Store chains fighting back against organized theft rings

Two members of Target's investigations team study loss statistics at the Ellicott City, Md., anti-theft center.

ELLICOTT CITY, Md. -- With frosted, unmarked windows and no sign hanging from the storefront, Target Corp.'s retail crime investigations center doesn't even look like it is being used.

But inside, analysts and investigators pore over footage from surveillance cameras and inventory spreadsheets, searching for leads on theft rings that have replaced old-school shoplifters.

It's a battle in which major U.S. retailers are struggling to gain ground. Store owners are spending $12 billion a year to battle organized retail crime, but thieves are pilfering $15 billion to $30 billion in goods annually, a huge blow to businesses and, ultimately, their customers.

"These are sophisticated crime rings," said Mike Erlandson, who heads government relations for Supervalu Inc. grocery stores.

Target has responded by opening several crime centers across the country.

The one in suburban Baltimore recently helped break a ring of 14 people who stole $20 million in merchandise from several retailers over a three-year period. Despite such victories, organized retail crime persists, in part because the Internet makes disposing of stolen merchandise easier than ever.

Thieves snag popular, easy-to-move items -- from baby formula to razors to skin lotion, often by the case. They work quickly and efficiently, snatching the merchandise and bursting out of stores' fire doors into waiting cars.

"We're talking about people who steal for a living," said Mike Serio, who leads Target's Maryland crime center.

When it's time to turn the loot into cash, the crime rings go online. Retailers contend that anonymity and a worldwide market make Internet sales safer than ever for criminals, safe enough that some crime rings take orders.

For that reason, Target, Supervalu, Wal-Mart Stores Inc., and other retailers are pushing federal legislation to fight what they call "e-fencing." "It's much easier to deal in stolen property than to deal drugs," said Brad Brekke, corporate vice president for loss prevention at Target, the second-largest U.S. retailer.

Efforts to curtail the online sales of stolen goods have created a political tussle against Internet companies.

To date, the online industry has fought off bills introduced in Congress in 2009 and 2010 that include requirements for eBay, Amazon.com, and other online brokers to keep serial numbers of certain items and reveal records of high-volume sellers to businesses that suspect the sellers traffic in stolen goods.

"We have 94.5 million active users," said Paul Jones, a former retail executive who now directs global asset protection for eBay. "They're saying, 'You now need to put their names and addresses out there because of a small number of bad actors.' That would be like retailers making customers wear name tags when they come into a store."

Amazon.com didn't respond to a request for comment.

A 2010 survey by the National Retail Federation showed that 90 percent of those questioned believed they had been victims of organized retail crime in the previous 12 months, and 59 percent thought there had been an increase from the previous year. That compared with 92 percent and 73 percent, respectively, in 2009.

Whether organized retail crime is rising or falling, contraband gravitates to the Web for disposal. Old-fashioned pawnshops or flea-market fences might pay only 30 cents on the dollar value for items they suspected were stolen, Target's Mr. Brekke said. Online, the margin rises to 50 cents on the dollar.

The U.S. Attorney's Office in Minneapolis reported that Target's investigations center in Minnesota was instrumental in building a new federal case that busted career criminals using counterfeit money to buy retail items and return them for $70,000 in real-money refunds.

Supported by retailers and eBay, the U.S. House passed a bill last year that would have established an organized retail theft investigation and prosecution unit in the U.S. Department of Justice. The measure died in the Senate Judiciary Committee.

"We've been at the table with eBay," said Lisa LaBruno, a former prosecutor who is now vice president of loss prevention and legal affairs at the Retail Industry Leaders Association. "But eBay is not the only player. We've got to have a global solution. We need federal legislation that compels all the players. ... Right now, nothing compels them to do anything."