Tuesday, June 5, 2012 · 11:00 AM–12:37 PM · 2011–12 session
Consumer Protection
1 BEFORE THE NEW YORK STATE SENATE
STANDING COMMITTEE ON CONSUMER PROTECTION 2 ------------------------------------------------------ 3 PUBLIC HEARING 4 TO INVESTIGATE CIRCUMSTANCES SURROUNDING ORGANIZED
RETAIL CRIME AND STOLEN GOODS; TO EXAMINE METHODS 5 EMPLOYED BY THE INDUSTRY TO COMBAT THESE GROWING
PROBLEMS; TO ASSESS THE IMPACT ON CONSUMERS; AND 6 TO DISCUSS WAYS TO ASSIST LAW ENFORCEMENT IN
PREVENTING THESE CRIMES 7
------------------------------------------------------ 8 9 10 Legislative Office Building
Van Buren Hearing Room A - 2nd Floor 11 Albany, New York 12 June 5, 2012
11:00 a.m. to 12:37 p.m. 13 14 15 PRESIDING: 16 Senator Lee M. Zeldin
Chair 17 18 SENATE MEMBERS PRESENT: 19 Senator Thomas F. O'Mara 20 21 22 23 24 25 1
SPEAKERS:PAGE QUESTIONS 2
Michael Rosen 7 19 3 Sr. Vice President of Government
Relations, and General Counsel 4 Food Industry Alliance of NY State 5 David Golub 7 19
Sr. Vice President of Administration 6 Price Chopper Grocery Store 7 Justin Dietel 7 19
Asset Protection Specialist 8 ShopRite (SRS) 9 Ted Potrikus 27 40
Executive Vice President, and 10 Director of Government Relations
Melissa Googas 11 Assistant Director of Government Relations
Retail Council of New York State 12
Gary Weisbecker 52 59 13 Director of Security
Walgreens Pharmacy 14
Kevin P. Terry 66 85 15 Detective
Colonie Police Dept. (Albany County) 16 17 18 19 20 21 22 23 24 25 1 SENATOR ZELDIN: Good morning, everybody. 2 Thank you for being here on this morning here 3 in Albany to have a hearing on organized retail 4 crime. 5 The general rationale for an 6 "organized retail crime" legislative package is -- 7 you know, this isn't just something that 8 New York State is suffering from. 9 Really, all across this country, over -- 10 almost $30 billion a year, annually, is being 11 stolen, 15 billion of which is the approximation for 12 supermarkets. And, additionally, state and local 13 governments are losing out on tens of millions of 14 dollars annually in lost sales tax and excise-fee 15 revenue. 16 Organized retail crime is a public health and 17 safety issue. The item stolen are often resold to 18 unsuspecting wholesalers who, in turn, sell the 19 stolen items to consumers. 20 Many of the heavily trafficked items require 21 proper handling, such as storage at certain 22 temperatures, which may not be occurring when the 23 product is in the hands of thieves. 24 Also, organized retail-crime thieves have 25 been known to change the expiration date of products 1 by repackaging them, thereby posing further health 2 and safety risks. 3 There's a package of six bills that the 4 Consumer Protection Committee passed last week, and 5 finally put some teeth into the crackdown on 6 organized retail crime. 7 These six bills, which I believe that, 8 Michael Rosen, our first speaker, is going to get 9 into a little further depth on, these six particular 10 bills are sponsored in the Assembly by 11 Assemblyman Mike Cusick. 12 Not only are we defining what "organized 13 retail crime" is, but we're addressing some of the 14 concerns of prosecutors who are dealing with the 15 challenges; for example, of jurisdiction. 16 Jurisdictional challenges: When a particular 17 a crime takes place in their county, it might be 18 part of a larger pattern of misconduct. They can 19 only charge for that specific crime, and not so much 20 the pattern. 21 So, we tried to deal with that. 22 We also have individuals that are aware of 23 limits, say $1,000, in order to qualify as a grand 24 larceny in the -- if someone, you know, is only 25 stealing $900 from one particular location, and 1 stealing $900 from another location, they're coming 2 under the $1,000 limit for grand larceny. 3 But, if it's part of a pattern of organized 4 retail theft, it really should be charged as if over 5 $1,000 was stolen. 6 These are very complex enterprises. 7 Some of our individuals that are testifying 8 today will get into a little bit more detail about 9 it, but it really starts at the most local levels, 10 with small teams that are going into a particular 11 store. 12 You might have an individual that's loading 13 up a shopping cart. Maybe someone else is outside, 14 getting ready to drive away in the getaway car. 15 Maybe someone was pulled off the street and given a 16 couple hundred bucks to come in and be the one to 17 push the shopping cart out the front. 18 It really depends on how that team is set up. 19 But what starts at this very small local 20 level gets very complex, because these goods are 21 getting passed up, they end up in warehouses. 22 Warehouses are packed, wall to wall, with stolen 23 products. 24 These are products that we find on the 25 Internet, sometimes in flea markets. 1 Yes, they're being sold at a substantially 2 lower price. The reason is, these products are 3 stolen. 4 There's no sales tax attached to it. And the 5 State's losing out, the consumers are losing out, 6 and -- and that's why we're here today. 7 That's why, last week, we passed these 8 six bills. 9 And, hopefully, today will be informative 10 for -- for others legislators here in the Assembly 11 and the Senate, and the Executive as well, for the 12 media, for the public, for prosecutors -- everyone 13 around New York State that -- who is concerned, and 14 really should be concerned, to become a little bit 15 more informed. 16 I'm joined today by Senator Tom O'Mara, who I 17 would I'd like to introduce at this time, to say 18 hello. 19 SENATOR O'MARA: Hello. 20 Thank you guys for being here. 21 I look forward to your comments on the 22 legislation, and direction on how you feel. 23 This will be helpful, where you think there 24 may be room for improvement. 25 And as a former prosecutor myself, I'm well 1 aware of the issue of organized retail crimes, and 2 look forward to helping the retail industry deal 3 with this problem. 4 So, I look forward to your testimony. 5 SENATOR ZELDIN: And our first witness today 6 is Michael Rosen. 7 Michael has -- aside from his title of being 8 senior vice president of government relations, and 9 the general counsel, for the Food Industry Alliance 10 has been very active with this particular issue, 11 and, helping raise awareness. Very good job of 12 representing his members, but also keeping 13 legislators informed, and educate us. Not just 14 informed that this is a problem, but educated on the 15 specific solutions that are out there. 16 Michael, thank you for being here this 17 morning. 18 MICHAEL ROSEN: Thank you for inviting us. 19 We appreciate the opportunity to submit 20 testimony. 21 I'm here on behalf of the Food Industry 22 Alliance. 23 We're a statewide not-for-profit trade 24 association representing the interests of New York's 25 21,000 food stores. 1 We have approximately 800 members that 2 operate 10,000 sites in New York. 3 SENATOR ZELDIN: Is your mic on? 4 Is it on? 5 SENATOR O'MARA: Yeah, it's on. 6 MICHAEL ROSEN: We good? 7 Okay. 8 In any event, we have -- we appreciate the 9 opportunity to testify. 10 Organized retail crime is a vexing problem 11 that continues to grow in New York despite our best 12 efforts to stop it. 13 I have two retailers with us today who are 14 here to offer firsthand accounts of their battle 15 with retail crime. 16 And, with your permission, I'm going to turn 17 things over to them, to start, and then we can, 18 perhaps, answer questions or have a dialogue. 19 SENATOR ZELDIN: Great. 20 We are joined today by two other members, as 21 Michael states. 22 I understand that your reputation precedes 23 you, David. You're a famous man up here in upstate. 24 So, for me, growing up on Long Island, 25 anything north of The Bronx was upstate. But I 1 guess this is, actually, in this area, you're -- 2 you've done a lot to represent Price Chopper very 3 well. 4 David Golub is the senior vice president of 5 administration for Price Chopper. 6 We're also joined by a Justin Dietel, who's 7 the asset protection specialist at (SRS) ShopRite. 8 I appreciate both of you individuals being 9 here, accompanying Mr. Rosen this morning, and I 10 look forward to your testimony. 11 And I guess, at this time, Mr. Golub, if 12 you'd like to begin. 13 DAVID GOLUB: Thank you. 14 Thank you, and, good morning. 15 I represent Price Chopper Supermarkets, and 16 we operate 128 stores in 6 different states. We're 17 operating in New York, Massachusetts, Vermont, 18 New Hampshire, Connecticut, and Pennsylvania. 80 of 19 the stores operated are in New York State. 20 And I really appreciate the opportunity to 21 present testimony today regarding the troubling 22 topic of ORC, and support the proposed ORC 23 legislation. 24 Organized retail crime is estimated by many 25 industry experts to be as high a 30 to 40 billion 1 dollars nationwide, each year. 2 The FBI refers to ORC as a "gateway crime," 3 which is a crime that often leads to other more 4 serious criminal activity. 5 In the past, ORC has been linked to money 6 laundering, credit card fraud, narcotics, and even 7 terrorism. 8 Our company's loss-prevention department has 9 developed a team of loss-prevention managers who are 10 assigned to ORC identification and prevention. 11 This team works closely with our internal 12 resources, as well as with close to 1,000 other 13 contacts that we've developed in a network of law 14 enforcement and other retailer loss-prevention 15 teams. 16 The network was specifically developed to 17 help identify, prosecute, and prevent ORC from 18 occurring in each of our marketing areas. 19 We continually collect data and photos on ORC 20 suspects, and we share that information with our 21 contacts in the form of BOLOs; what we call "be on 22 the lookout." 23 And these are reports that have pictures, 24 whenever we have pictures available through our 25 internal surveillance, as well as data or detail on 1 license plate numbers or any other information that 2 we can procure. And then we provide that to the 3 network, to help to identify these individuals, and 4 help to -- help law enforcement prosecute those 5 perpetrators. 6 Over this past year, we have identified close 7 to 60 percent of our external theft as being 8 ORC-related. 9 The amounts -- this amounts to about 10 $2 million to our company alone over this past year. 11 There was 659 cases that were identified as 12 ORC. And there are a lot of cases that we don't get 13 enough information to be able to identify. So, 14 there's a lot of theft going on that we're not made 15 aware of or we don't have information on. 16 Since the time we have been tracking ORC 17 cases, we have identified thefts that involve 18 high-profile products, such as razor blades, baby 19 formula, dental whitening strips, body wash, and, 20 fresh product, like meat and seafood. 21 We are now even seeing a rise in thefts of 22 Tide detergent, which has become a new form of what 23 is referred to as "street currency." 24 The product that is stolen is then resold for 25 cash at bodegas, mom-and-pop stores, pawn shops, 1 flea markets, and even online on eBay and 2 Craigslist. 3 We have also seen a rise in organized crime 4 involving credit cards, gift cards, fraudulent 5 couponing, price-ticket switching, and fraudulent 6 product returns using fake receipts. 7 As an example: During this past month, we 8 have been investigating an ORC group hitting our 9 capital-district stores for baby formula. 10 This group consists of two, three, or 11 four individuals at a time, loading baby formula 12 into reusable bags, and exiting the store without 13 paying. 14 Two subjects out of approximately seven known 15 individuals are presently being prosecuted. 16 The police have not been able to identify the 17 others involved. 18 The total case value of the linked incidents 19 is over $5,700, which by dollar amount would be a 20 felony. 21 However, due to the jurisdictional issues, 22 each incident is only prosecutable on its own as a 23 misdemeanor. 24 In this particular investigation, thefts have 25 occurred in our stores in Brunswick and Troy, which 1 is Rensselaer County; Colonie, Albany County; 2 Niscayuna, Schenectady County; and Saratoga, 3 Saratoga County. 4 This type of case clearly demonstrates our 5 frustration with the present laws. 6 These individuals know how to work the 7 system, and travel no more than 10 to 15 minutes 8 from store to store, knowing that there are no 9 cumulative-theft totals that they would be held 10 accountable for if they're caught and prosecuted. 11 In this case, Price Chopper loses $5,700 in 12 product, and the baby formula is unavailable for our 13 customers to feed their children. 