Black Market Billions: How Organized Retail Crime Funds Global Terrorists (Gal Zentner's Library) (3 page)

Part I: The Piracy Economy

Organized Retail Crime Goes Global
9

When a Deal Isn’t a Deal
31

The Cost to the Stores
53

1. Organized Retail Crime Goes Global

A hush falls over the room as a man in a designer suit jacket walks to the podium. The man is tall and well spoken and is comfortable addressing an audience of 30,000. Methodically pointing to charts projected onto a screen using high-tech equipment, he reviews how much this organization spent within the last year, its new financial targets, how it can make more money in the upcoming year, and, most importantly, how the American army fighting across the border in Afghanistan is no match for his organization. In the wings, spokespeople for the organization take notes furiously, ready to communicate the main points of the meeting to the rest of the world.
¹

This man isn’t the chief executive of a Fortune 500 company. He is Baitullah Mehsud, head of Pakistan’s Tehreek-e-Taliban terrorist group.
²
(Mehsud was subsequently killed in August of 2009 along the Afghan border in U.S. air strikes.)

As it turns out, consumers and businesses weren’t the only ones suffering from the repercussions of the global recession. Terrorist organizations such as al Qaeda that once brought in close to $30 million a year before the 9/11 attacks felt the financial pinch just like legitimate businesses around the world. Abd al Hamid Al Mujil, known as al Qaeda’s “million dollar man,”
³
at one point turned to charitable donations to raise money for the terrorist group. When the U.S. government realized in 2006 that he was using his position as the executive director of the eastern province branch of the International Islamic Relief Organization (IIRO) to funnel money back to al Qaeda, he was removed from his post, costing the IIRO millions of dollars
in potential donations. With its once large bank account dwindling, al Qaeda decided to decentralize. Instead of having one major unit functioning in the Afghanistan and Pakistan regions, al Qaeda suddenly had affiliates all over the world that shared the same ideals but planned and executed their own terrorist attacks.

Professor Bill Martel of Tufts University’s The Fletcher School of Law and Diplomacy told me, “Pre-9/11, the conventional wisdom was that groups like al Qaeda were tightly organized with clear lines of control from its leadership. What’s happening now is that al Qaeda has lost central control [of] its power as well as its financing. Once the U.S. began to attack al Qaeda, it became a very dynamic organization with a constantly evolving set of networks all connected to the core group. These subgroups are all highly adaptable as well and take it upon themselves to recruit from within—convincing their own people that supporting their group is one step closer to God while using the Internet for self recruitment, planning and financing.”
⁴

Martell notes that al Qaeda wasn’t the only organization facing a funds shortage once these groups started to come under greater scrutiny and attack. After all, they declared war on the U.S. and attacked it, and in response the U.S. attacked al Qaeda and its financial means of support. Hezbollah and the Taliban also became decentralized, creating an opportunity for subgroups to crop up in unsuspecting areas such as Latin America, Africa, South and Southeast Asia, and even the U.S. These affiliated groups supported the main organization and indoctrinated extremist ideals shared by their members worldwide. However, they were on their own when it came to getting money to fund attacks. They raised funds by increasing the cocaine trade, carrying out kidnappings, and running scams that bilked donors out of money meant for charitable organizations. Transferring funds via
hawalas
⁵
was commonplace and in fact was a standard way of accumulating money.

What wasn’t typical was that the Lashkar-e-Taiba (LeT), al Shabaab, and South American cells of Hezbollah
⁶
were increasingly
relying on gangs, cartels, and international sympathizers to build their bank accounts. One of the main sources of money was organized retail crime (ORC).

Why Is ORC Such a Threat?

