Authors: Hitha Prabhakar
“It’s important to note that ARAPA is not intelligence,” says Fischer. “There are other systems the APD uses that do that. ARAPA is a tool used by retailers and law enforcement that is ever evolving.”
The ARAPA web site is one of a number of web areas the APD has inside of CONNECT (Community Oriented Notification Network Enforcement Communication Technology), which operates as a 24-hour crime watch for different business sectors. It also allows both
law enforcement and retailers to track whether their “one-off” incident is actually part of a larger ring hitting the same or different stores in the area. Another example of a case busted by using the ARAPA system happened in 2009. A traveling booster and e-fencing operation had been hitting Marmaxx, JCPenny, and Toys “R” Us stores, shipping nearly $85,000 a month to fences in Texas for a total loss value of $2 million.
What the APD realized is that ORC rings travel, to nab criminals, law enforcement efforts must expand and build local trust. To complicate crime-fighting matters, criminals were communicating with each other in jail, in some instances coordinating hits as well as shipments from behind bars. To bring to light what the ORC rings were doing in Albuquerque, the APD put up wanted posters in malls and on billboards to let the community know who they were looking for. Kenneth Cox credits the use of ARAPA for saving his division an estimated $15 million in stolen merchandise related to ORC in 2010.
“Getting involved was crucial,” says Albuquerque Police Chief Ray Schultz. “When Karen [Fischer] first proposed the idea of ARAPA, I knew as a police department, we had to be involved and get behind it. There is always turnover in police departments, and with that changing of the guard, there are new ways of going about dealing with ORC. While I was in charge, I wanted to implement a system that I knew would last and stay committed to our retail partners. As a public-sector organization, knowing how to work with your private-sector partners is very important.”
The LAPD and APD might be great examples of how government agencies can effectively communicate with each other; however, the system is still new and has yet to be completely adopted and used on a national level. With that said, record numbers turned out for the annual LAAORCA conference in 2011, and Detective Oda expects the numbers to increase.
Part II: Follow the Money
The Money Trail and the Business of Cross-Border Trade
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Profile of a Booster and a Fence
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Family Ties
119
Money Laundering 2.0
139
The Political Agenda
159
Strange Bedfellows
179
4. The Money Trail and the Business of Cross-Border Trade
It’s 5 a.m. on a Monday at a highway Super 8 motel near Madison, Wisconsin. Traffic is surprisingly heavy for such a sultry summer morning. Maria (an alias), a member of the Houston, Texas arm of the MS-13, works swiftly to load a U-Haul van, filling it with cardboard boxes full of OTC drugs such as Prilosec, Sudafed, and Zantac. She collected them while hitting the first of 12 Walgreens stores along her 1,200-mile route back to Houston. This early-morning ritual at a motel isn’t anything new for Maria, who does this at least four times a week. What is new are the cameras on the outside of the building—something she hadn’t noticed in the past. The slow, omniscient sway of the camera’s lens will put a crimp in her stealth mission to load up and leave the motel undetected. Staying at the Super 8 allows her to pull up behind the motel late at night instead of having to walk through the lobby with all her goods. Likewise, renting a U-Haul under an alias helps keep Maria’s mission under wraps. Why the secrecy? All the merchandise in Maria’s U-Haul is stolen. The total value of her pull from one night is about $50,000 to $60,000 retail.
Maria moves fast. On average, it takes her three and a half to four minutes to steal $2,000 worth of merchandise from a store. After working as a booster for the MS-13 for almost nine years, Maria has her technique down to a science. First, she never hits the same store twice in one month or takes the same route. However, the stores she hits can be in the same area. Second, if a store manager or sales associate asks her if she needs help, she leaves. (Personal interaction equals
attention, and Maria needs to remain as under the radar as possible.) Third, if she is required to work in a group, the maximum number of people is four. Any more people might raise a red flag and puts the hit at risk. It also prevents them from getting out of the store in less than five minutes. By the end of her four-day trip, Maria’s rented van will be filled with an estimated $100,000 worth of merchandise. In a month, Maria makes this journey three times and on average picks up nearly $500,000 worth of merchandise at retail value.