14 Another example, and this one just shows how 15 bold some of these individuals are, is from this 16 past November. 17 A woman walked out of our Commercial Drive 18 store in Utica with almost $1,000 in meat, grocery, 19 and general merchandise while an accomplice stood 20 lookout. 21 One month later, she left our Cobleskill 22 store with $389 worth of meat and Tide laundry 23 detergent. 24 On December 26th, she was arrested by the 25 New Hartford Police and charged with petit larceny. 1 Two months later, with the same accomplice, 2 she again walked out of our Cobleskill store with 3 $721 in products. 4 At that time, the Cobleskill Police informed 5 us that she had five outstanding warrants for 6 arrest. 7 During the month of April: 8 At our Johnstown store, she took $965 in 9 merchandise on the 6th; 10 $632 in merchandise on the 7th; 11 And at 5:30 p.m. on April 12th, she left our 12 Palatine Bridge store with a cart worth $924. 13 At 6:30 p.m. that same day, she was seen 14 again in our Johnstown store, and attempted to push 15 $943 in merchandise, but was stopped by our 16 loss-prevention team, who then notified the 17 Johnstown Police, and, once again, the suspects were 18 arrested. 19 The total estimated loss to us was $4,500 -- 20 more than that -- but the individuals were charged 21 with petit larcenies and separate misdemeanors in 22 each jurisdiction. 23 There is another case that is scheduled to 24 air on Channel 6's "Perp Patrol," where an 25 individual has been returning Oral-B refills to our 1 stores using fake receipts. 2 This individual has received more than $1,800 3 in fraudulent refunds from 37 of our stores before 4 we were able to identify what this person was up to. 5 We continue to see ORC activity across the 6 many counties in New York, as well as across our 7 six states that we operate in. 8 Our current laws are insufficient to 9 effectively prosecute and deter these types of ORC 10 crimes from happening, and because of this, I 11 strongly support the passage of the proposed package 12 of bills regarding ORC in the state of New York. 13 Thank you for giving me the opportunity to 14 give this testimony, and, I'd be happy to answer any 15 questions that you might have. 16 SENATOR ZELDIN: Thank you. 17 And we will have a few questions. 18 And I will just invite your colleague, 19 Mr. Dietel, to give his opening remarks. 20 JUSTIN DIETEL: Thank you. 21 Good morning. 22 My name is Justin Dietel, and I'm an 23 asset-protection specialist at (SRS) ShopRite. 24 We are a full-service grocery store operating 25 in New York and New Jersey. 1 We operate a total of 31 stores, with 28 of 2 them in New York, from Yonkers to Liberty, up to the 3 capital region, and employ approximately 4 8,000 associates. 5 We also supply a number of independent 6 operators through our cooperative who operate under 7 the ShopRite banner. 8 I appreciate the opportunity to present 9 testimony -- excuse me -- testimony today on this 10 important but troubling topic. 11 Over the last several years, all retailers 12 have seen an explosion of organized retail theft. 13 ShopRite has not been immune to this. 14 Some of the items we have seen losses on are 15 razor blades, baby formula, Red Bull, meat, seafood, 16 cosmetics, and analgesics. 17 We have even experienced some losses on 18 non-traditional theft items, such as gum and Tide. 19 These losses are taking place on any item 20 that can be easily resold. 21 Some of the items in question have ended up 22 at gas stations, bodegas, and flea markets, where 23 they're purchased from the shoplifter and then 24 resold. 25 Many times, the person running the location 1 will request certain items. 2 Some of the items stolen end up being resold 3 on the Internet, while others are shipped out, 4 repackaged, and then resold back to unsuspecting 5 retailers through distribution centers. 6 To be clear: Those involved in this type of 7 theft are not your traditional shoplifter. Instead 8 they are professionals who conduct these actions for 9 financial gain. 10 They are stealing large quantities of items, 11 and many times, are looking for specific items as if 12 they had a shopping list. 13 Many are also knowledgeable of the laws where 14 they are more likely to be fully prosecuted, and 15 plan their crimes so that they can only be charged 16 with misdemeanors. 17 To them, this is their job. 18 These losses impact all of us in different 19 ways: 20 From the retailer, who is the obvious loss of 21 merchandise, but there is also the loss of sales, 22 since most times, those involved in ORT clear the 23 shelf of the items stolen. 24 Customers lose out, since now they are not 25 able to buy the items they want, and may need to 1 make several shopping trips to other locations to 2 find the items. 3 We all lose out by continued loss of revenue, 4 since sales tax for the state and local government 5 is never charged to these items. 6 There's also a drain on local law 7 enforcement, since they are continuously involved in 8 the prosecution of the same individuals. 9 Over the last several months, we have been 10 dealing with a shoplifter that is very well known to 11 us. 12 He was first observed in our Middletown and 13 Wallkill stores back in 2008. 14 More recently, he has recruited others to 15 work with him throughout the area, including 16 Montgomery, Vails Gate, Montague, Chester, and 17 Monroe. 18 He normally enters a store with an accomplice 19 and they head directly to the baby-formula section. 20 He then points out the [unintelligible] 21 accepted formula he wants, along with the nearby 22 fire exit, and leaves the store. 23 A few minutes later, the accomplice places 24 the items in a shopping basket and exits through the 25 fire door. Outside is the regular shoplifter 1 waiting in a running car. 2 Recently he has also recruited drivers. 3 We apprehended one of the accomplices in our 4 Chester store, and he explained that our regular 5 shoplifter had put him up to this. 6 He also explained, that since he was now 7 caught, they would just use someone else. 8 He went on to explain that the formula was 9 being resold to various bodegas in Middletown, but 10 that he was not involved in the resale of the items. 11 As you can see, the proposed legislation on 12 emergency-exit theft, jurisdiction and venue, and 13 organized-retail-theft enterprise would be extremely 14 help in prosecuting and dissuading these types of 15 actions. 16 Thank you for giving me the opportunity to 17 give this testimony this morning, and I'll be happy 18 to answer any questions. 19 SENATOR ZELDIN: Thank you, Mr. Dietel. 20 If any of you gentlemen wouldn't mind 21 speaking on: Why should consumers care? 22 Obviously, we see the impact on retailers and 23 your business operations, but if you could speak a 24 little bit on the consumer impact. 25 DAVID GOLUB: Sure. 1 The consumer impact is -- it's twofold. 2 One, that, if we're incurring that much of an 3 expense, then at some point it gets back into the 4 cost of doing business. 5 And, you know, it has -- it can have an 6 impact on pricing. 7 But a more -- another impact would be, the 8 fact that there's product not available for them to 9 shop. 10 So, in the one example I was mentioning about 11 the baby-formula ring, they come in, basically, wipe 12 out the shelf. 13 So, now, mothers that come looking for 14 formula for their babies, they can't find the 15 formula. 16 So now we have to wait until we can get our 17 next truck in of product to be able to stock the 18 shelves. 19 So it's a very -- it's an inconvenience for 20 customers, as well as, you know, having product not 21 available for them. 22 MICHAEL ROSEN: There's another issue, where 23 they're stealing perishables or over-the-counter 24 drugs. 25 They are not careful in how they store these 1 products, and how long it takes for them to be 2 resold. So, these are products that can deteriorate 3 if they are temperature- or light-abused. 4 We often see -- or, we sometimes see products 5 are repackaged with new sell-by dates. 6 So, the customer -- the end -- the customer 7 may end up with a product that's no longer valid, 8 and possibly no longer safe. 9 JUSTIN DIETEL: I think one of the issues 10 also is, many times, retailers, to prevent this type 11 of loss, end up having to put these items behind 12 lock and key. 13 And I think, as we all know, we're pressed 14 for time. 15 You go into a store, you want to get baby 16 formula. You have your children with you, and now 17 you have to wait for somebody to unlock a case, and 18 you're standing there for, five, ten minutes. 19 Or, you need razor blades, but, Oh, they're 20 behind the counter, so I need to wait on line to -- 21 just to buy a package of razor blades; as opposed to 22 easily accessible items that they can then purchase. 23 MICHAEL ROSEN: In the food industry, we are 24 pleased if we make a penny on a dollar. 25 So, if someone is stealing thousands and 1 thousands of dollars, it doesn't take long before 2 that has to affect prices. 3 So there's clearly a direct effect to 4 consumers in any number of respects. 5 DAVID GOLUB: And as Justin was saying in his 6 testimony before, it really ties up the system, from 7 law enforcement and the courts, where, now, law 8 enforcement is being called to a store to pick up an 9 individual, and they're not available for safety of, 10 you know, the community while they're coming in to 11 get these individuals, which they come in 12 continually to get the same individuals to bring 13 them in and prosecute them. 14 SENATOR ZELDIN: Now, the economy, obviously, 15 over the course of the last few years, has been 16 going through a recession that really has impacted 17 businesses, families. I'm sure that it's impacted 18 your businesses, of course. 19 Have you seen a spike in organized retail 20 crime in the last few years? 21 And, do you think that it's related to the 22 economy? 23 DAVID GOLUB: I think that some of it is 24 related to the economy, because I think that, you 25 know, people will take advantage of other 1 opportunities when there are things that -- when 2 it's tight -- when the economy is tight. 3 But I think it's also, it's a theft of 4 opportunity, where they're seeing -- the criminals 5 are seeing a real opportunity to be able to take 6 advantage of the fact that the laws don't really 7 hold them accountable for some of the things that 8 they're doing to the level that would deter them. 9 So that, because of that, they're getting 10 smarter, to be able to take advantage of that. So 11 they're -- it's a crime of opportunity. 12 MICHAEL ROSEN: I was going to say the same 13 thing. 14 Our other members report, from across the 15 state, that these crimes are so carefully planned, 16 that they stay within the felony limit that is -- 17 they stay within $1,000. They'll go from 18 jurisdiction to jurisdiction. And they know that 19 prosecutors have any number of issues, they're 20 short-staffed, and it's hard for them to take a 21 misdemeanor violation seriously. 22 SENATOR ZELDIN: You know, the receipts fraud 23 and UPC-code fraud, if you can speak a little bit to 24 how that's happening. 25 What exactly the impacts are on your 1 business, what kind of -- if devices are being used. 2 But maybe if you just shed a little bit of 3 light on that particular issue. 4 DAVID GOLUB: Yeah, we had that one case I 5 had mention about the Oral-B-return individual. 6 They took a receipt from one of our stores 7 and they were able to doctor it, so that, they went 8 in and presented that receipt to our stores, saying 9 that they, basically, had purchased this Oral-B 10 product. 11 We haven't been able to find out where this 12 individual's getting the product; whether they're 13 taking it from our stores, or other stores. 14 But, they continually come in, present the 15 same receipt, doctored up each time, to be able to 16 get a refund on this. 17 And they're being able to -- I mean, this 18 individual has, seventeen, eighteen hundred dollars 19 worth of refunds, until we caught on to what the 20 individual was doing, because we actually had 21 somebody who got a copy of the receipt, and then we 22 were able to see that that wasn't a legitimate 23 receipt. 24 JUSTIN DIETEL: We haven't seen this same 25 issue with receipts, but in the past, we saw an 1 issue with UPC codes, where people would actually 2 print up -- on a smaller-size baby formula, the 3 liquid formula, it's normally a few dollars. 4 They would print up the UPC from it, place it 5 on a large container of powdered formula. Take 6 twenty of them off the shelf, clean out the entire 7 shelf. Go to the register, hand it to the cashier, 8 the one with the doctored UPC on it, and tell the 9 cashier: Hey, I have twenty of these. 