Uniting Against ORC

Organized retail crime accounts for approximately $30 billion in losses each year, according to FBI estimates – and that figure may be conservative.

In a 2006 NRF survey, 79 percent of retailers reported having been the victims of organized retail crime (ORC); based on preliminary responses to a survey that
will be released later this year, that figure is expected to rise to around 85 percent.

Richard C. Hollinger, a professor in the department of criminology, law and society at the University of Florida, describes ORC as being “like an iceberg. We’re just seeing the tip. It could be a much thicker berg or it could be smaller. But the more you look, the bigger the iceberg gets.”

Working in gangs, professional boosters hit retail stores one after another, sweeping products off the shelf and into bags. Stolen goods are often sold for 30 cents on the dollar at flea markets, pawn shops, small, independently-owned stores or on the streets, but the fastest-growing fencing segment is online auctions.

Based on the estimates of several retailers, approximately 18 percent of all stolen goods (around $5.4 billion) are being sold via the Internet. More strikingly, retailers estimate that approximately 25 to 30 percent of goods being sold on web auction sites were stolen or fraudulently obtained, according to NRF’s preliminary survey findings.

Former supervisory special agent Brian J. Nadeau, program manager of the FBI’s Organized Retail Theft Program, has told the consumer press that boosters can walk out with “$5,000 to $10,000 worth of merchandise each time they leave a store.” The same team might hit several stores in a day — and the same store once a month. “A really good professional thief can make between $100,000 and $200,000 a year,” he says.

In response, retailers are increasing their collaboration with local law enforcement, the FBI and fellow retailers, as well as lobbying for stiffer penalties against those that commit ORC. And the results, while scattered, are encouraging.

In January, law enforcement teams throughout central Florida arrested 18 people related to a multi-million dollar retail theft ring and fencing operation involving health and beauty aids and over-the-counter medicines. Estimated retail value for the goods, stolen over a five-year period, is between $60 million and $100 million.

Each suspect is being charged with one count of felony racketeering, which carries a maximum penalty of 30 years in prison, and one count of felony conspiracy to commit racketeering, which carries a maximum penalty of 15 years in prison.

A month later, an investigation in Rocklin, Calif., resulted in the arrest of three individuals who allegedly were part of an ORC ring stealing products like Prilosec, Crest White-Strips and Oil of Olay from Longs and Safeway stores.

Target recently cooperated with California law enforcement in a sting involving 13 street gang members (Tony Heredia, director of assets protection for Target, would not say where it occurred because the case was still being prosecuted).

As recently as three years ago, only a small handful of retailers had ORC units. “That was one of our biggest problems, says Frank Muscato, ORC investigations supervisor for Walgreen. “If we couldn’t get retailers to recognize how big a problem ORC is, how could we get law enforcement to recognize it?”

Today, he says, “pretty much every major retailer has people assigned to fighting organized retail crime within their company, and more companies are creating a separate division within loss prevention to fight ORC.”

FBI ORC division
Earlier this year, the FBI took a major step in recognizing the seriousness of ORC by establishing a division dedicated to investigating ORC incidents. Muscato characterizes the FBI action and the increased emphasis on retail ORC units as “huge accomplishments” in the fight against organized retail crime.

In the Polk County (Fla.) arrests cited earlier, retail investigators and law enforcement used software tools to scan the Internet looking for auction or other websites that could be selling stolen product. High-volume sellers were identified from their seller IDs, says Joe LaRocca, NRF vice president of loss prevention, and “the police knew exactly where to go to start searching and conducting surveillance.”

LaRocca points out that such investigations are most effective when merchandise contains RFID tags or other hidden labeling. Law enforcement recovering stolen property can log onto LERPnet, a secure national database that allows retailers and law enforcement agencies to share information about ORC activities, to see if any losses have been reported for those items.

Many LP specialists meet regularly with their counterparts in other retail organizations and with law enforcement to share information that could help thwart ORC activity. Just as significantly, many retail LP departments are working with their companies’ government affairs departments in lobbying for stiffer penalties for organized retail criminals. And their efforts are paying off.