business

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

But inside, analysts and investigators are poring over footage from surveillance cameras and inventory spreadsheets. They are searching for leads on theft rings that have replaced old-school shoplifters with sophisticated criminals.

It's a battle where major U.S. retailers are struggling to gain ground, including Minnesota companies such as Target Corp. and Supervalu Inc. While retailers spend $12 billion a year to battle organized retail crime, thieves pilfer $15 billion to $30 billion annually, a huge blow to businesses and, ultimately, their customers.

"These are sophisticated crime rings," said Mike Erlandson, who heads government relations for Supervalu grocery stores, Minnesota's fourth-largest publicly traded company. "They know what to steal and how much to steal."

Target has responded by opening several crime centers across the country. The center in suburban Baltimore recently helped break a ring of 14 people who stole $20 million in merchandise from several retailers over a three-year period. Despite such victories, organized retail crime persists today, in part, because the Internet makes it easier than ever to dispose of stolen merchandise.

Thieves snag popular, easy-to-move items -- everything from Enfamil baby formula to Gillette Fusion razors to Oil of Olay lotion, often by the case. They work fast and efficiently, snatching a couple of Dyson vacuum cleaners and busting out the fire doors of stores into waiting getaway cars.

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

When it's time to turn the loot into cash, the crime rings go online. Anonymity and a worldwide market make Internet sales safer than ever for criminals, retailers contend -- safe enough that some crime rings take pre-orders, confident that they can steal what's in demand.

"The ease of selling on the Internet has made for crime waves," Erlandson said.

For that reason, Target, Supervalu, Wal-Mart and other retailers are pushing federal legislation to fight what they call "e-fencing." Online markets make retail crime too "low risk, high reward," said Brad Brekke, corporate vice president for loss prevention at Target, the No. 2 U.S. retailer.

"It's much easier to deal in stolen property than to deal drugs."

Online industry pushes back

Retailers' efforts to curtail the online sales of stolen goods have created a political tussle against Internet companies, with both sides coordinating strong lobbying efforts.

To date, the online industry has fought off bills introduced in Congress in 2009 and 2010 that, among other things, would have required eBay, Amazon.com and other online brokers to keep serial numbers of certain items and reveal records of high-volume sellers to businesses that suspect those sellers traffic in their stolen merchandise.

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

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

Jones disputes the notion that the ease of selling stolen goods online has spurred more retail crime. Overall, retail theft seems to be going down, not up, Jones maintained.

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

Whether organized retail crime is rising or falling, contraband gravitates to the World Wide Web for disposal. Along with anonymity and ease of sale come an enormously expanded market and much higher profits. An old-fashioned pawnshop or flea market fence might only pay 30 cents on the dollar value for items they suspected were stolen, Target's Brekke said. Online, with middlemen eliminated and buyers unsuspecting, the margin rises to 50 cents on the dollar.

And just about everything is available online.

In Arizona, thieves used liberal return policies of major retailers to steal items and return them without receipts in exchange for store credits. The thefts included toys and gift cards donated to the Angel Tree program for needy children. The store credits eventually showed up for sale online. With the help of eBay, Home Depot, Lowe's and Wal-Mart, prosecutors arrested a network of people and stopped a fraud that totaled $1.2 million.

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

In a deficit-wrecked economy, such corporate initiatives may be the only way overworked, understaffed state and federal prosecutors can fight property crime.

"Our loss prevention people build the entire case and hand it to law enforcement, which in many cases doesn't have the resources," Supervalu's Erlandson said.

A need for a global solution

Supported by retailers and eBay, a bill that would have established an Organized Retail Theft Investigation and Prosecution Unit in the U.S. Department of Justice passed the U.S. House in 2010. It died from inaction in the Senate Judiciary Committee.

However, political diplomacy inevitably seems to break down around codified accountability for online markets. And that, retailers insist, is the only thing that can really deter e-fencing.

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

In fact, Brekke pointed out, online markets "make a certain profit on every sale, legitimate or not."

In addition to serial numbers for electronic devices, retailers want laws that make it a crime or at least a civil liability if operators of online markets do not exercise "due diligence" to determine if merchants on their websites are selling stolen merchandise.

This is a poison pill for the online industry. Records show that lobbyists for eBay and Amazon met more than 40 times with members of Congress to stop a 2009 Senate bill co-sponsored by Minnesota Democratic Sen. Amy Klobuchar that bolstered record-keeping and legal accountability for e-fencing. Klobuchar said on Friday that she will support similar bills in the future.

"Our laws need to be as sophisticated as the crooks that are breaking them," she explained.

Jones says eBay looks into every complaint it receives from retailers, but 90 percent of those complaints do not lead to e-fencers. "We need to decide on a case by case basis how to handle bad actors," he said.

Jones, who sells expensive sports collectibles on eBay, says he would have been swept up in a proposed law that would have required publication of information on everyone selling more than $12,000 a year in merchandise. Jones said many eBay sellers work out of their homes as he does and fear they will themselves become victims of theft if their identities and addresses become more readily available.

Meanwhile, more attempts to legislate are on the way. David Garriepy, government affairs director for RILA, says the trade association is looking for members of Congress to introduce bills in the current session.

"The more you study this," Erlandson said, "the more you see the need for it to be addressed."

Jim Spencer • 202-408-2752