Congressional Action Needed to Curb Growing
Multi-Billion-Dollar Crime Problem

Organized Retail Crime is already a large national problem that continues to grow rapidly. Organized criminal rings are stealing billions of dollars a year, according to the FBI. Everyone shoulders this enormous price tag—consumers who unwittingly buy adulterated goods, communities that lose sales tax revenue, and retailers victimized by thieves.

Federal legislation is needed to curtail professional, organized thieves who are reselling large volumes of stolen goods at flea markets, through the black market and over the Internet.

Brazen retail thieves are increasingly using the Internet to sell stolen goods. Today, gangs of sophisticated, full-time thieves operate around the country. They steal everything from over-the-counter (OTC) medications and infant formula to DVDs and jewelry. Many of these criminals are beginning to sell a high percentage of their stolen merchandise on the Internet, often through online auction sites.

Case study: Earlier this year, authorities broke up an enormous organized crime retail ring in Polk County, Florida. What began as a single shoplifting investigation turned up an organized enterprise that stole up to $100 million in medicine, health and beauty goods. Operating for at least five years, the ringleaders sold products out of two warehouses, three flea markets and two Web sites.

Retail criminals don’t care about jeopardizing the health and safety of consumers. Professional crime rings have resold health products like infant formula or OTC medicine, often after altering expiration dates or mishandling them. Unsuspecting consumers face “potential health and safety risks from legitimate products which may have been mishandled by the criminal enterprises who stole them for resale to consumers,” Chris Swecker, assistant director of the FBI’s Criminal Investigative Division, told a House committee in 2005. “In many cases, stolen infant formula, pharmaceuticals, and other consumables are not stored under proper conditions. When these items are reintroduced into the retail market, they can pose a significant health hazard to the consumer.”

Case study: In a Texas case, agents seized $1 million of stolen baby formula that was being stored in garages with rodents running across storage facilities with no temperature controls.

Theft rings use the illicit proceeds to finance violent criminal activities. The Texas crime ring, for example, hatched a plot behind bars to assassinate a police detective and a special investigator for U.S. Immigration and Customs Enforcement. It failed. Earlier they plotted to murder the federal prosecutor on the case. It, too, was foiled. In another case, a female member of an international street gang told investigators about giving the gang leaders the proceeds from theft and robbery sprees. Later, she was killed by two gang members.

By selling stolen goods on the Internet, retail criminals evade local authorities.Thieves have migrated to the Internet because it offers anonymous access to huge numbers of unwitting buyers. Criminals reap a profit by evading antiquated shoplifting laws, written in an era of pawn shops and flea markets. These laws, which are not required for Internet auctions, require sellers to identify themselves and the serial numbers of the goods sold.

Organized Retail Crime requires federal attention. The rampant growth of Organized Retail Crime is outpacing state and local authorities’ ability to combat it. Criminals increasingly sell stolen goods online and transport stolen merchandise across state lines to avoid tougher criminal penalties. State and local law enforcement cannot always chase criminals across state lines and onto the Internet—and criminals know it.

In 34 states, the felony theft level is over $500; 17 of those states have a felony theft level of $1,000 or more. Taking advantage of current law, thieves move from store to store, stealing below the felony threshold at each store, thus risking little more than a misdemeanor charge and small fine. Even if they are caught, they usually see limited jail time or probation and are soon free to steal again.

A federal law with teeth will fight the problem and protect consumers. A federal law would define Organized Retail Crime as a federal offense, making it harder for criminals to hide behind state laws and the Internet. Federal legislation will require online auction sites to collect additional data from high volume sellers, which by itself will deter the sale of stolen goods online.

If enacted, this legislation would:

• Deter Organized Retail Crime by giving law enforcement greater authority to pursue criminals and make it more difficult to resell stolen goods on the Internet.
• Apply traditional models of stolen property requirements to high-volume sellers on the Internet.
• Prevent criminals from reaping a huge profit from their crimes to fund other criminal enterprises.
• Protect the privacy of low-volume sellers by focusing identification requirements on high-volume commercial sellers.
• Protect unsuspecting consumers by reducing the sale of stolen property online and preventing health hazards.

When Organized Retail Crime is forced out of the marketplace, everyone will benefit—consumers, legitimate on-line sellers, and retailers.