Retailers of Counterfeit Goods Left Holding Bag

by Mark Friedman  on Monday, Sep. 4, 2006 12:00 am  

In 2002, New York handbag designer Kate Spade sent its first letter warning the owner of the Jamileh Kamran Store in Little Rock to stop selling counterfeit handbags.

Jamileh Kamran Afsordeh didn't listen. She continued participating in a crime that some consumers consider victimless and some experts believe may be as profitable (and far less risky) as selling drugs.

In August 2005, agents from Immigration & Customs Enforcement raided her store and her brother Jalil Kamran's business, the Rejuvenation Clinic & Day Spa in Little Rock. Agents seized hundreds of counterfeit items bearing brands such as Kate Spade, Gucci, Chanel, Prada and Louis Vuitton, according to a June news release from the U.S. attorney's office. Also seized were hundreds of counterfeit labels that had not yet been attached to items, the news release said. And agents found several letters from Kate Spade telling Afsordeh to stop selling fake bags.

"Yes, I was wrong," said Afsordeh, who also goes by Jamileh (pronounced "Jamie Lee") Kamran. "In 28 years of helping people, I made one mistake. It's not fair in God's eyes for someone to come and stab them in the back because they have done one wrong thing."

When asked about the letters warning her to stop selling the counterfeit items, she said, "I don't want to get into that one because it brings all the pain for me back."

She also added: "Don't believe whatever they tell you."

Her brother didn't return a phone call.

In June, Afsordeh and Kamran pleaded guilty in U.S. District Court in Little Rock to one felony count of trafficking in counterfeit goods. They each were sentenced to probation for a year, fined $10,000 and ordered to pay $2,470 in restitution.

Boom Market

Afsordeh and Kamran bought the counterfeit items at various markets across the United States, according to Afsordeh's lawyer, Sam Heuer.

"It wasn't like they were clandestine about the purchase of the goods. They were readily available," Heuer said.

They were part of an explosion in the market for counterfeit goods. Although the domestic value of goods seized in 2005, $93.2 million, was 32.8 percent less than in 2004, the number of seizures increased by 10.5 percent. In 2005, there were 8,022 seizures, compared with 7,255 in 2004, according to U.S. Customs & Border Protection.

Government officials believe the profit from wholesaling counterfeit goods to retailers like Afsordeh and Kamran is funneled to organized crime and terrorist groups. Legitimate companies also come out on the losing end.

U.S. businesses lose between $200 billion and $250 billion in revenue annually because of counterfeiting. The U.S. government also misses out on millions of dollars in taxes, and more than 750,000 jobs are lost to counterfeiters, according to Customs.

The federal government has vowed to crack down on counterfeiters. In March, President Bush signed the Stop Counterfeiting in Manufactured Goods Act, which tightened the laws against trading counterfeit labels and packaging. It also stiffens the penalties for counterfeiters.

"We're cooperating with the private sector to raise awareness of counterfeiting so we can help stop fraud before it starts," Bush said on March 16, just before he signed the legislation.

U.S. Attorney Bud Cummins of Little Rock said he hasn't had a high volume of counterfeit cases in his district.

But the counterfeiters are out there, Afsordeh said.

"Everywhere they are selling it," she said. "The issue was to clean up (counterfeiting) but they came after the two of us."

She said customers still come into her store and tell her where in Little Rock they have purchased counterfeit items.

Afsordeh and her attorney, Heuer, didn't think selling counterfeit goods was wrong. Heuer said Afsordeh informed customers that the goods in question were "knockoffs."

Heuer said consumers should know that they can't get an authentic $500 handbag for $100.

Cummins has a different view of the arrangement. He said Afsordeh only told undercover agents that the items weren't authentic after being pressed about it.

And even if Afsordeh told every customer that the items were counterfeit, selling counterfeit goods is still against the law, he said.

Heuer said few people know that selling counterfeit items is against the law.

"I mean, our nation's built on imitations, and the law's b***s***," Heuer said. "It's a law designed solely to protect the rich and powerful."

Enforcement officials say trafficking counterfeit items is simply stealing.