Once known to the retail community as the minor crime of shoplifting, in the past decade ORC has grown into an estimated $38 billion a year black market operation.
⁷
U.S. government agencies such as Immigration and Customs Enforcement (ICE), the Federal Bureau of Investigation (FBI), and the Department of Homeland Security (DHS) have all tracked ORC synchronized teams that steal from our economy and use the money to attack us and support international terrorist groups. These groups include Partiya Karkeren Kurdistan (PKK) in Iraq (led by Saddam Hussein’s son, Uday, until his death), the FARC (Revolutionary Armed Forces of Colombia), the IRA in Ireland, as well as Hezbollah, Hamas, and Lashkar-e-Taiba (Pakistan/India).
⁸

These terrorist organizations are hell-bent on destroying not only the lives of the people within their own countries who don’t stand with them (or their mission) but also the American economy, its people, and its way of life. While it is difficult for government organizations to track exactly how much money is actually being made, the National Retail Federation (NRF), ICE and FBI estimates the proceeds from stolen goods equal $600 million dollars annually and have been funding everything from weapons, to fake visas and passports, to paramilitary equipment.
⁹
ORC is one of the easiest and least detectable ways for criminals to make money quickly and send it to terrorist groups overseas. What’s even more disturbing is that these terrorist organizations are using grassroots tactics to recruit people into ORC rings. According to Joe LaRocca, spokesperson for the NRF’s ORC initiative, the rise in ORC, especially within the past two years, has
had to do with the economy. Consumers were quite literally “dying for a deal” by purchasing items that were stolen by crime rings with links to terrorist organizations overseas—they just didn’t realize it.

“The economy played a big role in the organized retail crime and the resale market,” says LaRocca. “Consumers who were cashed-strapped and lost their jobs looked for alternative places to purchase everyday items at an affordable cost. When places like Walmart, Target, and Walgreens became too expensive for them, the only option was to tap into resale markets, flea markets, pawn shops, and online web sites. These consumers forfeited their comfort and trust with retailers they knew, and chose those [retailers] who had what they were looking for at lower prices in order to save some money. And when the economy is tight like that, consumers made those tough choices. Suddenly, shopping at a desolate warehouse or purchasing a clearly fake or stolen purse at a handbag party thrown by a friend seemed like a good idea, regardless of who or what the ripple effect may be [impacting].”
¹⁰

LaRocca sat down with me one humid afternoon at the Atlanta National Retail Foundation conference on loss prevention. He explained how domestic ORC groups were fully aware of American consumers’ spending vulnerabilities and took advantage of them. “People were forced to do more with less, and these guys were smart enough to make money off of it,” he said. LaRocca also pointed out that with the economic downsizing that was taking place, retailers had to cut back, creating an endless cycle of understaffed stores that aided criminal acts.

Another reason why these crimes are so attractive to ORC rings is that they are not looked upon as federal crimes. Retail theft falls into the category of “property theft” and takes on a lesser charge than an offense that would fall within the jurisdiction of the major crimes division. Despite ORC rings stealing upwards of $1 million in a couple of months, they are still viewed as petty thefts in some instances.

One ORC ring, which was busted in Polk County, Florida in 2008, involved an orchestrated group who stole $100 million in over-the-counter (OTC) drugs, beauty products, and baby formula, reported Casey Chroust, executive vice president of retail operations at the Retail Industry Leaders Association (RILA).
¹¹
This group was a well-organized crime ring, masterminded by someone who knew how the system worked. They worked as a team, blocking cameras and using boosters (someone who steals items from a store) to steal the merchandise, making handsome profits.

Up the coast in New York City, another ORC leader established and oversaw a ring of about 75 to 100 people. Jerry Biggs, director of the organized retail crime division at Walgreens, called this man “Samuel Elias.” Elias’ ring stole upwards of $2.5 million in merchandise from Walgreens per hit and used it to fund everything from his gambling addiction to overseas accounts based in Jordan.

Both of these rings are similar in how they organized and executed and profited from ORC. However, neither was prosecuted under federal statutes despite engaging in anti-American acts for years, including sending money overseas to support terrorist organizations.

These are just small examples of a larger issue that spans three continents and involves people and cultures from around the world, including the U.S.