10 The cashier scans the one with the much lower 11 priced UPC on it, twenty times. The cashier doesn't 12 realize; they think they -- everything was rung up, 13 and the customer ends up walking out, paying a few 14 hundred dollars less. 15 SENATOR ZELDIN: So, over the course of this 16 hearing today, we'll be discussing, in length, the 17 six bills as part of legislative package. 18 Senate Bill 6955A is the piece of legislation 19 with regards to this issue. 20 It prohibits retail sales, receipt fraud, and 21 UPC-code fraud, and provides for criminal penalties 22 for such crimes; creates harsher penalties for 23 persons who possess fifteen or more counterfeit 24 receipts or UPC -- the universal product codes; and 25 for those who possess devices used to manufacture 1 fraudulent receipt -- retail sales receipts and 2 UPC codes. 3 Our next speaker, Ted Potrikus, from the 4 Retail Council, will go into a lot of detail with 5 regards to all six bills. 6 But, one of the themes, in just listening to 7 your testimony, is, each of the six bills in this 8 legislative package, whether it's, you know, the 9 jurisdictional element of one of the bills, or the 10 grand larceny in the fourth degree and the $1,000 11 threshold, your -- the example that was given, 12 Mr. Golub, of, you know, multiple days, one day 13 after another, every single dollar amount was under 14 $1,000. 15 So, the testimony was, you know, just very 16 relevant, and I appreciate you all being here today. 17 This is an issue, obviously, that we're going 18 to be paying close attention to between now and, not 19 only the end of session, but going forward through 20 the summer and fall, even while we're not here, 21 working with law enforcement, as -- as, you know, 22 Mr. Rosen represents your organization very well, 23 all of your companies very well, to make sure that 24 we're doing everything we can, not just in 25 government, from the legislative end, but also on 1 the judicial end, to crack down on it. 2 Your testimony was very informative. 3 I appreciate you being here to answer 4 questions, and taking the time. 5 And, thank you again. 6 Do you have any questions, Senator O'Mara? 7 SENATOR O'MARA: Thank you, no. 8 Thank you. 9 JUSTIN DIETEL: Thanks. 10 DAVID GOLUB: Thank you. 11 MICHAEL ROSEN: Appreciate the opportunity. 12 SENATOR ZELDIN: Thank you for being here. 13 And the next witness is Ted Potrikus. 14 Ted is the executive vice president, and 15 director of government relations, for the 16 Retail Council of New York State. 17 And Ted is going to be joined by -- with 18 Melissa Googas. 19 And Ted and Melissa have been working very 20 hard on this particular legislation, really, since I 21 came in -- before I came into office. 22 I've been here since January of 2011, but 23 I -- really, from day one, in conversation, one with 24 Ted and Melissa, we were talking about what needs to 25 be get done with regards to organized retail theft. 1 It's a very important issue to -- I know, to 2 the Retail Council, and I appreciate you being here 3 this morning. 4 So, welcome. 5 TED POTRIKUS: Thank you. 6 MELISSA GOOGAS: Thank you. 7 SENATOR ZELDIN: And feel free to get started 8 at your convenience. 9 TED POTRIKUS: And, thank you very much. 10 And, that is true; we did, I think the very 11 first meeting that we had with you, we said: Boy, 12 do we have one for you, Mr. Chairman. 13 You've been extremely attentive and 14 interested in this issue from the start, and we 15 appreciate that very much. 16 And we thank you, too, for the opportunity to 17 speak this morning at -- at what the retail industry 18 ranks as among its most challenging operational 19 burdens. 20 We think it appropriate that your Committee 21 has convened this session because, surpassing those 22 operational burdens, is the fact that the public 23 safety really is on the line when it comes to 24 talking about this issue. 25 You've introduced a comprehensive package of 1 bills attacking ORC at its roots, and the retail 2 industry applauds and strongly supports each of the 3 measures. 4 We'll address each specifically in just a 5 moment, but a brief overview of organized retail 6 crime may be a helpful preface. 7 From our perspective, we're not here today to 8 discuss, and your bills appropriately do not 9 address, what people commonly think of as 10 "shoplifting." 11 You hear the word "shoplifting," and a few 12 images come mind: 13 The amateur tempted by the five-finger 14 discount on a dare from friend; 15 The kid stealing a candy bar; 16 The person stealing an item, or items, for 17 personal use or consumption; 18 The person stealing for the thrill that they 19 may experience. 20 Organized retail crime is something vastly 21 different and so much more dangerous at every level. 22 Amateurs tend to steal for personal 23 consumption, but, boosters, the street-level 24 thieves, make money by stealing merchandise and 25 reselling it to fences who, in turn, sell the goods 1 for a fraction of the retail cost to an unsuspecting 2 public, to higher-level fences, or to distributors. 3 In short, organized retail crime is fraud 4 activity conducted with the intent to convert 5 illegally obtained merchandise into financial gain 6 without personal use when the following item -- 7 elements are present: Theft in multiples of items, 8 conducted over multiple occurrences, conducted in 9 multiple stores, conducted in multiple 10 jurisdictions, and conducted by two or more persons. 11 Groups, gangs, and sometimes individuals, are 12 engaged in illegally obtaining merchandise through 13 both theft and fraud in substantial qualities -- 14 quantities as part of a criminal enterprise. 15 These rings generally consist of boosters who 16 methodically steal merchandise from retail stores, 17 and fences who convert the product to cash or drugs 18 as part of the criminal enterprise. 19 Sophisticated criminals have found ways to 20 switch UPC bar codes and receipts, as we just heard, 21 so that when they ring up differently at the 22 checkout, and it's commonly called 23 "ticket-switching." 24 Others use stolen or cloned credit cards to 25 obtain merchandise or produce fictitious receipts to 1 return products back to retail stores. 2 In many instances, ORC groups target several 3 retailers in one day, moving from state to state, 4 county to county, and stealing and reselling 5 merchandise. 6 These groups often steal thousands of dollars 7 worth of merchandise at a time with the intent to 8 resell it for profit, to buy drugs, or fund other 9 illegal activities. 10 The FBI reported in January of 2011 that: 11 ORC is a gateway crime that often leads us to major 12 crime rings that use the illicit proceeds to fund 13 other crimes, such as organized-crime activities, 14 health-care fraud, money laundering, and, 15 potentially, even terrorism. 16 We are certain that that is not a claim that 17 the FBI makes lightly, nor do we. 18 The threat to consumers is immense. The 19 theft and resale of stolen consumable or 20 health-and-beauty products, such as infant formula, 21 over-the-counter medication, and cosmetics, poses 22 significant safety risks to individuals purchasing 23 such goods from ORC fences. These products 24 lightly -- likely been repackaged, relabeled, 25 subjected to altered expiration dates, or stored 1 improperly before being reentered into the stream of 2 commerce. 3 Fences send their boosters to work with 4 fence sheets, a veritable shopping list of the items 5 most desired at that time on the black market. 6 The products they seek tend to be things that 7 are easily concealed, valuable, and highly sought. 8 As we've heard, they can run the gamut, from 9 diabetic test strips, premium razor blades, face 10 creams, and smoking-cessation products, to infant 11 formula, printer cartridges, batteries, name-brand 12 power tools, vacuum cleaners, and now Tide 13 detergent. 14 All of these products command high value on 15 the black market, but the list doesn't stop there. 16 Higher-end merchants know that the thieves 17 want to clean the shelves of designer jeans, 18 jewelry, and accessories, and the gangs are willing 19 to stop at nothing to clear the stores of the 20 merchandise they need to fill their fences' demands. 21 These items showed up everywhere itinerant 22 vendors, stores seemingly set up from nowhere, 23 Internet sites, flea markets, and similar venues. 24 Some of the stolen merchandise is scrubbed 25 clean of the markings of the store from which it was 1 stolen, repackaged with expertly counterfeited 2 labels, new expiration dates and new markings, and 3 reentered into the legitimate stream of commerce. 4 The merchant often thinks he's buying the 5 merchandise from a legitimate supplier. 6 Estimates of losses to ORC activity, 7 nationally, are as high as $37 billion annually, 8 with state and local government losing out on 9 tens of millions of dollars annually because of lost 10 sales tax. 11 Estimates suggest that New York State may be 12 forfeiting as much as $75 million annually in sales 13 tax lost to ORC activity. 14 The question, of course, is: What can be 15 done? 16 Retailers throughout the state have 17 established close partnerships with 18 district attorneys and law-enforcement agencies, 19 creating groundbreaking Internet-based information 20 sharing systems, now operating in Monroe and in 21 Albany Counties. 22 Police agencies in Onondaga County and other 23 jurisdictions are following suit. 24 We applaud DAs, such as: 25 Mike Green, then-with Monroe County, and 1 responsible for spearheading the online information 2 sharing that we'll talk about, and now executive 3 deputy commissioner for the state's Division of 4 Criminal Justice Services; 5 David Soares in Albany County; 6 Kathleen Rice in Nassau; 7 Cy Vance, Jr., in Manhattan; 8 Dan Donovan in Staten Island; 9 And, Thomas Kapp in the Office of the 10 Bronx County District Attorney. 11 They, and others, have shown an active 12 interest in and acknowledgment of the very serious 13 ramifications associated with ORC. 14 Retailers, of course, have recruited and 15 dedicated entire teams of personnel and attendant 16 resources to address the crisis, from the store 17 level, right up through the chains of distribution 18 we discussed a few moments ago. 19 These loss-prevention professionals, many 20 with law-enforcement backgrounds, criminal-justice 21 degrees, and other important credentials, all know 22 it's not just the store's bottom line that's at 23 stake when it comes to ORC. 24 These are professionals equally dedicated to 25 ensuring the public's health and well-being. 1 You'll be hearing from some of these 2 professionals during your hearing today, and in your 3 session plan for this summer in your district. 4 They have thousands of stories to tell, with 5 new stories happening every day in every store. 6 It's amazing. It really is. 7 New York needs new laws that would augment 8 and strengthen these ongoing relationships between 9 retail and law enforcement. 10 We seek new laws that aim for and bring to 11 justice those who lead the ORC groups and prey upon, 12 not only retailers, but also those who they may hire 13 to do, for lack of a better phrase, the dirty work. 14 That's why the bill package that 15 Chairman Zeldin has introduced, with sponsorship now 16 in the Assembly from Member of the Assembly 17 Michael Cusick, is an important leap forward. 18 And if I may, I'd like to talk briefly about 19 each of the bills. 20 6956 would establish a number of definitions 21 of terms related to ORC activities, establishing the 22 statute of the aforementioned difference between 23 organized retail crime and garden-variety 24 shoplifting. 25 The bill would provide for the aggregation of 1 the value of merchandise stolen within a certain 2 period of time, important, because, as we've heard, 3 ORC gangs operating in this state are well trained 4 to keep the value each theft under $1,000. 5 They then can avoid the threat of felony 6 larceny charges, this despite the fact that these 7 same gangs will hit dozens of stores in a single 8 episode, loading their trunks with stolen 9 merchandise that, when aggregated, will far exceed 10 the $1,000 limit. 11 6959 would create the crime of leading an 12 organized-retail-theft enterprise, and we think this 13 is a very important bill, and we appreciate your 14 introduction and sponsorship of it. 15 The measure would allow for the prosecution 16 of the individual who conspires with others, as an 17 organizer, supervisor, financier, or manager, to 18 engage for profit in organized retail crime. 