Shoplifting, Inc.


U.S. retail thefts are becoming a big moneymaker for organized crime–pulling in as much as $10 billion a year.

Last year, police arrested a Polk County, Florida woman named Blanca Sevilla after she was caught walking out of a grocery store with her purse stuffed with $90 worth of Good Start Soy Baby Formula that she hadn't paid for.

A classic case of petty shoplifting? Not exactly. After interviewing Sevilla and another baby formula booster named Jessie Lopez as they sat in the county jail, authorities learned that the thieves were part of a 21-member ring of shoplifters headed by Eli Nimrod Castillo-Almendarez, who was arrested in March 2009.

The ring, based in Georgia, was allegedly paid between $100 to $300 a day to methodically steal cans of baby formula in six Florida counties for eventual sale on the black market in North Carolina. The ring's take in one year totaled $2.5 million, police said, adding that over the ring's seven-year period of activity, it could have netted $17.5 million.

It wasn't the first time that Polk County was victimized by what law enforcement and retail industry experts call “Organized Retail Crime” (ORC). In 2008, 18 people were arrested and charged with the theft of $100 million in cosmetic products over the span of five years.

ORC may not fit most people's image of organized crime. And that may be one reason why it hasn't received the attention it deserves. Such large-scale theft is often hard to detect from the thousands of shoplifting incidents reported around the country each year, but it “is an extremely sophisticated, coordinated crime, ” Frank Muscato, the ORC investigations supervisor at Walgreens, told Congress during a hearing on the subject in 2008. “It is not opportunistic theft where merchandise like food, clothing, sundries or music are stolen for personal use.”

No Federal Definition

Another reason why ORC often falls below the radar screen is that federal law provides no uniform definition for this type of crime, making it difficult to track. While the size and scope of ORC is thus hard to pin down, in a paper presented by University of Florida criminologists at the 2007 American Society of Criminology conference, ORC was calculated to be a $10 billion annual problem (other estimates have pegged it to as high as $30 billion a year), resulting in millions of dollars of losses to states in sales tax revenue. It's certainly an issue that is of concern to retailers nationwide. According to the National Retail Foundation's most recent annual survey , 92 percent of respondents in 2009 reported that their companies had been a victim of ORC incidents in the past 12 months.

According to Walgreen's Muscato, ORC has grown in the past two decades. “ORC is a fairly new type of crime,” he told The Crime Report. “It started taking hold in the early 1990s. That doesn't mean that people weren't stealing to resell before, but they have become organized. As the years went on, ORC has gotten bigger and bigger and bigger. No one was recognizing it, and now it is getting more recognition–that it is a specific crime and that people leave their house in the morning to do this.”

A 2009 U.S. Immigration and Customs Enforcement bulletin, for example, notes that “ORC rings are very sophisticated, compartmentalized and operate similar to criminal organizations involved in drug trafficking or human smuggling. Furthermore, transnational criminal syndicates such as Eastern European street gangs and organized crime elements have become increasingly involved, and utilize traditional money laundering techniques to conceal their profits.”

Retailers are slowly awakening to the threat. Five years ago, Walmart, Walgreens and Target had ORC teams,” Muscato says. “Today, every chain retailer has an ORC team.”

Law enforcement and industry reps say that it can be difficult to pursue the crime because current laws don't address some of the nuances related to it. For example, law enforcement can currently pursue these cases under the Racketeer Influenced and Corrupt Organizations Act (RICO)–both Polk County cases were prosecuted under the statute–but the standards can be difficult to meet in some ORC cases. “When a criminal goes out and steals [as part of a boosting crew], they don't always meet the felony threshold per theft incident, and RICO is looking for that felony threshold,” says Millie Kresevich, a senior loss prevention manager at Luxottica Retail, a luxury and sport eyewear company.

And although ORC can also be pursued under state or local theft or burglary laws, these crimes are often multi-jurisdictional. “The (kind of) challenge we run into, for example, is a case where they're stealing from San Francisco or Los Angeles and then selling it over the internet,” says Joe LaRocca of the National Retail Foundation (NRF). “No one agency has jurisdiction over the internet, and in those cases, law enforcement can be perplexed about where to file the case and who to go after: the group in California that's stealing, or the seller in another state that's fencing the goods?”

Adds LaRocca: “there's a federal nexus that needs to be involved, but it's up to local and statewide agencies to go after these problems, and that's where the disconnect begins.”

Four Bills in Congress

Four bills aimed at addressing these shortcomings are currently wending their way through Congress, including one introduced late last year by Rep. Lamar Smith (R-Texas). These bills would specifically make ORC a federal offense under RICO, and create stiffer penalties for the crime. The bills would also allow the victims to pursue cases against the offenders, as well as the online marketplaces that are knowingly involved in the resale of stolen goods. (Some online retailers have expressed concerns about how these laws would be enforced.)

“(These bills) would start to get people on the same page in terms of calling this out as a serious problem, and provide some bite with the bark,” says LaRocca, who is lobbying for the bills. “(They will) hold people who are responsible for these crimes accountable.”

Ohio is one of 18 states with statutes that explicitly address ORC. A law that went into effect last April allows Ohio police to aggregate a number of misdemeanor theft cases to illustrate that an individual is part of a coordinated activity. “We saw a decline in ORC immediately after the bill was passed in Ohio,” Luxottica Retail's Kresevich says. “Right now, our biggest challenge is to educate law enforcement on the bill and educate prosecutors on why using this statute is better than the previous laws.”

Pending the creation of new state and federal statutes to tackle the issue, retailers and law enforcement are increasingly creating formal partnerships to address ORC. Across the country–from San Diego to Albuquerque to Philadelphia–task forces comprised of local police and retailers meet regularly to stay abreast of ORC trends.

And last June, the U.S. Immigration and Customs Enforcement agency launched a pilot program to work with retailers in four cities to focus on ORC cases involving immigrants, or cases where products and money are being diverted outside of U.S. borders (some recent cases have involved boosting crews of undocumented immigrants, and there have also been some allegations that proceeds have funded terrorism efforts, such as a Texas case where money made by a boosting ring was traced to Hamas and Hezbollah).

Additionally, the NRF and the Retail Industry Leaders Association have developed a database–the Law Enforcement Retail Partnership Network –to track and report ORC. In 2009, retailers provided information about nearly 100,000 retail crime incidents via the system, and in December, it was connected to a FBI database to assist federal law enforcement in investigating and tracking these cases.

“Organized theft rings steal billions of dollars of merchandise every year, which victimizes retailers, endangers the safety of retail employees, and raises the price of consumer goods,” says the NRF's LaRocca. “Banding together with law enforcement sends a clear message to criminals: You will be stopped, caught and prosecuted for your actions.”

Bernice Yeung is a San Francisco-based freelance journalist. She was a 2010 John Jay CMCJ/H.F. Guggenheim Fellow.

Photo Via Retailer Daily

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