Although some involved in ORC are doing it for personal financial gain, most are motivated by the idea of
jihad
and having a hand (small or large) in plotting the demise of one of the world’s greatest superpowers—the United States of America.

The Promised Land: Money Talks

Chris from the Congo
¹²
arrived in New York only to get caught up in the world of counterfeit handbag sales. He told me his story on
a July day in 2010 as we sat on a stoop on Lespinard Street, just steps from Chinatown. Let me assure you that although Chris is involved in retail crime, he is not part of any terrorist cell.

Chris hails from the Congo by way of Paris. Although he is only 28, he already has a strong business sense. He looks like a normal, well-educated member of high society. When I met up with him, his shorts were tailored and pressed. His basic white T-shirt was crisp and fit perfectly and was tucked into his shorts. Chris even sported a pair of Prada driving moccasins, often seen on the feet of Upper East Side chief executives, not downtown on Chinatown street merchants. In his right ear was a lattice-patterned earring made of diamonds.

Chris comes from a professional family. His sister works in financial services at a bank in London. His brother is in medical school. Following in his sister’s footsteps, Chris came to the U.S. to get a business degree from Pace University in New York City. His family believes this is all he is doing. But the truth is that upon arriving to the city, a contact told him to get in touch with a man from Somalia who ran a couple of businesses and could potentially give him a job. “I didn’t come to New York
not
to make money,” said Chris. “I had everything in Paris—free healthcare, free social security and benefits. The only reason you would leave that is if you wanted to make real money, and you can do that here.”

When Chris arrived in New York, he hooked up with a warehouse owner, from whom he would purchase handbags for $20. He then sold each bag for $60, making $40 in profit per bag. When he first started out, he was moving 30 to 40 bags a day on average. Now, he sells approximately 100 to 150 bags a day at $60 per bag and keeps almost all of the profits. Let me reiterate at this point that Chris keeps the money he earns and is not involved with terrorist rings, but he is very familiar with those who do send their earnings to such groups.

Chris and I made our way to a nearby Starbucks, where he paid for the two drinks on his business debit card from JP Morgan Chase. He explained that he also runs another clothing business, where he
sells pants, shoes, and shorts online. “If I am not making money on my web site, then I want to be making money doing this. If I am not working here, I am learning. I have to constantly be improving my situation.”

Just as he said this, Chris got a phone call on his cell. It was a colleague of his who also sells handbags in the same Chinatown area, telling him the cops are near. “Come on; we have to go,” he said as he gathered his bags, took a last gulp of coffee, and headed out the door. Chris and I ran to the street corner to gather the rest of his merchandise before it could be confiscated by the patrolling NYPD. Chris is constantly moving around; he doesn’t have a stand (like some handbag sellers) for fear that he will get arrested. In fact, most of his colleagues operate their businesses like this.

He said some people bring in so much money that they feel they have no choice but to stay in this industry. Chris explained, “When I was put in touch with the warehouse owner, I didn’t realize how much money people could make doing this. While I brought in about $10,000 a month, enough to pay for my living expenses and tuition, some people bring in close to fifty or sixty thousand dollars a week, specifically those who have sellers working under them. And you better believe they are the ones sending the money home through the mosques and family members via hawalas. Their American dollars are supporting their economies and political groups back home.”

Most of Chris’s colleagues who come from Somalia and send money back to their homeland spend their days voicing their disdain toward the U.S. Many of the gripes center around the U.S.’s perpetuation of capitalism and the “in your face” display of money by Americans, in addition to how they spend it. According to Chris, many of his colleagues have a love/hate relationship with that aspect of the U.S. Likewise, the racial undertones that make it more difficult for immigrants to establish themselves as business owners or to get jobs is a topic of heated conversation. “The United States isn’t the easiest place for immigrants if they want to establish themselves,” said
Chris. “I think all of the rules and regulations, mixed in with overt racism and a general disdain for Muslims, perpetuates a feeling that we not only need to make and take money from this country, but we need to use it to help our home countries. It’s the right thing to do.”