But unlike the typical shoplifter, who, according to Jerry Biggs, director of the organized retail crime division at Walgreens, steals for his or her own benefit, Maria lifts merchandise to sell it and send funds to the MS-13 back in El Salvador. They have sent word they need $10,000 to pay off the El Salvadorian government and get a comrade out of jail. To make money quickly, Maria and several other women affiliated with the MS-13 are sent out to boost from retail stores such as Walgreens, Walmart, and Target, hitting ten to twelve stores in one day. After a day of lifting, these women go back to their hotel rooms (usually Super 8s or Motel 6s). They drive their U-Hauls
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up to the door of their rooms, sort their merchandise with the efficiency of a skilled pilot, and box it up and ship it to a warehouse in the U.S.
Maria stays up all night with the help of a street-grade speed pill, writing down every piece of merchandise she lifted in a detailed log, which will be sent with the merchandise to the warehouse. The nearly 10,000 boxes of Prilosec and Tylenol, sorted by type and brand, form a wall around her, fencing her in as though she is in her own personal jail. The logs make it easy for the warehouse fences to analyze exactly what is coming in, how much is available, and if it’s an item they need or can do without. In Maria’s stash are more heartburn and stomach ailment medicines than in years past.
“These rings are run like small businesses,” says Biggs. “On most days, warehouses get shipments of at least 200 to 300 boxes worth between $14,000 and $20,000, from boosters all over the country. By looking at their detailed log, they can tell what’s in high demand and
what they can move out of the warehouse quickly and get the most money from, selling it at 75 cents on the dollar. The profit margin ranges from 20% to 30% because they are paying very little for the merchandise.”
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Like any well-run corporation, the structure and management are just as important to an ORC ring as the people who are running it. Biggs explains that the larger ring, the one Maria was affiliated with in Houston, was composed of three booster groups and four fencing operations. Forty to fifty women, also known as “runners,” (which is essentially the same thing as a booster) would steal from retailers between Houston, Los Angeles, and Las Vegas and send the merchandise back to the “den”—a code word for the home base warehouse. Women are often chosen as boosters as well as runners because they are less suspicious than men and are more likely to get away with the crime.
Most women affiliated with the MS-13, like Maria, are considered property of the gang and are used only to boost merchandise. On this particular trip, Maria is getting ready to ship her merchandise to a warehouse called Alpha Trading, located in Louisville, Kentucky. It is owned by Abe Zakaria (who, according to Biggs, is from Jordan and is now a Level 3 fence of stolen goods). Zakaria will purchase the merchandise and then sell it to a retailer. Maria makes only a small percentage from this transaction. For every shipment delivered, she earns only $700, even though she boosts along the route from Wisconsin to Houston, hitting 20 to 30 more stores before the end of her trip. As she moves further from the scene of the crime, the merchandise becomes harder to trace back to its point of origin.
Maria isn’t the only woman who takes on the role of booster as part of a larger organization. June (an alias), originally from Iran, belongs to a ring of 70 people. Her group is led by George (another alias), who has close ties to the Mujahadeen-e-Khalq (MEK) in Iran, according to Biggs. June was recruited to boost through George’s connections to her family in Iran. As part of the MEK, she hits the Eastern Seaboard,
going from Atlanta all the way to New Jersey. Her method is basically the same as Maria’s. In a five-day span, June hits 12 to 15 Walmart stores, stealing $4,000 to $5,000 worth of merchandise per store; items include things such as Enfamil, diabetic test strips, and diapers. Her warehouse, in North Carolina, houses upwards of $150,000 worth of merchandise on pickup days. Although June gets paid only pennies on the dollar for her work, her Level 3 fence, to whom she sells, makes close to 80 cents on the dollar for every item sold. She does not share in the profit.
