A three-year sting operation ended Nov. 19 as authorities dismantled four alleged counterfeiting rings in New York City. Operating out of self-storage facilities in the New York City boroughs of Brooklyn and Queens, the rings allegedly netted about $10 million in combined annual revenue.
According to the Queens District Attorney’s Office, 26 people and two businesses have been indicted on charges of importing, manufacturing and distributing counterfeit products under brand names such as Nike, Timberland, True Religion, Polo and The North Face. Additionally, the rings allegedly dealt in counterfeit watches, headphones and cigarettes.
These alleged rings imported their goods from China, then distributed them in at least 21 states and the Virgin Islands.
“Operations such as those allegedly run by the defendants fuel an underground economy. They are cash businesses that pay no taxes and damage the reputations of reputable brand owners and lower consumer confidence in the name brands by foisting inferior products into the marketplace,” Queens District Attorney Richard Brown said.
Under New York’s Organized Crime Control Act, 12 of the 26 defendants face “enterprise corruption” charges. Another dozen defendants face conspiracy and felony trademark infringement charges. The two businesses face either $10,000 in fines or twice the amount of their allegedly illegal gains.
Many of the 26 defendants already have been arrested.
Suits Being Filed Against Storage Facilities
The Mayor’s Office of Special Enforcement is preparing nuisance abatement lawsuits against the Stop & Stor facility at 534 63rd St. in Brooklyn and the Storage Quarters facility at 31-40 Whitestone Expressway in Queens.
New York Criminal Justice Coordinator John Feinblatt has accused the two self-storage facilities of “looking the other way.”
“Counterfeit goods hurt both legitimate businesses and consumers, and self-storage owners have a responsibility to monitor their premises for illegal behavior, just like any other landlord,” Feinblatt said.
A Storage Quarters manager told The Storage Facilitator he did not expect his facility to be shut down. Representatives at Stop & Stor’s corporate office couldn’t be reached for comment.
Counterfeit goods hurt both legitimate businesses and consumers, and self-storage owners have a responsibility to monitor their premises for illegal behavior, just like any other landlord.
–John Feinblatt, New York criminal justice coordinator
New York Nuisance Abatement Law
Significant changes to the nuisance abatement law in 1977 made it easy for the city to bring such cases to court; nearly 1,000 nuisance abatement cases were filed in 2011 alone.
Under the law, a complaint can be lodged ex parte, meaning the proceedings can begin without the business owner’s knowledge. For a case to stick, the city must prove that at least three instances of illegal activity occurred over the past year. The two self-storage facilities in question have been under police surveillance for the past three years.
Glenn Wright, a private attorney in New York, said: “Nuisance abatement suits are fairly common lawsuits, with about 50 filed in Manhattan each month, mostly against bars selling to minors or retail stores selling counterfeit merchandise. The first one against a self-storage facility with a similar set of facts was filed earlier this year.”
In that particular case, the City of New York v. Safeguard Properties LLC, the city went after a Safeguard Storage facility in Brooklyn after authorities observed a group of counterfeiters selling CDs and DVDs out of a storage unit. Safeguard Self Storage settled with the city and agreed to adopt a “code of best practices.”
Although Wright is not representing the facilities tied to the alleged counterfeiting rings, he told The Storage Facilitator: “I would advise these self-storage facilities to cooperate, as they are not the main targets and will likely receive very favorable terms in a negotiated settlement in exchange for assuming a slightly higher standard of duty in screening and monitoring their tenants.”
Wright definitely advises against going to court. If the facilities were to lose at trial, they “would be responsible for statutory fines based on every day retroactive to the first violation. Losing at trial could also result in a long closure that would constitute a default under their commercial lease.”
Operation Finish Line
The New York Police Department’s Trademark Infringement Unit, along with the district attorney’s Economic Crimes Bureau, began the “Operation Finish Line” sting in November 2010. Engaging in undercover buys, surveillance of the self-storage facilities and court-authorized wiretapping and email monitoring, authorities intercepted thousands of conversations, many of which were translated from Arabic and Chinese to English.
Two private investigation agencies helped with the sting.
In executing search warrants, authorities seized more than $500,000 in cash, along with more than 1,000 boxes of counterfeit merchandise and business records.
Photo courtesy of Queens District Attorney’s Office