Black Market Billions: How Organized Retail Crime Funds Global Terrorists (Gal Zentner's Library) (17 page)

In the first six months of 2010, recorded cargo theft increased by 5% over the same time period in 2009. Products that were most likely to be stolen included food and drink, pharmaceuticals, consumer
care products, and tobacco, which increased from an average loss of $751,000 in 2009 to $1.6 million in 2010.
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Next to cigarettes and pharmaceuticals, the most frequently boosted product when it comes to cargo theft is auto parts.

But auto theft-related organized retail crime doesn’t always happen on a large-scale level.

Autotheft Gone Rampant

Back in Albuquerque, Commander Harold Prudencio was about to let me in on a little secret. Leaning in close, he said: “If you want to see where most of the ORC happens in New Mexico, look at the stolen car reports for the week, then drive over the border. A lot of the ORC rings steal automobiles and sell the parts in border towns.” It’s hard to believe, but with statistics that say the amount of cargo theft that involved auto parts went from 19 thefts in the first six months of 2009 to 30 during the same time period in 2010, it seemed Prudencio was right. To see for myself, I drove to the border town of Palomas, Mexico. Now, if you are thinking that Palomas is anything like Cabo San Lucas, Acapulco, or Mazatlan, think again. Palomas borders Columbus, New Mexico, the place where Mexican revolutionary general Pancho Villa launched his attack on the U.S. in 1916. It’s also famous for cheap dental procedures, prescription drugs, and its drug wars involving the Juarez Cartel. Ten days before I started my trek south, I read that three people were beheaded. Their heads were found separated from their bodies in the town square by a priest. A couple of days later their bodies were found charred in a car just outside of town. This was definitely not a safe town.

Soon, amid blistering desert sun and yucca plants, my luxury car (full disclosure—it was my mother’s SUV and, no, I wasn’t on the registration or insurance and didn’t have permission to drive it to Mexico, but I did it anyway) and I were sailing across the border between the U.S. and Mexico to test how easy it is to get a stolen car across
the border. I was feeling uneasy. At customs, the nonchalant border agent on the Mexican side took a swig of his Coca-Cola and asked me in Spanish if I had anything to declare. He briefly looked at the car and into my tinted windows, and then let me drive across. He had no questions about my registration or identification. Neither did he check to see whether there was anything in my SUV that I could potentially be smuggling into Mexico. The whole process took less than 45 seconds.

I parked the car on a dusty road just a few feet south of the customs checkpoint. I made sure to park on the main street. I didn’t know which would be worse—if the car was stolen, or if an auto parts smuggler realized I was in Palomas doing undercover investigative work and decided to seek vengeance. I figured my mom’s wrath would be far worse. As I wandered around the town’s main street, I found several auto parts stores selling what looked like used hubcaps, rims, bumpers, mufflers, and tires, cleaned and on display for less than market value. “Most of these come in every couple of days,” said Arturo, the owner of the store, in Spanish, as he pointed to a long row of shiny rims selling for just $10 apiece. (If I wanted to buy a set of four, the price would be $35.) He explained there were more styles in the back if I wanted to see them, or I could wait until Friday and see the new rims come in. A couple doors down from Arturo’s store was another auto parts store. The prices were less expensive, but they sold the same merchandise.

But Arturo’s store wasn’t the only one in Palomas selling stolen auto parts. During my afternoon trip, I counted 11 different storefronts with shiny hubcaps, fenders, and wheels lining the chain-link fence in front of the store. Walking along the dusty streets of Palomas, I was reminded of a story Commander Prudencio told me about Anjun Tahir, a Pakistani native who was arrested in August 2009 for committing bank fraud by way of stolen vehicles. His scheme was simple. According to Prudencio, Tahir would apply for a loan and then purchase a salvaged luxury vehicle. He would steal the exact
same model and then swap the VINs. Then he would drive the stolen model with the swapped VIN to Palomas. Tahir claimed he was sending the money back to his home country (although it was unclear exactly which method he was using—hawalas or stored value cards), but he was brought up on charges of loan fraud. Tahir’s scheme was just another example of how the proceeds of stolen vehicles are laundered through various means (in this case, committing loan fraud).