The Warehouse: Ground Zero for Cross-Border Trade
In most cases, warehouses can move stolen items across the border more quickly than boosters because they maintain a front to look like legitimate wholesale businesses that sell to retailers both offline and online. Smaller retailers looking for a price break, or ones that want to get around the minimum order requirement needed to buy directly from manufacturers, enlist the help of wholesalers, which have less stringent requirements than the manufacturer. For legitimate wholesalers, the more buyers they have for a specific product, the bigger the order they can make, which drives down the price of the item. Small and mid-cap retailers purchase these items in quantities that meet the customer demand in their stores. This also allows them to be more price-competitive with larger retailers. Most wholesalers deal with retailers all over the U.S. and, in some cases, worldwide. Therefore, having a system in place where they can obtain the merchandise, box it, and ship it to the retailer in a minimal amount of time and at the lowest cost possible is crucial. And fence wholesalers such as Alpha Trading take advantage of this system.
Likewise, the location of the legitimate wholesaler is just as important as what it offers retailers. If a wholesaler isn’t located near a main
transportation hub, such as an interstate, railway station, or seaport, it becomes difficult and expensive to get merchandise into the warehouse and out to customers. Every year a plethora of wholesalers go out of business because the costs of running a large warehouse and shipping become so great.
This issue came to an apex in 2007.
Profile of a Purchaser
As the world acknowledged that a global recession was upon us, gas prices started to rise, the real estate bubble began to burst, and interest rates increased the cost to own, rent, and finance real estate, especially big buildings. Consumer confidence faltered, and retailers as well as established wholesalers felt the pinch to their margins. Seeing an opportunity in the market, shell warehouses fronting as legitimate wholesale warehouses started to pop up all over the country. They promised heavy discounts on items and transportation costs that were a fraction of what most real wholesalers charged. What’s more, because these shells run their businesses in the most technologically advanced way possible, they were able to move merchandise around the country as quickly as, if not more quickly than, their legitimate wholesale counterparts. The shell warehouses’ low capital overhead allowed them to advertise and market themselves online with ease. Discount web sites and illegitimate warehouses started to outprice legitimate warehouses, and potential buyers who wanted to keep their costs down caught on quickly.
In 2007 the U.S. Census Bureau reported the number of retailers going through wholesalers (which includes warehouses) had gradually increased since 2002. Manufacturers and merchant wholesalers relied more heavily on e-commerce than retailers (ranking second with e-commerce) accounting for 21.2% ($1.226 billion) of total sales.
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What this means is wholesale businesses did most of their business and transactions online versus regular retailers.
Alpha Trading (a shell warehouse), for example, would get deliveries from boosters on Mondays and Fridays, with 450 boxes on average being delivered on those days. Boxes had everything from over-the-counter drugs, makeup, diabetes test strips, and baby formula to clothing from department stores such as The Limited and The Gap. The deep discount on merchandise became a major incentive for buyers from domestic and international stores to purchase from these warehouses, thinking they were getting a deal. But they didn’t realize the merchandise they were purchasing was stolen.
It’s easy to mistake a shell warehouse for something that is legitimate. When you pull up to the building, everything seems normal. Guards at the front gate asked for my identification as I drove in for an undercover visit. They record your name, time of arrival, and who you are visiting. At the front of the warehouse, someone carrying an official-looking clipboard comes out to greet you and take you inside.
Once you are through the glass doors, the warehouse greeter shuffles you into a larger room filled with rows of boxes similar to that in a warehouse retailer such as Costco. On the shelves, boxes are arranged by what they contain and cards that say how many items are in the boxes, as well as their price. One row is labeled detergent and is organized by brand name. Tide, according to the warehouse guide, is the best seller, followed by Cheer and Gain. All are sorted in boxes of 50 to 60 per bin and are priced between $30 and $40 a bin. In the adjoining row, over-the-counter medicines ranging from Tylenol to cough suppressant are stacked neatly in rows. According to my tour guide, a box of Tums EX 750 Antacid Calcium Extra Strength in Assorted Berries flavor, 200 count, has been one of the best sellers for more than three years. It may retail for $9.99 at Walgreens, Walmart, or Target. However, the warehouse’s price is $3. The buyer (either legitimate or not) will mark it up 100% to 200%, pricing it between
$6 and $8. This is still a discounted retail price compared to Walgreens’ price but is priced according to market demand.