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 user 2005-03-05 at 10:41:00 am Views: 41
  • #10680

    Sniffing out fakes
    Firms that specialize in counterfeit detection are in

    Last year, Peter
    Capolino, president of Mitchell & Ness Nostalgia Co., was desperate to shut
    down the street vendors and Internet sites selling counterfeit versions of his
    vintage sports jerseys, which can sell for up to $300. The Philadelphia firm’s
    sales had been dropping, in part because lower-priced fake versions of its
    collectible shirts–which look like ones worn by teams such as the Lakers and
    the Red Sox–were flooding the market. With police busy with homicide and
    narcotic investigations, Capolino turned to Stuart Drobny, a private

    Drobny, head of Norristown, Pa.-based Stumar
    Investigations, and his team immediately hit the streets, weeding through flea
    market stalls and hunting down street vendors. A year later, Drobny has raided
    more than 20 sellers in four states, served dozens of cease-and-desist letters,
    and confiscated hundreds of the bogus jerseys. This doesn’t come cheap. Mitchell
    & Ness spends about $400,000 a year pursuing counterfeiters. “I should be
    spending my time and money on sales and advertising instead,” says Capolino.
    “It’s really frustrating.”

    With the surge in ersatz merchandise pouring in from Asia,
    business is booming for private investigators, like Drobny, who specialize in
    counterfeits. A little over a decade ago, counterfeiters focused on copying
    designer footwear, handbags, and jewelry, or CD s, videos, and DVD s. But
    today’s counterfeiting trade has no limits: Everything from soaps and printer
    toner to airplane parts and medicine has an evil twin. And the copycats have
    moved beyond peddling their bogus wares via street vendors and flea markets.
    Fakes are even finding their way onto the shelves of major retailers and
    websites like eBay.

    Pricey imports. Indeed, from
    October 2003 to March 2004, U.S. customs officials seized $64 million worth of
    counterfeit goods, up from an estimated $38 million during the same period the
    previous year. The FBI estimates that U.S. businesses lose up to $250 billion a
    year from the sham products. “If you are a brand owner, you can’t get anywhere
    without hiring private investigators or having in-house counterfeit
    investigators,” says Dan Chow, a law professor at Ohio State University and an
    expert in Chinese counterfeiting.

    While most consumers consider buying a fake Louis Vuitton
    bag a victimless crime, companies argue the opposite. Yes, counterfeiting robs
    the company of revenue and jeopardizes brand reputation. But it also can be
    dangerous or even deadly–think counterfeit medicine, auto parts, and food.

    Most Fortune 500 companies say
    they spend between $2 million and $4 million per year to combat counterfeiting,
    according to the International AntiCounterfeiting Coalition in Washington, D.C.
    In 2002, CEO s of several major companies, including Unilever, Gillette,
    Heineken, and Procter & Gamble, formed a coalition to devise strategies to
    address the threats to their brands, including pressing for stronger penalties
    for counterfeiters and tougher law enforcement.

    The problem has worsened in recent years. Forget the old
    cottage-industry nature of counterfeiting. Many outfits now have mass production
    capability and have wormed their way into legitimate distribution channels.
    Technological advances such as scanners, high-speed CD and DVD burners, and
    digital embroidery machines have made some phony products virtually
    indistinguishable from the real thing. “Many companies feel that they are not
    winning the war against counterfeiting,” says Timothy Trainer, president of the
    anticounterfeiting coalition. Mitchell & Ness is fighting back even harder.
    It recently added holograms and serial numbers to its labels to differentiate

    Web tricks. At the same time, the
    popularity of online auction and retail sites on the Internet has made it easier
    for counterfeiters to unload their fakes on an unsuspecting public. The
    venerable jeweler Tiffany, for example, says it recently found that more than 70
    percent of the jewelry sold on eBay under the Tiffany name was phony. The firm
    is suing eBay, claiming that the online auctioneer has aided and benefited from
    trademark violations by allowing those items to be sold. Officials at eBay argue
    that it has a program in place that enables companies to police the auction site
    for counterfeit goods, but Tiffany says eBay bears that responsibility.

    Some companies do have their own internal investigation
    units, but that can be prohibitively expensive. That’s why many businesses turn
    to the 20 or so private firms, like Drobny’s, or larger firms like Kroll or
    Pinkerton Consulting & Investigations that operate worldwide, to track down
    the bogus merchandise. Some firms also monitor Internet activity, such as
    Virginia-based Cyveillance and GenuOne in Boston. “We look for sites selling
    inappropriate packaging and pricing, as well as bulk sales by unauthorized
    retailers,” says Todd Bransford, vice president of marketing for Cyveillance.
    Capolino, for example, pays GenuOne $5,000 a month to help catch sales of phony
    Mitchell & Ness products on eBay, where a quarterback jersey with a fake
    label can sell for $2,500.

    Most gumshoes have law enforcement backgrounds. But Drobny
    started out working for a private investigator. After he received his law
    degree, the southern New Jersey native opened up his own sleuthing shop 24 years
    ago, and he began specializing in counterfeits after Nike asked him to help
    track down fake sneakers in 1988. His firm now has 40 full-time employees, and
    his client list reads like a Who’s Who of luxury
    retailers: Kate Spade, Louis Vuitton, and Tiffany, to name a few.

    Drobny usually starts his hunt by gathering tips on the
    whereabouts of counterfeit vendors and wholesalers. The next step: purchasing
    some of the spurious items, which Drobny then sends back to the client to
    examine and verify that they are indeed fakes. With evidence in hand, the
    trademark owner, by law, can demand that the counterfeiters cease and desist–in
    the form of a letter that investigators like Drobny often serve.

    In some cases, investigators can persuade the seller to
    voluntarily fork over the imitated goods and may even use the vendor or store
    owner as an informant to get to the bigger fish. “You can’t stop with the
    vendors,” says Drobny. “You use them to get to the distributors and eventually
    to shut down the manufacturer.”

    Private investigators have no legal authority, but if a
    judge grants permission, the investigator–along with a law enforcement
    official–can raid the counterfeit seller’s place of business and confiscate
    evidence and financial records. If the investigation ultimately leads to a civil
    or criminal trial, the investigator typically acts as an expert witness.

    Another ploy: The detective firms will play the
    counterfeiters’ game, setting up a pretext storefront to buy the phony products.
    “We keep undercover businesses going all the time,” says investigator Michael
    Kessler of New York, whose clients include Sara Lee Household and Body Care USA.
    “It’s a way to monitor the marketplace.”

    Tracking down counterfeiters is similar to pursuing drug
    dealers, says Howard Dozier, an investigator in North Carolina. “You have an
    assumed name and identification and try to get to the factories through the
    wholesaler,” says Dozier, who has worked in law enforcement for 25 years,
    focusing on criminal intelligence and organized crime investigations. “It’s just
    like when I worked undercover in vice.”