to say, because they don’t know anybody,” she said.

Small, high-value items that hold their value on the black market are popular targets: razor blades, video games, DVDs, laptops, power tools, footwear and name-brand apparel. This hot merchandise sometimes shows up online. “We’ve actually had to come up with a term that describes this, because it’s so common,” LaRocca said. “We call it ‘e-fencing.’ It’s absolutely a part of why we’re seeing this problem grow.” On the street stolen goods might fetch 30 cents on the dollar, he says, but loot sold through popular auction sites sells for about 70 cents on the dollar.

The rings use clever tools to maximize profit and minimize risk. “Booster bags” and “booster boxes” lined with multiple layers of foil, for example, make anti-theft tags undetectable to the alarm systems at store exits. “Sometimes the boxes have spring-loaded bottoms,” Martinez said. “You can put it down on top of the clothing, and it swallows it up.” The thieves use the Internet to make careful studies of retailers’ loss-prevention policies, and some maintain databases loaded with details about planned targets, says Craig Matsumoto, director of loss-prevention consulting at Protiviti, a global risk-management firm. Crack thieves even hone their skills at places that amount to shoplifting schools, he says.

Not all professional shoplifters should be likened to Sean Connery in a cat suit, however. Wal-Mart once busted a ring that relied more on moxie than cunning. The group’s point woman was captured on camera in the electronics department. “She basically filled up a 30-gallon tub with printer cartridges and then just walked out the front door,” said J.P. Suarez, Wal-Mart’s chief compliance officer. “That’s a couple thousand dollars right there.”

Wal-Mart, long known for its zero-tolerance policy for all shoplifters, recently retooled its loss-prevention strategy to focus harder on organized theft. Teen-age first offenders who steal, say, a single DVD worth less than $25 may now get a pass. “The major problem is when someone comes in and sweeps 500 copies of the brand-new King Kong release,” Suarez said. “That is what these groups try to do.”

Even as they tighten their internal policies, Wal-Mart and other retail giants are banding together to form crime-prevention task forces and share information. They have little choice, says Suarez. “We are all in this together,” he said. “When they hit us, it is only a matter of time before they hit Target or somebody else down the road.”

With its Retail Loss Prevention Intelligence Network Database, announced in June, NRF aims to take the cooperation to a higher level. The idea is to create a massive repository of crime data that will help retailers, law enforcement agencies and eventually shopping center owners to track and prevent organized retail theft. LaRocca says some 30 major chains have signed on to the network.

The problem has exploded because the underworld regards stealing from retailers as a high-profit, low-risk crime, sources say. For police and mall security officers, the reluctance of many retailers to prosecute shoplifters can be maddening. “It’s sickening to me that some of these stores make it so easy for the crooks,” said a security officer at a major Houston mall, who requested anonymity. “There is a huge price — they are sitting ducks.”

Even behemoth retail chains, however, fear costly litigation for false arrest, and they dread spending thousands of dollars to build cases against thieves who might in the end just skip bail or get off with a small fine. Some major chains even refuse to call the police when they spot a shoplifter, says Sgt. Jeff Schwiesow of the Bloomington (Minn.) Police Department, who patrols Mall of America. “That is probably one of the most frustrating parts for us as a police agency,” he said. “We try to educate the stores. We’ll tell them, ‘You need to pick up the phone and call us; we’ll get onto it and make our own case.’ ”

When it comes to effectively prosecuting organized retail theft, the barriers are high. Shoplifting, after all, is a misdemeanor unless prosecutors can prove the thieves stole enough merchandise to cross felony thresholds or transported large caches of loot across state lines. Martinez cites the case of a Berlin, N.J., couple who scammed T.J. Maxx stores up and down the East Coast out of as much as $600,000. The two would steal or buy merchandise, make fake receipts with high prices on them and then use the receipts to return the items for cash, says Sgt. Louis Torres, a detective with the Holmdel (N.J.) Township Police Department. Neither the state nor federal government would take the case, but local police were swayed by T.J. Maxx’s notebook full of evidence. The sentence? Probation.

“We could only go after them for what they did in Monmouth County,” Torres lamented. “It was just a piece of the pie.”

A new federal law could make multijurisdictional felony prosecutions more viable. In January President Bush signed the law creating an FBI task force for retail crime and mandating that a private-sector database be part of its enforcement strategy. “What the database will do, in theory, is help the retailers combine efforts to be able to reach that threshold to make a federal case,” said the FBI’s Ives.

Meanwhile, retailers and mall owners are laying the groundwork for closer collaboration. Traditionally, mall security has focused on making parking lots and other common areas safe for shoppers. But security teams could also be used powerfully against organized thieves, particularly if retail chains can provide mug shots and vehicle descriptions through real-time crime alerts.

“Before [the thieves] do anything they have to come onto the property, onto the parking lot,” Levenberg said, “and as they’re transporting bags of merchandise back to their cars, they’re in the common area, where our security people have the opportunity to observe them.”

Moreover, the nation’s focus on terrorism means mall security officers are on the lookout for groups who appear to be conducting surveillance on a property or engaging in other suspicious behavior. It so happens that these are the same things loss-prevention experts watch for when trying to spot organized retail thieves. ICSC and NRF are developing training materials to help mall security officers thwart these rings, says Levenberg.

If these brazen thieves have proved one thing, after all, it is the power of working together.