A multi-agency task force in New York City has shut down four alleged trademark counterfeiting rings operating out of self-storage facilities in Queens and Brooklyn. The three-year operation has resulted in the indictment of 26 individuals and two corporations, with 19 suspects currently in custody. The illegal operations allegedly grossed a combined $10 million in annual revenue.
Two self-storage locations were identified by the Queens County District Attorney’s Office in a press release. A Stop & Stor location at 534 63rd St. in Brooklyn and a Storage Quarters facility at 31-40 Whitestone Expressway in Queens are expected to face nuisance abatement lawsuits being filed by the Mayor’s Office of Special Enforcement. Neither company was named a suspect in the case. In its release, the district attorney’s office identified both facilities as Stop & Stor locations, but a Google search revealed the Whitestone Expressway location belonging to Storage Quarters, which was confirmed on the operator’s website.
Both storage facilities were allegedly used for storing, selling and distributing counterfeit merchandise in at least 21 states and the U.S. Virgin Islands, according to Queens County District Attorney Richard A. Brown. Counterfeit goods included apparel from brands such as Nike, Polo By Ralph Lauren, Timberland, True Religion and The North Face, as well as watches, headphones and cigarettes. In addition to those arrested, investigators used search warrants to seize more than $500,000 in cash and more than 1,000 boxes of merchandise and business records.
The nuisance abatement lawsuits against the storage operators would be similar to a New York civil lawsuit settled out of court earlier this year by self-storage operator Safeguard Properties LLC. In that case, New York City authorities sued the company over counterfeit merchandise that was seized in 2012 from one of its facilities. Approximately 44,000 counterfeit trademarked goods and pirated video and audio recordings worth more than $550,000 were being stored and distributed by Safeguard tenants.
As part of its settlement, Safeguard Properties agreed to adopt a code of best practices and include more stringent rules in its rental agreements with tenants. The new procedures include a requirement to report all suspected criminal activity to law enforcement and a tenant-lease requirement granting Safeguard access to units without prior notice.
By filing nuisance abatement lawsuits against the operators, city authorities are trying to keep self-storage operators partially accountable for illegal activity that may occur on their property. “[The] seizures build upon the city’s comprehensive efforts to target counterfeit goods and the self-storage facilities that all-too-often look the other way,” said John Feinblatt, the city’s criminal justice coordinator. “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.”
Twelve of the defendants in this case have been indicted for enterprise corruption under New York’s Organized Crime Control Act, among other charges. Those defendants face up to 25 years in prison. The remaining defendants face felony trademark counterfeiting and conspiracy charges and up to seven years in prison if convicted. The two corporations included in the indictment (not the self-storage operators) face up to $10,000 in fines or double the amount of their alleged illegal gains.
“Operations such as those allegedly run by the defendants fuel an underground economy,” Brown said. “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.”
Dubbed “Operation Finish Line,” the New York Police Department’s Trademark Infringement Unit and the district attorney’s Economic Crimes Bureau launched a joint undercover operation in November 2010. During the investigation, officials seized alleged counterfeit merchandise worth an estimated street value of $750,000. The investigation included physical surveillance of the self-storage facilities, undercover buys and court-authorized wiretapping of telephones and e-mail accounts that intercepted thousands of conversations, many of which had to be translated from Arabic and Chinese into English.
The 19 defendants in custody were arraigned in Queens County Supreme Court.