We were conducting a market survey of stores selling a particular model of a camera manufactured by one of our clients that had been receiving numerous complaints about the quality of the cameras.
During the survey, we purchased counterfeit cameras from numerous small stores as well as from two different branches of a large, well-known and well-respected electronics outlet. Although we purchased the same counterfeit from both the large and small stores, our investigative approaches against both targets differed dramatically.
The small stores usually bought from a variety of distributors, changing continuously based on who offered the best price at the moment. Our approach was to make a large purchase coupled with surveillance to reveal the source of the counterfeit cameras. We worked each store independently, and by doing so we were able to identify and take down several mid-level distributors servicing these stores.
In the case of the well-known outlet, the challenge was considerably more difficult. The store was serviced by two large distributors, each of whom represented numerous companies and supplied top-name stores throughout the country as well as in several countries within the region. The fact that these distributors serviced other stores opened the possibility that counterfeits could be present in those stores as well. So, our next step was to conduct test purchases in the other stores.
Before making the purchases, however, we determined which stores were serviced by which distributor. We conducted test purchases only from the stores serviced by one of the two distributors – but not both. When counterfeits appeared in several of the stores, we could quickly identify which distributor was supplying the counterfeit goods.
The distributor in question had established a longstanding relationship with our client, supplying multiple lines of products in four separate countries. The distributor also represented other top- line companies, with contracts valued in the equivalent of millions of dollars. Consequently, the client was hesitant to believe the distributor would risk its reputation for a few counterfeit cameras.
Further investigations revealed that not all of the stores serviced by the distributor were selling counterfeits. In fact, the counterfeits were confined to about three-dozen stores, all located within a well-defined section of a large metropolitan area. Further investigation revealed that the stores in question were serviced by one particular employee of the distributor. Given that knowledge, we could then focus our investigation on the employee.
After searching public records, we found that the employee was part-owner of a company involved in importing electronics from China. We also identified an office and warehouse used by the subject and his cousin, who was a partner in the company. We learned through a credit check (which was legal to obtain without a release in the country in question) that the subject had accumulated considerable debt, in good standing, that he was paying off each month – though the payments far exceeded his income from the distributor.
The evidence we had collected led us to conclude that the distributor was not involved, so we approached the distributor and informed them about the situation. The distributor immediately called the employee in for questioning, with us present.
After presenting the evidence, the employee admitted everything and even gave us access to his warehouse, where there were only a couple of additional cameras stored. He handed over the remaining counterfeits and agreed to pay restitution to the client in exchange for not prosecuting. He also presented his resignation effective immediately. The distributor, eager to avoid adverse publicity, made further concessions to the client, including reimbursement of our investigative fees. Our client ultimately accepted the settlement.
In both cases, the investigations started off the same, with a purchase of a counterfeit camera, but the investigative approach, and outcome for each, differed significantly.