19 The bill would appropriately focus on and 20 reserve the most severe penalties for being the 21 leader of such enterprises. 22 It would be an important tool for prosecutors 23 seeking to unravel and take down ORC groups and 24 rings operating in the state. 25 6958 would establish jurisdiction and venue 1 for the pattern of ORC incidents transpiring over a 2 number of different jurisdictions. 3 And this is what we just heard about, with 4 going from county to county. 5 This would allow for the combination of those 6 crimes into one. 7 6954 would create the crime of criminal 8 practices with an access device, a huge bill, a very 9 important one. 10 The bill, as we understand it, stems from the 11 State's leadership roll in fighting crimes related 12 both to identity theft and to the use of stolen 13 information, taking both, literally, to the retail 14 level. 15 And it's important because not all organized 16 retail crime involves traditional theft from retail 17 stores. 18 ORC groups have employed numerous tactics to 19 obtain merchandise, including gift-card fraud, gift 20 cards being one of the access devices in the bill. 21 One form of gift-card fraud finds thieves 22 purchasing legitimate gift cards using stolen credit 23 cards, then selling the gift cards to the highest 24 bidder online, and usually for a fraction of the 25 face value. 1 In other instances, thieves may purchase 2 low-value gift cards, electrically reprogram them to 3 contain a higher value, and resell or redeem the 4 cards. 5 And, 6955 would create the crime of 6 sales-receipt fraud and UPC fraud. 7 They're both favorites of ORC gangs because, 8 I wouldn't know this from personal experience, but, 9 apparently, it's relatively easy to do. 10 You had just asked, Senator, about, you know, 11 how they do the receipt fraud. 12 And one of the stories that we heard came a 13 few years ago from a clothing retailer. And, one of 14 their store managers had been approached by someone 15 who was carrying a duffel bag with $10,000 cash in 16 it. 17 And what they wanted was, to exchange the 18 cash for three rolls of the water-marked receipt 19 tape, so that they could bootleg it. 20 And, apparently, the manager declined the 21 offer, but reported it. 22 But that's the extent that they'll go to, 23 because, with the computer printer, download the 24 font, it's pretty easy to do. 25 The Senate already this year has passed 1 three bills designed to thwart ORC activity, bills 2 under the sponsorship of Senator Fuschillo. 3 And we -- I want to take a minute to thank 4 him as well, for his stewardship of this issue over 5 the years. 6 We've talked to him about this. And, a 7 couple his bills would prohibit the use of the 8 booster bag, which the Senate has passed. 9 And the other -- oh, the "itinerant vendors" 10 bill -- I blanked out for a minute there -- 11 prohibiting the sale of certain items by itinerant 12 vendors. 13 All of these are important. And, again, we 14 support each of them. 15 And we thank you, Senator Zeldin, and your 16 colleagues, for your sponsorship. 17 We appreciate Member of the Assembly Cusick's 18 vigorous interest. He's just picked these bills up, 19 and he's very excited about it. 20 And I think that that's a -- this will be a 21 very good partnership with the Assembly on these 22 bills. 23 ORC poses a serious threat to New York in 24 many, many ways: Affecting the health and safety of 25 consumers, causing higher prices, syphoning money 1 from state and local governments, engaging in 2 widespread criminal activities, and costing 3 retailers untold sums of money in lost merchandise, 4 and the need for additional resources to fight this 5 crime. 6 The bills that you've introduced, and already 7 approved so far this year, are important steps, as 8 is today 's hearing. 9 We thank you for your interest, and for 10 focusing so intently on the true consumer-protection 11 nature of this issue. 12 I'd be happy to take any questions. 13 SENATOR ZELDIN: Thank you, Ted. 14 Thank you, Melissa. 15 If you can maybe highlight some of the most 16 egregious forms of organized retail theft that we're 17 seeing around the country? 18 TED POTRIKUS: Well, I think the biggest ones 19 probably have to do with the consumables, and with 20 the over-the-counter medications, because what 21 you're seeing is, you know, they go out with these 22 fence sheets, and they'll just come back at the 23 street level. 24 And Gary Weisbecker, from Walgreens, is 25 coming up after us, and I'm sure he'll be able to 1 tell you, from a store's perspective, what they see 2 at the street level. 3 But what happens is, just the brazen nature 4 of this: with the criminals going in, they know 5 exactly what they need, they know exactly where it 6 is in the store, how much they can steal before 7 they're going to get caught. And they just load it 8 up through the day. 9 Now, those are the people working for the 10 higher-level fences. And as it moves up, you know, 11 they just turn it in, and they get pennies on the 12 dollar for the value of what it is that they've 13 stolen. 14 And where the egregious nature really comes 15 into play is, is that snowballs. It just continues 16 to grow. And, suddenly, you have all of this stolen 17 product sitting someplace, you know, deteriorating, 18 or being altered in some way, whether it's the 19 packaging, whether it's the expiration date, 20 whatever it is, all of that turns into just one big 21 mess. 22 And we, as consumers, you know, you think: 23 Wow, I'm getting a real great deal on this. 24 And where the egregious part of it really 25 amplifies, is, you know, using the phrase, "If it's 1 too good to be true, it probably is." 2 And, suddenly, you see this merchandise that 3 you just -- you can't trust, or you shouldn't trust, 4 as a consumer. 5 So, I think -- but the cases, specifically, 6 you know, when you start seeing cases of Tide walk 7 out the door, it makes you scratch your head: Tide? 8 When did Tide detergent become, you know, something 9 big on the black market? 10 But when you see some of this security film 11 from, let's say, a major department store in 12 New York City that's on Fifth Avenue, and you watch, 13 not just the theft of the item, but what's happening 14 to the people around it, you know, if Melissa and I 15 are in there shopping, and then, suddenly, you get 16 these people, they'll stop at -- really, at nothing, 17 to make sure that they can steal the stack of 18 designer jeans. 19 MELISSA GOOGAS: Including -- sorry. 20 Including using a child in perpetration of 21 their crime. 22 TED POTRIKUS: Yeah. 23 MELISSA GOOGAS: We've seen video footage 24 from the same retailer, where a mom was pushing the 25 stroller, and putting headbands that probably, in 1 this particular store, cost $50, shoving them in her 2 child's coat, who was probably three years old. 3 That was one of the most egregious videos 4 that I had seen. 5 TED POTRIKUS: You know, you stare at it, and 6 you think two things: 7 The first is, you know, I -- you know, what 8 do you do? 9 You tackle the three-year-old when she's 10 walking out the door? 11 MELISSA GOOGAS: Right. 12 TED POTRIKUS: And the second thing is, is 13 that organized retail crime, or is that child 14 endangerment? 15 You know, because they're learning this 16 skill, and -- 17 So, you do see these. 18 And like I said, you know, there's a -- the 19 loss-prevention folks would have a thousand 20 different stories every day, because it does -- this 21 is a -- it's an opportunity crime, and it's one 22 where they see some loopholes and they can take 23 advantage of them. 24 SENATOR ZELDIN: One thing that I've just 25 been so amazed with, with this particular issue, 1 just how many big-box stores, chain stores, I mean, 2 it affects everyone. 3 TED POTRIKUS: It does. 4 SENATOR ZELDIN: And it's just -- you were 5 talking a little bit about these bills over the 6 course of the last few months, with different 7 individuals, different areas of the industry, 8 different businesses, and everyone is going through 9 it. 10 So while, you know, we're fortunate today to 11 have a few of the affected businesses, and the 12 organizations representing them, it's so broad now. 13 In your speech, a couple of things worth 14 noting: 15 You mentioned, with regards to the FBI report 16 in January of 2011, and I believe Mr. Golub 17 mentioned it during his speech, but, "The ORC is a 18 gateway crime that often leads to us major crime 19 rings that use illicit proceeds to fund other 20 crimes, such as organized retail" -- excuse me -- 21 "organized crime activities, health-care fraud, 22 money laundering, and, potentially, even terrorism." 23 And, I just think it's -- you know, it's 24 remarkable that, you know, for those who are just 25 now becoming aware that organized retail theft even 1 exists, just how big of -- and the impact just 2 beyond the immediate analysis of the theft 3 themselves, and on the business. 4 The other point, obviously many points, worth 5 noting, but, as far as, why it should matter up here 6 in Albany, with the fiscal impact of it, you know, 7 yeah, there's a duty to protect retailers from the 8 theft, there's a duty to crack down on those who run 9 these enterprises, but there's a duty to protect the 10 consumers. 11 But, you know, you use the figure of 12 $75 million annually in lost sales tax revenue. 13 And, you know, with the state of our economy, 14 with local governments, the counties that collect 15 sales tax, the state, everyone, right now is, you 16 know, really pinching pennies to make ends meet. 17 So, you know, that's a lot of money, 18 $75 million. 19 TED POTRIKUS: It is. 20 SENATOR ZELDIN: Now, can you explain why 21 New York State is a good target for organized retail 22 theft? 23 TED POTRIKUS: I think it's a good target 24 because it's such an attractive shopping 25 environment. 1 I mean, if there's a store, it exists in the 2 state of New York. 3 You know, we have -- you can get anything you 4 want here. And this is what people -- one of the 5 attractions of coming to the state of New York, is 6 to go shopping. 7 So, the opportunity of the merchandise is 8 there. We have a lot of stores. 9 A lot of -- we're, I guess, you can call it 10 "a target-rich environment." 11 You know, and as retailers work very closely 12 with local law enforcement, as they -- you know, one 13 of the things that we have tried to point out in our 14 meetings with law enforcement, is the real effort, 15 from the retail industry's side, to make sure that 16 we package these cases, because we understand that 17 law enforcement has limited resources. 18 Keeping that in mind, when you come back to 19 the fact that you've got some of these loopholes in 20 the law, that your bill package seeks to fill, and, 21 again, I go back to, appropriately so, because what 22 you're doing is, is -- as you've authored these 23 bills, is you're really going for the folks up at 24 the top of the chain, you know, not so much the 25 folks who are out there doing the dirty work. 1 But I think they can get away with it. And I 2 think, you know, in some of the larger cities, there 3 are so many other things taking up the time for law 4 enforcement, appropriately so. 5 But, as this issue, and one of the important 6 parts about today's hearing and your Committee's 7 stewardship of these bills, is that it is making it 8 more visible, and more people are going to find out 9 about it. 10 And the more that people find out about it, 11 the tighter that we can make some of these laws, 12 then the less of a target-rich environment the state 13 of New York becomes. 14 And I think that's -- you know, that redounds 15 to the benefit of the consumer first, and then the 16 businesses and the state second. 17 SENATOR ZELDIN: I'll tell, I haven't been 18 the largest fan of doing these hearings too 19 frequently. 20 As a matter of fact, this is our first 21 hearing that the Consumer Protection Committee has 22 held, and it may not be on the -- you know, the 23 sexiest topic for the public. 24 You know, some hearings that take place, you 25 know, you might -- you know, might spark, you know, 1 a huge, wide range of interest. 2 But when you -- it's really an important 3 topic. 4 I mean, $75 million of lost sales tax 5 revenue, tens of billions of dollars being stolen 6 annually. And, right now, we just don't have the 7 right rules -- the right laws to allow law 8 enforcement to crack down on it. 9 So it -- we do see it as a very important 10 issue, not to just protect the retailers, obviously, 11 but to also protect the consumers. 