"It's really not a victimless crime," said Therese Randazzo, director of the risk management division for Customs & Border Protection. "(Companies) put the research and development time into creating these products, and when you take this away from them, then you take their right to profit away from them."

Rise of Counterfeiters

Counterfeit merchandise is becoming more prevalent. And it's difficult to tell if counterfeiters have reached the saturation point, said Don Chow, an international business law professor at Ohio State University in Columbus.

One of the reasons for the explosion is that brand names have become more valuable as companies shell out millions of dollars establishing the prestige and goodwill of the brand, Chow said.

"The more desirable that that brand becomes, the more desirable it becomes for counterfeiters to make copies and knockoffs of the brand," Chow said. "(Counterfeiting) has become an extremely lucrative activity. Probably the most profitable criminal enterprise in the world today."

A counterfeiter can make as much money selling fake handbags as someone selling cocaine, Kris Buckner, president of Investigative Consultants, told the U.S. Senate Homeland Security & Governmental Affairs Committee in May 2005.

"However, today, there is little chance that a counterfeiter will ever see the inside of a prison," Buckner said.

Using advancements in technology, counterfeiters can easily make reproductions so convincing that even the companies can't tell if their product has been illegally copied. Sometimes companies have to send the suspect item to a laboratory for scientific testing to prove its authenticity.

Customers, on the other hand, enjoy the cachet of owning the equivalent of a brand-name item without paying the price. And knowingly buying counterfeit goods doesn't carry a social stigma because consumers don't mind if a faceless corporation misses out on some profit.

"There is a huge and inalienable demand for counterfeit products, and as long as there's going to be this demand, I think it's going to be difficult to eradicate it," Chow said.

China Connection

Lawmakers are trying to stop a flood of counterfeit goods pouring in from China.

"It is estimated that counterfeits constituted an alarming 15 to 20 percent of all products made in China and account for about 8 percent of China's total GDP," said Sen. Carl Levin, D-Mich., in a statement during the U.S.-China Economic & Security Review Commission Hearing in Congress in June.

He said the U.S. auto parts industry loses about $12 billion annually to counterfeit auto parts, and China is responsible for about 75 percent of those fakes.

"The industry has found enough different fake parts being sold in U.S. stores to construct an entire car," Levin said in his statement.

Unlike a fake handbag, counterfeit car parts may present safety concerns.

"Components such as brakes have been found that were made of compressed grass and wood," Levin said.

Levin urged law enforcement officials to take more action against counterfeiters.

"The bottom line is that counterfeiting is a serious and growing crime, and the Justice Department should be doing more to fight it," he said.

Companies are turning to private investigators to help break up counterfeit rings.

Several handbag companies, including Gucci, Kate Spade and Louis Vuitton, hired Haney & Associates of Eads, Tenn., to investigate Afsordeh and her brother.

Keith Haney, a retired lieutenant from the Memphis Police Department, handled the case. He said he couldn't comment on it specifically.

He said he has seen the number of people selling counterfeit goods rise over the past couple of years, and investigating them has provided a booming business for his company.

The restitution that Kamran and Afsordeh paid reimbursed the apparel companies for the cost of hiring Haney, Cummins said.

Better Days

Afsordeh said she has done a lot for Little Rock and made just one mistake.

She said she has hosted fundraisers benefiting the American Heart Association, Lion's World Services for the Blind, the American Cancer Society and the Arkansas AIDS Foundation. Afsordeh also created scarves and ties known as "The Face of AIDS."

"I love people," she said.

Afsordeh said she built up her line by helping people.

In 1997, Little Rock Mayor Jim Dailey was in an Arkansas Democrat-Gazette advertisement for Afsordeh's business. Dailey wasn't paid for the ad, but he modeled a patterned, handmade tie crafted by Afsordeh.

On Afsordeh's Web site, she touts Hillary Rodham Clinton as a client.

The Web site focuses on Afsordeh's specialty in "tailored clothing for the well-dressed individual."

Even after the news broke that her store had been raided, Afsordeh said her customers supported her. She declined to say, though, what got her involved in the counterfeit trade.

Afsordeh said she might be more willing to talk about her case in about a year.

"I went through hell and I came back," she said.

 

 

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