The FBI estimates that 794,616 motor vehicles were stolen in 2009, a rate of 258.8 vehicles stolen per 100,000 residents. Nationwide, nearly $5.2 billion was lost because of motor vehicle theft.
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ICE estimates that 30% of the cars stolen in the U.S. are taken apart and sold across the border. And what was the most-stolen car in New Mexico? Definitely not my mother’s Lexus, but a 1994 Honda Accord. Good thing I didn’t opt to take my sister’s car instead.

Crossing back into the U.S. was a much different story. The line of cars was long, and it took 45 minutes to move just a few yards. When I finally got to the station, the border patrol agent on the U.S. side inspected the trunk, backseat, and undercarriage in meticulous detail. He asked my name, my age, why I had been in Mexico, and how long I had stayed. He asked me for my passport. When I didn’t produce it (I didn’t even think to bring it!), he took a long look at me and then asked to see my driver’s license, which he ran through the system. Now I was intimidated and hoping that nothing from my teenage past could sneak up and get me into trouble. After I went through the wringer of questions, I asked the agent why the same due diligence wasn’t taken going into Mexico. His reply was deadpan but honest: “That’s Mexico for you. We can’t tell them what to do.”

Curbing Boosters and Fences: What Does and Doesn’t Work

Detective Amaury Guevara from the LAPD makes an effective suggestion for curbing boosters and fences, which is pretty much
shared by everyone in the loss prevention industry: For shippers, forwarders, and carriers to help combat ORC and cargo theft, they must first learn how these groups operate. “I tell all of my men when we are investigating a case to do their homework and learn how to steal,” says Guevara. “Once you know and understand how to bilk the system, you will have more of an understanding of how these criminals think and therefore be five steps ahead of them.”

The difference between the LAPD and most retail employees and private security is the lack of employee training needed to keep them ahead of criminal tactics. This is exemplified by my former colleague the handbag bandit, who explained that the handbags he was trying to sell me came directly from warehouse employees at Barneys. In a warehouse, whether it’s for a luxury retailer or grocery store, staff members are less than diligent about checking all paperwork when freight is picked up and delivered. Giving fictitious pickup times is a common practice for these groups. Members of these gangs typically are careless when it comes to producing official documents, so simple mistakes can signal that something criminal may be happening. For example, photos on fake IDs often are doctored snapshots, or the person pictured might be wearing inappropriate attire, such as a sombrero, which would not be allowed by a government licensing agency. Also, on shipping documents, gangs often include misspelled words—or even revert to Spanish—when making the forgeries, according to a FreightWatch study. Managers can take steps to fortify their supply chain security systems just by taking a few minutes to really examine a document. It’s an easy step that could save a company hundreds of thousands of dollars in losses.

When I asked Barneys for a response regarding their warehouse policies, the head of loss prevention declined with “No comment.”

Although Congress has made a significant effort to introduce boosting laws, these will barely make an impact. HR 6713, the E-fencing Enforcement Act of 2008, was introduced to do the following:

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Toughen the criminal code’s treatment of ORC “by refining certain offenses to capture conduct that is currently being committed by individuals engaged in organized retail crime and requiring the U.S. Sentencing Commission to consider relevant sentencing guideline enhancements.”

• Require physical retail marketplaces, such as flea markets and online auction sites, to review the account of a seller and file a suspicious activity report with the Justice Department when presented with evidence showing that the seller was selling items that were illegally obtained.

• Require high-volume sellers on online auction sites to display a physical address, P.O. box, or private e-mail box registered with a commercial mail-receiving agency to help online buyers get in touch with sellers and help law enforcement agents identify people who may be selling stolen goods online. In addition, the bill requires retailers to halt the sale of online goods if they find evidence that the goods were stolen.
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This law does not protect the consumer from internal employees (employees who work within the store) selling items on sites such as eBay and Amazon, nor shield potential employers from hiring people who have previously been involved in an incident at one or more of a retailer’s stores, nor prevent the creation of “multiple identities” on an auction web site who shop at these stores, nor does it identify relationships between incident victims and employee eyewitnesses.