12 I think Senator O'Mara a question. 13 TED POTRIKUS: Yes, Senator. 14 SENATOR O'MARA: Yeah, just one. 15 Have you had any success with prosecutions of 16 the criminal possession of stolen property, where 17 you can aggregate -- I understand that these thieves 18 come in and take less then $1,000 worth of 19 merchandise, they throw it in the trunk, and you get 20 two or three takes in the trunk. 21 Have you seen any success in those types of 22 prosecutions? 23 TED POTRIKUS: It's my understanding that, 24 from time to time, depending on how much time the 25 prosecutor might be able to attend -- to give to 1 that particular case, that they can move things up a 2 little bit and make sure that that happens. But if 3 it's coming from different localities, that's when 4 it gets a little bit dicey. 5 You know: Where did you steal this from? 6 Well, I stole this from Saratoga County, and 7 this came from this store. 8 I think it depends on the prosecutorial 9 discretion that might be involved. 10 And as we've talked to the different district 11 attorneys across the state, more and more of them, I 12 think -- and to your point, Senator Zeldin -- 13 they're becoming more aware of how they might be 14 able to follow -- apply some of the different laws 15 that are out there, that exist now. 16 But, none really speak as specifically to 17 organized retail crime, and the results of that, as 18 do these bills. 19 SENATOR O'MARA: What has your response been 20 from the various district attorneys with regard to 21 these proposals? 22 TED POTRIKUS: They've -- we haven't -- we 23 haven't sent them out to them for a specific, but 24 we've talked to them, those who I have mentioned, 25 and some others. We've talked to them throughout 1 the process, you know, really, over the last few 2 years. 3 And a lot of what you see in the bills that 4 Senator Zeldin has drafted comes from the commentary 5 that we've gotten over the years from the DAs' 6 offices, where they've said, you know: We could do 7 this. We need that. We'd like to see this. If we 8 could fill in this gap. 9 So, I'm optimistic that the district 10 attorneys would take a look at these and be 11 favorable with them. But, we'd look forward to 12 talking with them about it as well. 13 SENATOR O'MARA: Thank you. 14 SENATOR ZELDIN: Ted and Melissa, I really 15 appreciate your hard work on this issue. 16 I know we have a lot of work ahead of us 17 in -- 18 TED POTRIKUS: We do. 19 SENATOR ZELDIN: -- in making sure that we 20 educate all of our Senate and Assembly colleagues, 21 and, of course, giving the Executive whatever 22 information that he needs to make his decisions, and 23 to get him involved in the process as well. 24 But, I really appreciate your efforts, 25 helping us get to this particular point. 1 And getting back to my last one, about how 2 this may not be the sexiest topic yet, it's one of 3 those topics, where -- when, you know, where a story 4 breaks, you know, at one point, you know, maybe, 5 whether it be months, or years, from now, if, some, 6 you know, huge network out there, and everyone's 7 talking about it, then you can remember back to 8 what -- to our hearing, and, you know, the 9 retailers, the Retail Council, the Food Industry 10 Alliance, and the businesses themselves, were here, 11 saying: Hey, we -- you know, this is going on. 12 So, hopefully, before it reaches that point, 13 we can give law enforcement the tools to crack down 14 on it so it never becomes that big story. 15 But, I think we're all aware that it's out 16 there. 17 So thank you for being here. 18 TED POTRIKUS: And, Senator, thank you, and, 19 Senator O'Mara, thank you, for your attention. 20 We appreciate it very much. 21 SENATOR ZELDIN: Thank you. 22 MELISSA GOOGAS: Thank you. 23 SENATOR ZELDIN: Thank you, Ted. 24 Thank you, Melissa. 25 1 Our next speaker is Gary Weisbecker, from 2 Walgreens. He's the investigation specialist for 3 Walgreens, their organized retail crime division. 4 And also, Gary, your reputation precedes you 5 as well. 6 My father, who is a little bit into the 7 corporate security industry and business, speaks 8 extremely highly of you. 9 And it was actually pure coincidence that 10 you're here speaking today, but, he told me that I 11 was going to be blown away at how smart you are of 12 all of this stuff. 13 GARY WEISBECKER: Well, thank you. 14 Your father is a very nice gentleman. 15 I had a very good dialogue with him. 16 SENATOR ZELDIN: Well, I'm glad that you're 17 here this morning -- 18 GARY WEISBECKER: Thank you, Senator. 19 SENATOR ZELDIN: -- and I look forward to 20 your testimony. 21 GARY WEISBECKER: Good morning. 22 My name is Gary Weisbecker, and I am the 23 investigation supervisor for Walgreens' organized 24 retail crime division. 25 I work in partnership with local, state, and 1 federal law-enforcement authorities, along with 2 other retail ORC units, investigating organized 3 retail crime. 4 First, let me thank you for the opportunity 5 to speak regarding the important issue of organized 6 retail crime. 7 Prior to coming to Walgreens, I served in the 8 New York City Police Department for 23 years, 9 reaching the rank of detective sergeant, retiring in 10 2002. 11 If I would have been asked during my 12 law-enforcement career about the crime of organized 13 retail theft, I basically would have reacted: 14 You're talking about shoplifting. Right? 15 Maybe. 16 If you want to call it "shoplifting on 17 steroids, times 100," you may be close. 18 So, what is "ORC"? 19 "Organized retail crime" refers to the 20 professional boosting crime rings and other 21 organized crime activity occurring within a retail 22 environment. 23 This crime is most commonly committed by 24 well-organized structured groups who steal 25 everything, from (OTC) over-the-counter medications, 1 to baby formula, to bluejeans. 2 To clarify: A shoplifter steals for their 3 own personal use; 4 A booster steals to resell the items they 5 steal; 6 A fence is the one who routinely purchases 7 the stolen merchandise. 8 Just as in any criminal organization, there 9 are structured levels, and the same holds true for 10 organized retail crime. 11 There are three levels of boosters. 12 Level 1 boosters usually work alone and steal 13 in areas they are familiar with. 14 These boosters are usually your local 15 drug-dependent individuals who used to be involved 16 in other criminal activity, but have switched to 17 organized retail crime because of the low risk and 18 high return, usually, 25 cents on a retail dollar. 19 They will hit two to three stores, stealing 20 hundreds of dollars in product from each store 21 daily. 22 Level 2 boosters work with one or more 23 accomplices, and targeted a multitude of stores in a 24 wide geographical area. 25 A typical three- to four-person boosting crew 1 may start out boosting in Brooklyn, head into 2 Suffolk, then Nassau, into Queens, over the 3 Whitestone Bridge into The Bronx, north on the 4 thruway into Westchester, over the Tappan Zee Bridge 5 into Rockland, and further north, hitting stores all 6 along the way. 7 At the end of their day, they may have hit 8 upwards of more than 25 stores, accumulating more 9 than thirty to forty thousand dollars in retail 10 product. 11 Level 3 boosters work in structured groups, 12 and target markets throughout the United States. 13 They are affiliated with organized crime rings that 14 move large amounts of stolen product. 15 There are three levels of fences. 16 Level 1 fence usually operates a small retail 17 business, such as a grocery store. 18 They get their stolen goods from Level 1 19 and 2 boosters, and usually resell to a Level 2 20 fence. 21 A misconception, is that the convenience 22 store owner may know the product is stolen, but is 23 simply purchasing the merchandise from the boosters 24 to stock their shelves. 25 In reality, most store operators who purchase 1 stolen retail goods buy tens of thousands of dollars 2 worth of stolen goods daily for resale to high-level 3 fences. 4 You would expect, while watching a small 5 grocery store, to see people enter with no bags, and 6 leave with bags after making a purchase. 7 Watching a grocery store that is also a 8 fence, you would observe a voluminous amount of 9 people entering with bags of all sizes, and exiting 10 with no bags. 11 An investigation into such a small grocery 12 store in Queens revealed a very active fencing 13 operation, with over $500,000 worth of stolen OTC in 14 the basement accumulated in a little more than a 15 week. 16 Level 2 fence may operate out of their 17 residence, small business, or small warehouse. 18 They receive their stolen goods from Level 1 19 fences and Level 2 and 3 boosters. 20 They will clean, remove store labels and 21 tags, and repack the stolen product, and usually 22 resell it a Level 3 fence or e-commerce. 23 Level 3 fence may appear to be a legitimate 24 wholesale operation or distribution center. 25 They will get their stolen product from 1 Level 1 and 2 fences and Level 3 boosters, who 2 often, at times, have legitimate merchandise mixed 3 in with the stolen. 4 They will move the stolen product back into 5 commerce supply chain as legitimate product. 6 The economic impact of organized retail crime 7 is in the billions and billions of dollars, not 8 counting the tremendous loss in tax revenue. 9 There is more at risk than just product loss. 10 There are boosting crews that target 11 clothing, crews that target electronics, and crews 12 involved in refund fraud and other fraud activity. 13 Then there are crews that, for the most part, 14 target OTC: Prilosec, Zantac, Pepcid, Prevacid, 15 Allegra, Zyrtec, Claritin, Advil, Ali, Mucinex, 16 diabetic test strips, and baby formula, just to name 17 a few; product that is familiar and valued by the 18 consumers on a daily basis, and product that is 19 requested and sought after by the fences. 20 This is the product that is largely 21 integrated back into the supply chain as legitimate 22 product. 23 This is where the integrity and safety of the 24 product comes into question. 25 From the time the product is stolen, as it 1 works its way from the boosters through the levels 2 of fences, where is this product being stored? 3 It is often stored in the trunk a car, back 4 of a van, or truck, or sitting in a self-storage 5 facility all in non-climate-controlled conditions, 6 usually in extreme temperatures. 7 How accurate is that reading from those 8 diabetic test strips, or how effective is the OTC 9 you're about to take? 10 This was a brief glimpse into the world of 11 organized retail crime. 12 There are many other facets of this crime, 13 including the tools boosters use, such as booster 14 bags, keys for the lockboxes, refund fraud, and UPC 15 label switching. 16 There are boosting crews that steal just 17 under the felony threshold at multiple stores in 18 multiple jurisdictions. 19 There is the issue concerning flea markets 20 and OTC, and, there is the area of other serious 21 criminal activity associated with many fencing 22 operations. 23 Organized retail crime has been around for a 24 very long time. The severity of it has stayed under 25 the radar in the past, but is now in the forefront. 1 There are four critical needs to address 2 organized retail crime: educate, cooperate, 3 investigate, and legislate. 4 With your support, there is an enormous 5 potential to deliver the tools needed to assist in 6 this battle. 7 Thank you. 8 SENATOR ZELDIN: Thank you, Gary. 9 I wanted to ask you a little bit about the 10 "cooperate" of the four, and, just -- if you could 11 just educate us a little bit on how Walgreens works 12 with other businesses similarly situation, works 13 with law enforcement. 14 How is the cooperation between normally -- 15 what normally are competitors, as well as the 16 cooperation of law enforcement? 17 GARY WEISBECKER: Well, when this -- Senator, 18 when this crime is now in the forefront, many large 19 retailers have their organized retail crime 20 divisions. 21 We work very closely, in cooperation with 22 other retailers, including the other drug chains. 23 That's where it starts at, that boot level, 24 the cooperation: the sharing of intelligence, the 25 sharing of information on booster groups, on fencing 1 locations. 2 Without intelligence, we cannot do any type 3 of an investigation into organized retail crime. 4 And where does this intelligence start from? 5 It starts from the store level. 6 And without the cooperation with the stores, 7 even our own stores talking to us and the other 8 retailers, you're not going to have that level of 9 success. 