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Phony Business

Shady Business: Police say the selling of cheaply priced faux brand-name items has become a common practice at area flea markets. They make arrests following leads from private investigators hired by corporate giants to protect their good name. Police round up flea-market sellers of counterfeit cool stuff, because manufacturers are losing $200 billion a year By Michelle Ku IT'S EARLY MORNING, and the sun is just rising. Most people are still in bed on a Saturday morning in summer, but Mary Ellen Rivas and her teenage son and daughter are hard at work setting up their booth at the De Anza Flea Market, where they sell stickers, earrings and gift items. "I like this [market] because it's once a month," Rivas says of the Cupertino outdoor market, located on the campus of De Anza College. "These are serious customers here. I try to carry quality merchandise, and here customers appreciate it." But Rivas didn't always carry quality merchandise. Four years ago, she was caught selling counterfeit goods. Among the items she carried were faux Nike, Adidas and Warner Bros. shirts, jackets, hats and shoes--called "knockoffs"--all at unbelievably low prices. "I used to carry knockoffs, but I changed my merchandise," Rivas says. "I got caught once, and once was enough." Each week, thousands of fakes are still being sold at swap meets and flea markets throughout Santa Clara County and the country. At any given market, one out of every 10 items is probably a knockoff, said William Wolfe, a detective with the San Jose Police Department. And counterfeiting is on the rise. In 1982, the International Trade Commission estimated that knockoffs had a $5.5 billion effect on the American economy--in terms of lost profits and jobs for the original manufacturers and expenses incurred by law enforcement efforts aimed at catching the counterfeiters. The number grew to $66 billion in 1998 and has more than doubled to today's estimated $200 billion loss. Sgt. Luther Pugh, a community services officer with the Santa Clara County Sheriff's Department, calls counterfeiting the most common crime at flea markets. (In earlier times, it was more common to find people hocking stolen merchandise, he says.) In June, officers from the Sheriff's Department visited the De Anza market and arrested six vendors. Officers confiscated a truckload of goods, arrested and cited the suspects, and released them at the scene. "The vendors make a good deal of money selling these things," Pugh says. "One of the vendors had over 600 items of clothing that were counterfeit. Just while we were observing them, they were doing a pretty brisk business. And they travel from flea market to flea market." Identifying fakes often takes a trained eye, something local police officers don't have. That's why corporations like Nike hire private investigators to police flea markets around the country and here in Silicon Valley. SOME FAKES are easy to spot. For instance, it doesn't take much to figure out that a "Sieko" watch is not an authentic Seiko. A smart shopper might also suspect that a Nike T-shirt with a Hanes tag on the collar probably wasn't crafted by Nike-certified laborers. And a $20 Rolex can't be the real thing. Kris Buckner, an investigator with Southern California­based Investigative Consultants, says that most counterfeit products are better replicas than Siekos. With the better fakes, it takes specialized company and trademark knowledge to spot them, says Buckner, a former police officer. "We're trained by the various companies," explains Buckner, whose client list includes Chanel, NFL Properties, Rolex, Seiko and Warner Bros., "to be able to tell apart a counterfeit from the real product." In some cases, an investigator must know where a company manufactures its product. A Dooney & Bourke handbag with a "Made in China" label must be a fake, Buckner explains, because the company assembles its product in the United States. Prior to contacting the sheriff's office or the SJPD, Investigative Consultants identifies vendors who are selling fake items. Then the group works with the law enforcement agencies to make arrests and issue citations. Such a process was used during a May visit to the Berryessa Flea Market, where SJPD made several arrests. On each trip to Berryessa, SJPD usually limits the number of arrests to three because of the time it takes to catalog and inventory the confiscated items. Also, word of SJPD's presence spreads fast and vendors often close their booths for the day. "Most of the vendors are totally legal," he says. "Only a few sell knockoff items, but the ones that do are huge." THE CORPORATE VICTIMS of counterfeiters insist that they are losing millions of dollars a year to cheap imitations of their products. "It's hard to [put a number on it]," says David Simpson, security director for Nike. "If you add up everything we seize by us, police or customs, it's several million dollars. And you're just scratching the surface. There's a lot out there you don't seize." To help combat counterfeiters, Nike also hires private investigators to protect its trademark through criminal and civil investigations. The majority of the fake Nike apparel sold in the United States consists of T-shirts and sweatshirts. Knockoff Nike footwear is generally distributed outside the United States. "We've taken action at the San Jose flea markets," Simpson says. "But it's a tough deal. You have to go in and try to pursue the people, what they are selling, and then work backwards and try to see who their suppliers and manufacturers are." According to the International AntiCounterfeiting Coalition, the largest multinational organization to represent companies that suffer from product piracy and counterfeiting, most knockoff merchandise made in the United States is produced in Los Angeles and New York. Overseas, the groups says, Taiwan is a major source of pirated goods. The IACC estimates that the fraud costs the economy more than $200 billion a year in lost jobs, taxes and sales. The knockoff business is so lucrative that organized crime has gotten involved and fake brand names are even making their way into regular retail stores, according to David Quam, executive director of the IACC. "[Swap meets and flea markets] are just the tip of the iceberg," Quam says. "There's a whole industry involved outside of the flea markets and street vendors. There are stories of counterfeit items making it onto legitimate store shelves. We have to combat this on all levels." Some of the larger retail chains have purchased counterfeit Nike merchandise in the past, Simpson acknowledges. The number of counterfeit items available on the open market has increased due to improved technology that makes it easier and cheaper to produce authentic-looking merchandise. The problem is so pervasive that companies are pushing for harsher punishment of counterfeiters. Quam, for one, thinks vendors selling knockoffs should get jail time. "The problem with civil remedies is they get fined or sued," Quam explains. "Counterfeiters take that as a cost of doing business. It's a fine or risk they take. That's why we push for criminal remedies. You can't get out of serving jail time, and in areas with criminal punishments, people are leaving the area." Recent changes in California's anti-counterfeiting laws have imposed stiffer penalties on individuals arrested for selling or manufacturing knockoffs. In 1996, individuals caught selling knockoffs in California received citations unless they had a prior counterfeiting conviction. If they had priors, they were charged with felonies. Today, individuals arrested for selling knockoffs valued at greater than $400 are charged with felonies, which include jail time. But vendors are mobile, so making an arrest isn't always easy. And even if a vendor gets cited and evicted from a market, there's always someone else to take their place, San Jose police detective Bill Wolfe says. "They usually get their stuff from Los Angeles and they don't give out the information on who they get it from." While companies like Nike and Rolex have a clear financial interest in putting counterfeiters out of business, consumers don't necessarily feel victimized when they buy a fake. Often they already know, and they buy the item because of its low price. THE DISPLAY SIGN advertised Dooney & Bourke purses--high-end handbags which usually cost more than $200--for only $20. When Sgt. Luther Pugh and other officers peeked inside the De Anza Flea Market vendor's nearby van, they saw a man gluing home-made Dooney & Bourke insignias onto generic purses. While searching the vendor's haul, Pugh found that two women who had bought the purses had paid with a check. Pugh called the phone numbers on the checks and informed the consumers that they had bought fakes. But they weren't upset, Pugh recalls. After all, they only paid $20. The beauty of it was that no one else would know how much they paid. Everyone would just think the $20 purse was an authentic Dooney & Bourke. "Some people just don't care," Pugh says. [ San Jose | Metroactive Central | Archives ]