In general, the proposed law might address weaknesses in federal laws that help facilitate growing ORC rings. This law also calls on retailers to take responsibility for curbing ORC on their web sites by collecting information about their customers who are involved in fencing goods on their web sites. Retailers are then required to give that information to the government so that law enforcement officials can use it to prosecute fences. The problem arises when retailers don’t collect the information or inquire about certain sellers on the site, in the store, or on another auction site and then synthesize that
information to obtain a multichannel overview of loss and fraud. In addition, retailers are noticing that fences and boosters have less fear of getting caught, are engaging more in smash-and-grab activities, and are becoming more violent.
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The E-fencing Enforcement Act of 2008 also doesn’t include the sale of gift cards. What’s more, the only ORC bills that have been passed have been at the local and state level. Therefore, they are inconsistent with other states in respect to how they define ORC and measures that should be taken in prosecuting ORC members and fences.

“ORC criminals are ten steps ahead of law enforcement,” says Detective Guevara. “Identity theft and gift card fraud is just scratching the surface. These criminals spend their days on social networking sites, or sites such as Second Life, and figure out ways to mine information from people’s data that they mindlessly mention online. Banks used to prevent fraud by having real people in place who checked for signatures and saw the person making a $100,000 deposit. Now, with Internet growth, those types of checks and balances are quickly being eclipsed by online banking, fast deposits, and even faster monetary transactions. The worst part is that federal laws aren’t moving fast enough to keep up with changing technology. By the time Congress introduces a new bill and it gets voted on, technology changes, and they have to revise a law that hasn’t even been passed yet. The system is very inefficient and is causing retailers to lose money at a rapid rate.”
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Like most organized groups, boosters and fences often work with people they know and trust—people they consider “family.” But this is not the type of family you would want to have Sunday dinner with. This is an altogether different type of family—and not a very nice one, as we’ll explore next.

6. Family Ties

In 2007, the concept of “family” was the topic of conversation
du jour
. With the economy on the decline and a heated presidential election gaining momentum, everyone from conservative Republicans to pop singers were redefining what “family” meant. For ORC rings that function domestically and internationally, “family” takes on several definitions.

In the Tri-Border Area (TBA) of South America (which includes Paraguay, Brazil, and Argentina), ORC groups have indigenous and nonindigenous roots. “Families,” such as the Morel family based in Paraguay, had ties to international mafias and smuggling rings that have garnered them influence and political power within the country. The Morels functioned similar to the Italian mafia, complete with family members and a boss to whom they reported. They ran one of the largest smuggling rings in South America, smuggling arms, drugs, cars, and stolen car parts.
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Nonindigenous families have existed in areas such as the Tri-Border Area for generations. Many of these crime syndicates come from China, Colombia, Corsica, Japan, Lebanon, Mexico, Nigeria, and Russia.
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The three main ethnic communities within Ciudad del Este (located in Paraguay) are Chinese, South Asian, and Korean. In 2003, Ciudad del Este counted 30,000 people of Chinese descent in its community. However, only 9,000 are legally registered as residents.
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The Lebanese and Arabic ethnic communities also have a strong presence. Portuguese is spoken fluently in this area, although Arabic is spoken with the same frequency as Portuguese (if not more so).

Brazil is home to 1 million Muslims who have citizenship. Of that 1 million, the second-largest concentration of Muslims, after Sao Paulo, is in Foz do Iguacu, about 283 miles from Paraguay. The Muslim population within the city is of Lebanese and Palestinian descent, and they maintain commercial outlets in Ciudad del Este.
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Hezbollah Lebanese merchants are tied to the Shia in both Paraguay and Brazil. But the Hezbollah in the Tri-Border Area is a political movement that engages in terrorism, explains Larry Johnson, a former analyst at the U.S. Central Intelligence Agency and co-owner and chief executive of BERG Associates.
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Tiered multicountry terrorist organization allows them to create and gain leverage against local governments and this leverage benefits them when it comes to negotiating on a larger level. Sticking to their own ethnic group is one way ORC rings can ensure that information doesn’t leave the circle.