10 Then the cooperation comes up to the next 11 level: law enforcement. 12 We just don't go to law enforcement and tell 13 them: Listen, we just got hit by a boosting crew. 14 We lost $10,000 in about five stores. 15 We'll work up that investigation before we go 16 to law enforcement. 17 The next key component is the prosecutors. 18 The prosecutors have to be in on what's going 19 on with organized retail crime. It's just not a 20 simple theft case. There's more than that. 21 And that's where -- that component of 22 cooperation is key to any type of success in this 23 type of [unintelligible] investigation. 24 SENATOR ZELDIN: Can you talk about your 25 observations of the cooperation between 1 law enforcement or prosecutors of different 2 counties, different jurisdictions? 3 I mean, obviously, you know, Walgreens, you 4 operate in multiple counties. 5 You might have a particular individual or 6 group of individuals stealing from multiple stores 7 in different counties, so, you end up working with 8 different law enforcement and different 9 prosecutorial, I don't want to say, levels, but, 10 counties. 11 So, how do you see their cooperation with 12 each other? 13 GARY WEISBECKER: It's also a process of the 14 education, so, the counties know what's going on, is 15 with law enforcement. 16 Sometimes it's frustrating at a point. 17 We may be following a Level 2 boosting crew 18 that's hit in many multiple jurisdictions, and we 19 have all documentation, all evidence against them. 20 Then they finally get apprehended in one 21 jurisdiction. 22 It would be a lot easier if we could get all 23 the jurisdictions together and accumulate all the 24 aggregated value of what was stolen, and prosecute 25 it in one jurisdiction. 1 Part of the cooperation amongst the counties 2 is with the education. And that's why it's very 3 important to go out and educate different 4 law-enforcement agencies, different prosecutors' 5 offices, of what organized retail crime is about, 6 and everybody come together, being on the same page, 7 to fight this type of crime. 8 SENATOR O'MARA: Yeah, I got a question. 9 With regard to various jurisdictions, county 10 to county, do you see any different jurisdictions 11 that may deal with this type of theft more 12 stringently being avoided by the organized thieves? 13 GARY WEISBECKER: Just like in any crime, 14 Senator, some jurisdictions will actively pursue it. 15 Others will treat it less severe, as a basic 16 shoplifting. 17 I always say: You got to work towards your 18 strength. 19 Where do we have our strength; which 20 prosecutors' offices, which law-enforcement 21 agencies, that want to cooperate. 22 What -- on -- overall, when you actually take 23 the time to sit down and explain to the different 24 jurisdictions, the different district attorneys' 25 offices, of what you're dealing with, and not just 1 come with the case, they really listen, and they 2 really understand what's going on. 3 They say: Really, I had no idea. 4 I've done that recently, twice, in the 5 Bronx County, the District Attorney's Office. And I 6 talked to about 70 of the ADAs. 7 And, after that, I gave about a one-hour talk 8 in a training session. 9 They were totally -- they had no idea what 10 organized retail crime was about. 11 So, that's that education component of 12 getting everybody on the same page. 13 SENATOR ZELDIN: And, Walgreens, you might 14 have -- you sell all sorts of different types of 15 gift cards. 16 GARY WEISBECKER: Yes. 17 SENATOR ZELDIN: You know, the one particular 18 part of it, honestly, there, you have your own 19 issues with UPC -- with the universal product codes, 20 as well as the receipt fraud. 21 But, if you could talk -- I mean, a couple of 22 the bills that -- in the legislative package deal 23 with the fraud, with regards to receipts, UPC, and 24 as well as some of these gift cards, whatnot. 25 So, if you could just talk about how that 1 impacts Walgreens. 2 GARY WEISBECKER: Well, even with those rolls 3 of tape that Ted was talking about, they're very 4 key, for when they have the receipt fraud. They'll 5 use the printer, download the font. 6 They'll actually go into a Walgreens store, 7 maybe at one particular Walgreens store, another 8 store, and steal that product. Then print up 9 receipts for it and do a fraudulent return at 10 another store. 11 And continuously do that over and over and 12 over again. 13 With the UPC fraud switching, I know that's 14 prevalent in a lot of the big-box stores with a lot 15 of high-ticket items, that they get away with that. 16 But the legislation that you put forth, 17 Senator, really hits home on a lot of the issues and 18 a lot of frustrations that I see -- see there on a 19 daily basis. 20 Usually, I'm not dressed in a suit jacket and 21 tie. I'm out there, day in and day out, in the 22 trenches. 23 I'm the one that's following these boosting 24 crews. I'm the one that's setting up surveillance 25 these fencing locations. I'm the one that's 1 debriefing these boosters. 2 And they'll actually know what the easy 3 stores are. 4 They're ones that know, in New York State, 5 that they can steal from different jurisdictions as 6 long as they keep it under $1,000, and get away with 7 it. 8 Then they'll talk about some other. 9 "Oh, you don't want to go to that state. 10 They'll lock you up for that." 11 So the word is out on the street, that it's, 12 sometimes: Okay, we can go here, it will be easy, 13 and we're not going to get prosecuted for it. 14 SENATOR ZELDIN: Okay. 15 Anything else you'd like to add, Gary? 16 GARY WEISBECKER: No. 17 I just want to thank you, Chair, and this 18 Committee, in putting these bills forth, and getting 19 them passed in committee, and moving pushed forward. 20 Thank you, Senator, for your cooperation in 21 this. 22 It's a whole team-work effort with this. 23 It's just not one individual. 24 Working together, we can have a tremendous 25 impact on organized retail crime. 1 And, it affects, number one, the consumer. 2 SENATOR ZELDIN: And, you know, particularly 3 taking a business like Walgreens, as an example, 4 there are 212 legislators here, up in Albany, and, 5 we all have a Walgreens somewhere in our district. 6 We all have, you know, your competitors, and 7 supermarkets. 8 And I think that there's an opportunity, 9 really, for the industry to be able to educate all 10 the individual legislators so that they understand 11 the depth of this particular issue. 12 GARY WEISBECKER: Yes. 13 SENATOR ZELDIN: And -- and that's, you know, 14 one of -- I think that was your -- the first one -- 15 we talked about cooperate. 16 I think the first one was, educate, that you 17 mentioned. 18 So, your assistance with that, moving 19 forward, would definitely be appreciated. 20 And thank you for taking the time to be here. 21 GARY WEISBECKER: Thank you, Senator. 22 Thank you, Senator. 23 SENATOR O'MARA: Thank you. 24 SENATOR ZELDIN: Our final speaker is 25 Investigator Kevin Terry, from the Colonie Police 1 Department. 2 The Colonie Police Department is one of the 3 jurisdictions that understands organized retail 4 crime. They have two major malls within their town, 5 and many chain retail stores. 6 They've been successful in identifying and 7 cracking down on organized retail crime, given the 8 current resources. 9 And, really appreciate you being here, 10 Investigator Terry. 11 DETECTIVE TERRY: Thank you. 12 Good morning. 13 SENATOR ZELDIN: Good morning. 14 DETECTIVE TERRY: I'm here representing 15 Chief Steven Heider from the Colonie Police 16 Department, who has made a significant effort to be 17 ahead of the curve regarding this topic, and all 18 topics involved with organized retail crime. 19 As he so proudly states in just about every 20 speech that he gives, we were often noted as the 21 safest community in the country. 22 And part of the basis for that is the 23 crime-prevention aspect of taking an active role in 24 crime prevention, both, with our community, our 25 residents, as well as the businesses within the town 1 of Colonie. 2 Due to the demographics of the town of 3 Colonie, a significant portion of our call volume 4 and arrests are related to retail theft. 5 We do not have a separate category that we're 6 able to do a statistical analysis on; that is, 7 technically, organized retail theft. 8 So, some of the terms that I'm going to be 9 using are an all-encompassing thing, based on the 10 way that our computer system and our statistical 11 analysis is done. 12 But two of the big ones that referred to the 13 topics that we've been talking to today, are our, 14 quote/unquote, shoplifter call; and, secondly, our 15 larceny-just-occurred call. 16 Doing some research prior to coming to speak 17 to you today, Senator, looking at our numbers for 18 just our small 52 square miles within Albany County, 19 the number of retail theft occurrences has steadily 20 increased from the time that we began tracking this 21 data. 22 In 2002, we had 478 such incidents, up to, 23 2011, where there were 701. 24 So that number has continued to increase as 25 we've tracked this information. 1 Now, some of the previous speakers took into 2 account the toll onto the police system that these 3 types of incidents occur. 4 Any one of these incidents, whether it is a 5 larceny that just occurred or a shoplifting or an 6 organized retail theft, is going to tie up a minimum 7 of two officers, for anywhere between an hour and an 8 hour and half, while the defendants are transported, 9 processed, and most likely, ultimately released with 10 an appearance ticket. 11 And that's one of the issues that I want to 12 talk about here. 13 Often, our patrol officers are not going to 14 notice or detect whether an incident is a routine 15 shoplifting or whether it is part of an organized 16 theft. 17 Normally, the organized occurrences are going 18 to be reported to us through the loss-prevention 19 personnel with the given retailers, and they are 20 going to provide us with information that allow us 21 to then connect the dots between the multiple 22 retailers that may be affected by it. 23 So, it's kind of a two-pronged system, where 24 our -- the defendants that are caught are going to 25 be handled by the patrol officer. 1 And, in some instances, I'll admit, that 2 these incidents are going to fall through the 3 cracks, because the patrol officer is going to treat 4 it as a normal shoplifting. 5 Where, once it comes into the detective 6 office, we're a little more able to track a pattern 7 of a particular item that is stolen, or a particular 8 suspect description, or vehicle description, that 9 will allow us to put this together as more of a 10 planned event that's taking place. 11 Many of these offenses are committed by 12 repeat offenders who have been through our system 13 before. 14 The majority of the defendants are released 15 with an appearance ticket to return to court at a 16 future time. 17 The police agencies are forced to do this 18 because, depending on your jurisdiction, and the way 19 court system is set up in that jurisdiction, judges 20 either aren't able or aren't willing to arraign 21 defendants or to set bail on a misdemeanor charge. 22 So, normally, the police's -- the police 23 department's hands are tied in those situations, 24 where, unless there is some type of an extraordinary 25 circumstance, the defendant's gonna to come in, 1 they're gonna get processed, they're gonna get 2 fingerprints done, pictures done, and then, within 3 an hour, they're gonna be released out the front 4 door, with an appearance ticket to return to court. 5 Defendants know that, and they know that 6 that's how the system works. 7 They know that municipalities, such as 8 Colonie, Guilderland, and Bethlehem, that's how we 9 operate. 10 We don't have holding cells. We're not going 11 to hold someone until they return to court for a 12 morning of appearance, like the city of Albany does. 13 So, it creates kind of a revolving-door 14 situation, that we -- I saw many of times when I was 15 a patrol officer, that, we would arrest someone two 16 or three times in a given week, because they were 17 charged with misdemeanors on two or three different 18 days. And, all three times, they were released, 19 with appearance tickets to come back to court on our 20 next criminal-court night. 21 Because that situation is set up that way, a 22 lot of these folks, that -- I heard it mentioned 23 before by one of previous speakers, that is their 24 job: They go out, they do this every day, they 25 become very proficient at it. 1 They understand the system in which loss 2 prevention attempts to apprehend them. 3 They understand the system in which the 4 police work. 5 They know what time we take our lunches. 6 They know when there's less likely to be a 7 police car on Wolf Road or on Central Avenue, at 8 noontime, because lunches are tied up, versus, at 9 8:00 or 9:00 in the morning. 10 And these are all things that, through, both 11 formalized and informal debriefs of suspects, they 12 tell us this information. 13 They know what days that certain stores and 14 certain retailers have increased loss-prevention 15 staff onboard, versus when they don't. 16 They know -- and in some instances, we've 17 documented, on blogs where they've posted, they know 18 particular sections of particular buildings where -- 19 stores, where cameras don't cover. 20 So, this isn't a routine thrill or 21 personal-use shoplifting. 22 These are people that are very proficient at 23 what they do. And a lot of the time, they don't get 24 caught because of how proficient they are. 25 Once the suspect has been arrested, upon the 1 adjudication of the cases, the majority of them, and 2 I'll throw you two numbers here, 67.7 percent in 3 Colonie versus 65.6 percent statewide; so, right 4 around two-thirds of offenders that are going to be 5 charged with a petit larceny, the misdemeanor, are 6 either going to be ACOD'd, which is "adjourned in 7 contemplation of dismissal," or they're going to 8 plea to a violation. 9 Now, what that means is, the law allows that 10 both of those dispositions, the ACOD and pleaing to 11 a violation, allow their record to be sealed for 12 that particular offense. 13 So, what happens, is, once that goes through 14 the process and the case is adjudicated, the record 15 gets sealed, the mugshots get pulled out, and there 16 is no record on their criminal history of that 17 offense taking place. 18 So, many suspects could be arrested over and 19 over for petit larcenies. And if they follow 20 through the process the correct way, for them, they 21 can have all of those removed from their record. 22 And when we come to deal with them, if we're not 23 familiar with that particular person, we don't know 24 that they have the extensive history that they do. 25 The reason that the police department is 1 greatly in favor of this legislation, is this will 2 allow us to charge organized perpetrators with 3 felonies. 4 When we have a felony, it's a different 5 situation for us within our town for it, where we 6 have to call a judge in. And a judge is supposed to 7 come in for a felony charge. 8 That allows us to set a monetary bail on 9 them. Or, in some situations, to remand the 10 individual to jail until their next court 11 appearance, which, that in itself acts as a major 12 detergent to have -- than having the organized 13 folks, who know how the system works, from coming 14 back, and just going in and out of our doors on a 15 regular basis. 16 Felonies often also allow investigators to 17 have further input with the DA's office. 18 And, by doing that, we can explain to them, 19 beyond the arrest paperwork, to say that this is 20 part of a ring; this is part of an organized faction 21 of people that are out doing this. And, there may 22 be situations where this charge is for this 23 particular amount, but based on our investigation, 24 we know that it was also perpetrated in other 25 counties, and other aspect -- in other areas of the 1 state, and that this isn't a one-time thing that 2 the -- a particular retailer suffered a larger 3 dollar loss based on the actions of this group. 4 I'll use a case study for that one, when I 5 conclude here. 6 In addition to our shoplifter calls, and that 7 was the numbers I read for you previously here, we 8 have half again as many of these calls as what we 9 call "larceny just occurred." 10 What a "larceny just occurred" is, in the 11 majority in the instances, it's a shoplifting 12 incident in which the suspect does not go back 13 voluntarily with loss-prevention personnel, but they 14 attempt to flee the store. 15 Sometimes this is with the merchandise. 16 Sometimes it's without the merchandise. 17 That type of call generates a different 18 police response because this person normally isn't 19 being cooperative. So, it's going to get two or 20 three more units. 21 When there's a situation that, on any given 22 day in Colonie, you may have eight or nine police 23 cars for the entire town, now we're sending two or 24 three to that incident. We're approaching 50 -- two 25 or three, with a sergeant, you've got, 50 percent of 1 our resources are being allocated to this theft 2 occurrence that happens every day. 3 So, it is a large number of our calls. 4 Those type of incidents, those suspects have, 5 by their actions, shown that they're not willing to 6 cooperate, and it creates a risk to the general 7 public, that, during their fleeing of a store, 8 fleeing of a mall, if a three-year-old child or a 9 75-year-old woman gets in the way, they're getting 10 push down; they're getting knocked out of the way. 11 They get in a car. They're going to attempt 12 to flee the parking lot. They're not going to stop 13 for the police. 14 We have -- we -- every year, we have 15 accidents based on this. 16 And, a lot of these individuals know that 17 we're not going to get in a chase with them over a 18 $70 pair of jeans that they're attempting to steal 19 or they're attempting to boost. 20 So, it creates a lot more problems for us. 21 Depending on what information was obtained by 22 the loss-prevention people, at that point, if we are 23 not able to take the suspect into custody at the 24 time that the crime occurred, now it becomes a 25 workload for the detective office. 1 And we get any number of reports, on a weekly 2 basis, that come from -- a 40-year-old white male 3 with a brush-cut and a blue suit, stole X, Y, Z from 4 Target, to, some instances we have -- we have 5 images, we have pictures, we have video, we have 6 license plates. 7 So, depending on the information that we 8 obtain, then it becomes a case for us to take on. 9 And there is a significant workload within our 10 detective office that is following up on these types 11 of cases. 12 The most difficult part of that follow-up is 13 the identification of the perpetrators. 14 Depending on how good the surveillance 15 footage is, and what angle the surveillance footage 16 is taken at, at that point in time, we would 17 normally rely on anyone within our agency that 18 recognizes the person. Then we'd have an idea of 19 who they were. 20 Over the past year or so, we've utilized the 21 "Perp Patrol." 22 I heard that mentioned before. 23 We sent -- we put a lot of things on that 24 with WRGB in the capital-district area. That helped 25 us with identifying people. 1 But one of the things that really seems to be 2 taking off and working very well at this point in 3 time, we've been involved in, in conjunction with 4 the Organized Retail Theft Council, with 5 Mr. Potrikus and Melissa, their help, and the State 6 Department on Criminal Justice Services, and the 7 Crime Analysis Center here in Albany that's directed 8 by John Riegert, we've worked on developing an 9 interactive website in which the loss-prevention 10 officers can post images and post information to 11 help identify suspects that are involved in 12 incidents, which loss-prevention officers have 13 access to, and they can help identify individuals 14 that they have dealt with previously. 15 But then, through the Crime Analysis Center, 16 it's then distributed to police personnel. 17 So, there's a lot larger group of individuals 18 that have the opportunity to look at these 19 surveillance pictures, to help identify who these 20 frequent-fliers are that are doing this type of 21 activity every day in our community. 22 The Colonie Police have investigated a number 23 incidents that would fall under the proposed changes 24 and amendments to the legislation that we've talked 25 about this morning. 1 There have been multiple incidents in which 2 defendants come up from the New York City 3 metropolitan area with dozens of counterfeit credit 4 cards or debit cards. They visit multiple retailers 5 within the capital-district area, and purchase gift 6 cards, as well as electronics, including iPads, 7 using the counterfeit credit cards. 8 One such case that I was involved in: Within 9 a one -- within about a six-hour period of time, 10 there were Target stores that were victimized in 11 Rensselaer County, Schenectady County, 12 Saratoga County, and we arrested them as they were 13 leaving the Target -- I'm sorry -- the Walmart in 14 Latham Farms on Route 7. 15 That day, we were only able to charge the 16 particular event that occurred in Colonie. 17 And, depending on the manpower and -- of the 18 other agencies that get involved, sometimes it's 19 very difficult to connect all of those dots, to come 20 up with a charge in which we can compile all the 21 theft that occurred that particular day, versus the 22 group that was done in Colonie. 23 Now, where that creates an issue is, if you 24 don't have a felony here in Colonie. 25 Everyone involved in this was from Brooklyn. 1 They were given an appearance ticket. 2 They're going to drive back to Brooklyn, and 3 we are never going to see them again. And, there's 4 going to be no consequences for their actions 5 whatsoever. 6 Several capital-district Home Depot stores 7 recently were victimized by suspects gathering 8 high-end tools, Dewalt tools, large-dollar-item 9 equipment and tools, near an emergency exit at the 10 back of the store in which this organized group 11 determined that there was not surveillance footage. 12 There were no cameras set up in that area. 13 They would gather the items at the door. 14 They had a second party come, bring the car 15 up to the back of the building where there was no 16 one around at the rear of the store. They blast the 17 fire doors open. 18 This particular set of fire doors had an 19 alarm it that would go off. That was the only way 20 they knew there was something going on. 21 They open the fire doors, they load up the 22 equipment in the back of the pickup truck, and off 23 they went. 24 And, we never got a picture of the suspects, 25 nor the vehicle, nor a license plate. 1 So, that is relatively going to become -- 2 without any additional input, that's going to be an 3 unsolvable crime for just about any police agency, 4 until these individuals repeat that, and they do 5 something stupid to get themselves identified. 6 Larcenies in which suspects either apply 7 their own bar-code labels to merchandise, or they 8 replace the bar-code labels from less-valuable 9 similar items within the store, and then purchase 10 the items at the point of sale for a significantly 11 decreased price. 12 Target was a victim of that, that, we had 13 several cases involving that. 14 As well as, there's been a significant number 15 of regional investigations in the capital-district 16 area, regarding organized theft of Dyson vacuum 17 cleaners, diabetic test strips, cellular telephones, 18 GPS units, baby formula, diapers, meat, seafood, 19 razors and replacement cartridges, pregnancy tests, 20 batteries, DVDs, and over-the-counter medication, 21 and alcoholic beverages. 22 One particular case that I was involved in 23 was the diabetic test strip. 24 It started in Colonie. And, within a week, 25 it went from Colonie, to Troy, to East Greenbush, to 1 Clifton Park, to Schenectady, back to Colonie to a 2 different Hanford store. 3 And, we were able -- ultimately, we were able 4 to identify them. But, we were only able to 5 prosecute them in Albany County, because we did not 6 have -- Albany -- I'm sorry -- Albany County and 7 Saratoga County. 8 SP Clifton Park was able to prosecute one of 9 them as well. 10 From the police point of view, I forwarded 11 these six proposed bills to John Grebert, who's the 12 president in the New York State Association of 13 Chiefs of Police. 14 And he notified me, through the law and 15 legislation committee, that they unanimously voted 16 in favor of all six bills. 17 One of the things -- two final points that 18 I'd like to make here. 19 From the public safety point of view, the 20 people that organize these type of rings, they're 21 not very selective in the people that they pick to 22 participate, to be the grunts, to be the mules, 23 within this. 24 One of the things that we see often, are the 25 people that are actually hired, we'll use as a soft 1 term, to do this particular crime. They get picked 2 up down in Albany at the mission. 3 They'll go in, they'll offer someone 4 100 bucks to: Come on, take a ride with me. I've 5 got something I need you to do. 6 Because many of those folks are -- are -- 7 have various addictions, they do not necessarily act 8 accordingly when they are approached by 9 law enforcement. 10 And we get into a lot of situations where our 11 personnel are put at risk by getting into fights 12 with them, having them flee, fleeing a scene, 13 getting into an accident with innocent civilians 14 that are actually paying for the items that they're 15 taking at stores. 16 So, that's one of the issues that we see all 17 the time, where, the mule gets arrested, and nothing 18 ultimately happens to the person that's hiring the 19 mule. 20 So, that is one of the -- the section that 21 I'm -- I have particular interest in. 22 We talked briefly about the prosecutors. 23 And, just one example that I'd like to finish 24 with: A case that I was involved in back in 25 September, an individual from Brooklyn came up, went 1 to North Greenbush, went to Saratoga, went to the 2 Latham Target -- Latham Walmart. I'm sorry. 3 And, with 17 -- actually, had possession of 4 34 counterfeit credit cards on his person. 17 of 5 them were made out to him, although they had someone 6 else's information attached to the bar-code scanner 7 on it. 8 These individuals made over $4,000 worth of 9 purchases at the Latham Walmart. It took them seven 10 different swipes of different credit cards to make 11 all these purchases go through. 12 That particular individual pled in criminal 13 court, and he was given a six-and-five split, which 14 is, six months of county time, and five years of 15 probation. 16 That was one particular aspect of the DA's 17 Office that followed up on that. 18 And in an extremely similar case that was 19 prosecuted, again, by the Albany County DA's Office, 20 there was an individual by the name of 21 Rashawn Blant [ph.], who went to trial. Did not 22 take the plea. 23 And at trial, he was sentenced to 9 to 24 18 years in state prison for, essentially, the same 25 act. There was a couple of more incidents that were 1 involved. 2 But, it shows the discrepancy of how certain 3 cases are prosecuted versus how other cases are 4 prosecuted. 5 And, I think the information that we're able 6 to put out through this group, and through law 7 enforcement, and the Retail Association, if we can 8 get everyone on board and show some of these 9- to 9 18-year sentences, that we would -- it would act as 10 an extreme detergent to some of the incidents that 11 we are seeing on a daily basis. 12 That's the end of my presentation. 13 If you have any questions? 14 SENATOR ZELDIN: Thank you. 15 Really, a lot of very informative stuff, 16 highlighting with specific examples of why each of 17 the six pieces of legislation can be helpful. 18 You mentioned the very personal piece of it, 19 with regards to the going after the mule, and, all 20 the higher-ups, they don't -- they're not held 21 accountable. 22 And I think that's a personal aspect of it 23 for me as well, and for a lot of people out there, 24 because it is -- it seems to be such a broad, 25 complex network, and we're not holding the people at 1 the top accountable. 2 It's only the mule each time, and the network 3 continues to exist, because the mule is the most 4 easily to replace -- the easiest person to replace. 5 Now, something else that's very personal, is, 6 you know, you're talking about the fraudulent credit 7 cards, the stolen credit cards, that are used and 8 they're swept. 9 It's happening to a lot of us, it's happened 10 to me a couple of times, where, you know, a debit 11 card or a credit card number gets compromised. 12 And, what we care about, as individual 13 consumer, when it happens to us, is that we are made 14 whole for the charges on our account that aren't 15 real, they're not ours. 16 But, there is a story to be told on the other 17 end of -- on the other end of that transaction. 18 Where I, as an individual consumer, care 19 about being made whole with my bank or my credit 20 card company, on the other end of it, each one of 21 those swipes could be an organized retail -- 22 probably, is an organized-retail-theft enterprise in 23 other states, because we see where the charges are 24 coming from. They might be taking place at a Target 25 or a Walmart. You know, I see an Indiana or Ohio. 1 But, it's probably part of one of these networks. 2 So, for all of us throughout state, as, 3 consumers, who have these personal experiences, 4 where we've only thought about, and cared about, 5 being made whole, think about all those stories that 6 are told of individual instances of organized retail 7 theft taking place, really, all throughout the 8 country. 9 Your words were very informative for me, and 10 for, you know, everyone who will be -- who are 11 listening, and will be listening, to the webcast. 12 Now, during an earlier presentation, there 13 was an FBI report that was highlighted from 14 January of 2011, talking about how -- in addition to 15 Mr. Golub's testimony, talking about how this is a 16 gateway, and there are other crimes taking place. 17 And if you can -- if you don't mind speaking 18 a little bit, maybe shed a little bit of light on 19 what the FBI might have been referring to in that 20 January of 2011 report. 21 Do you need me to read that quote again? 22 DETECTIVE TERRY: Yeah, if you have it right 23 there. 24 SENATOR ZELDIN: Okay. 25 So, this is from -- this is from 1 Ted Potrikus's testimony from earlier: The Federal 2 Bureau of Investigation report in January of 2011, 3 that ORC is a gateway crime that often leads to us 4 major crime rings that use the illicit proceeds to 5 fund other crimes, such as organized-crime 6 activities, health-care fraud, money laundering, 7 and, potentially, even terrorism. 8 Is there anyway you might be able to shed 9 some light as to how this might be bigger than 10 just -- why we should care about this, maybe even 11 beyond just the theft itself? 12 DETECTIVE TERRY: Well, I think, as a -- on a 13 personal basis, all of us should look at it, that, 14 at the end of the day, someone is victimized by 15 this. 16 And, Senator, you made the comment there, 17 that the majority of our victims are concerned that 18 they're made whole by their bank. 19 Well, now the bank needs to be made whole. 20 And if the bank ultimately doesn't get made 21 whole, well that affects everyone here's interest 22 rates. 23 A particular case that -- that I was involved 24 in, we recovered property that had been purchased 25 fraudulently. 1 We had six iPad -- brand new iPads as 2 they came out in the trunk of a car. 3 We couldn't get anyone to take them back. 4 They didn't belong to the Colonie Police. 5 They certainly didn't belong to the 6 defendant. 7 We took them to the store. 8 The store got their money from some unknown 9 person's credit card swipe. 10 When that person in Utah or Alabama or 11 Arizona got their statement, they filed a notice 12 with the credit card company, saying that "I wasn't 13 in Colonie, New York. I didn't make that purchase." 14 So, the buck continues to get passed as to 15 who the victim is. 16 And in some of these instances, we -- in that 17 particular case, we attempted to get the -- nobody 18 would claim the iPads. And we attempted to get 19 them for the police department, because they were 20 sitting in our property room, gathering dust on 21 them. And we could not track back who the ultimate 22 victim was in this. 23 But I guarantee you, for each iPad that was 24 purchased, someone was out $600. And whether it was 25 the bank, the credit card company, Target, or the 1 individual victim who may or may not have noticed 2 that that particular charge was on their bill, 3 ultimately, there is a victim for each one of these 4 things to take place. 5 Now, in the instances where the person who is 6 spearheading or organizing this, I think the main -- 7 it -- the main reason that this is going on, is it's 8 going undetected by a lot -- there's so much of this 9 going on that is falling through the cracks of the 10 police, of -- in some cases, loss prevention. 11 I think loss prevention probably catches a 12 lot more of it than anyone else does. 13 But then, ultimately, the prosecutors, 14 everyone's offices, are so overwhelmed that they're 15 not catching this, which, that makes it even more of 16 a crime of opportunity, because they're trying 17 something once, they're trying it twice, they're 18 trying it three times, and they're getting away with 19 it over and over and over again. And they're making 20 large sums of money on it over and over again. 21 Now, my particular experience on it, is it's 22 most often been narcotics-related; that people have 23 been funding their narcotics operations by the 24 proceeds of this organized theft. 25 But a lot of what I've been involved with 1 hasn't gotten any further than Harbor Hill, or the 2 city of Albany, or the city of Schenectady. 3 In these instances where it's going to 4 Brooklyn, they're not gonna -- there's 5 four detectives working for Colonie today, during 6 the day. 7 They're not going to send me down to 8 Brooklyn, to walk around and see if we can figure 9 out where this is going. 10 So, a lot of times, we hit a wall, where we 11 take it as far as we can, we prosecute it the best 12 way that we can, but we know there's another bad guy 13 in another jurisdiction that we can't necessarily 14 follow up on, just because we don't have the 15 resources to be able to deploy personnel, and to 16 conduct an investigation in another part of the 17 state. 18 So, mainly, the crimes that I've seen locally 19 have been, primarily, narcotics-related; that, these 20 individuals are, both, brokering narcotics, but as 21 well as that part of their business, they are using 22 the narcotics to get the mules to go do the 23 organized retail crime, and, they are making 24 significant sums of money. And, they're driving 25 around in Mercedes and Jaguars, while I drive a 1 Saturn. 2 SENATOR ZELDIN: Has there been any 3 interaction or interest on the part of the 4 Attorney General's Office? 5 DETECTIVE TERRY: I have never had a case 6 that has gotten to them. So -- but, I can't 7 really -- I've never tried and gotten shut down, but 8 we never made an effort to funnel them through their 9 office. 10 But, if they're willing to help, we're 11 willing to meet with them. 12 SENATOR ZELDIN: I'm just curious. 13 I know, you know, there's a history there of 14 consumer protection inside that office. And I know 15 the functions have moved around a little bit over 16 the course of the last year and a half. 17 But, I just figured I'd ask. 18 Now, I just would like to thank you, all of 19 the speakers that we had today. 20 This legislation was recently introduced, 21 although, it was an issue that was put on my radar 22 as soon as I took office. 23 My first conversation with Ted and Melissa, 24 from the Retail Council, is only recently that we 25 actually introduced the legislation. 1 Fortunately, Senator [sic] Cusick has signed 2 on on the Assembly side. 3 He and I worked together on legislation last 4 year, that we were able to see passed and signed 5 into law. 6 So, I'm excited to see that he signed on to 7 this effort. 8 I would, hopefully -- you're here today. 9 I recruit your help, the help of all the 10 speakers who are here, to contact individual 11 legislators all throughout the state, contact the 12 Governor, contact the media, consumer groups, just 13 to try to raise more awareness for the issue, 14 because it obviously has a little bit more momentum, 15 as Gary mentioned in his speech. 16 It's now an issue that has come to the 17 forefront a little bit -- a little bit more than 18 ever before. 19 And, I think that we can save -- we can save 20 a lot of companies money. 21 We can save a lot of consumers money for the 22 cost of their product. 23 We can make the law-enforcement job, for your 24 job, for prosecutors, everyone's jobs, easier, and 25 hopefully crack down on something that we all know 1 is very broad, very complex, all over the state, and 2 across the country. 3 So, I thank you, Investigator Terry. 4 I thank all of our witnesses for being here 5 today, and for your hard work, getting -- moving 6 this issue to this particular point. 7 Now we just have to see this legislation pass 8 through both houses, hopefully signed into law by 9 our Governor, and give you the tools that you need 10 for your job. 11 So thank you for being here. 12 And, thank everybody else as well. 13 That will conclude our hearing. 14 15 (Whereupon, at approximately 12:37 p.m., 16 the public hearing, held before the New York State 17 Senate Standing Committee on Consumer Protection, 18 concluded.) 19 20 ---oOo--- 21 22 23 24 25