Cartier actions disrupt major U.S. Watch counterfeiting ring

Tens of thousands of fake luxury watches with a street value of $1.5 million have been seized and a major U.S. counterfeiting ring disrupted following court orders, raids and a $4.8 million penalty, all prompted by a Cartier investigation.

The multi-million dollar penalty, issued Apr. 15, is believed to be the largest contempt-of-court judgment ever levied in a U.S. trademark case.

The companies and persons involved were allegedly responsible for at least 50% of fake luxury watches sold annually in America, including those on the Internet, JCK was told by Marc Frisanco, counsel for protection of intellectual property rights for Richemont International, the Swiss luxury group whose brands include Cartier.

“This is a significant breakthrough in our ongoing fight against counterfeiters,” said Stanilas de Quercize, president and chief executive officer of Carter Inc., Cartier’s North American division. “For the first time in the United States, we‘ve been able to target higher level wholesalers and importers rather than just street level vendors.”

The raids occurred in New York in October 2002, but details were only released this April, when case documents were unsealed. The $4.8 million judgment against each company involved was issued because the companies allegedly kept making and selling counterfeit watches, in violation of the federal court restraining order. “This shows we can hit the big guys making the money,” said Frisanco.

The case is ongoing. No criminal charges were filed, by press time, although the FBI reportedly has become involved in the investigation.

From China to NY. This case began almost two years ago. In early 2001, following another Cartier investigation, the U.S. Customs Service shut down fakegifts.com, which sold “replicas” of high-end watches online. Information from fakegifts.com and dozens of other websites Cartier has been able to shut down since then launched a new inquiry, conducted for Cartier by George Arnold Associates, a private investigation firm in North Carolina. It led to Hong Kong and mainland China, where local authorities have closed a number of counterfeit watch makers, based on evidence provided. It also led investigators to several New York City companies which allegedly imported, assembled, stamped and sold fake watches locally and throughout America.

On Oct. 4, after eight months of investigations into the multinational ring, which moved counterfeits from China through Hong Kong to New York City, Cartier and other Richemont brands filed a complaint with the U.S. federal court of the southern district of New York. It accused six companies in New York City, their owners and operators, and “various” unidentified persons and companies of violating the U.S. trademark law by making and selling fake Richemont brand watches. Judge Thomas P. Griesa issued orders halting production, sale, and distribution of the phony watches and authorizing seizure of the companies’ merchandise and assets, including $500,000 in the bank.

Search and seize. Raids by U.S. marshals took two days and occurred at six locations in a two-block radius in the Canal Street area of New York’s Chinatown. More than 124,000 phony-branded watches-including Cartier, Panerai, Montblanc, Gucci. In addition, the sting uncovered Rolex-plus fake dials with brand names, blank dials waiting to be imprinted, logos, documents and other materials were seized. It’s “an impressive collection of evidence,” said Marc Frisanco. “(With the evidence) we hope to have broken this assembly and distribution operation.”

The raids were also significant, he noted, because they substantiated “suspected close ties” with online sellers of counterfeit products. The people and places raided in October 2002 were major suppliers of fakegifts.com and other Web sites, as well as of street vendors in New York City, Los Angles, and other U.S. locations. The raids “confirmed what we believed,” Frisanco said. “There’s no difference between online counterfeiting and traditional counterfeiting, in terms of the actors involved and the problem’s dimension. Counterfeiters have simply taken advantage of the possibilities offered by the Internet.”

In March of this year, Cartier returned to court with new evidence that the six companies allegedly continued to make and sell fake watches, despite the court’s restraining order. On Apr. 15, Griesa ordered “each” violator to pay $4.8 million to Cartier and the other plaintiffs in the original complaint. “The objective of the court is to stop this counterfeit operation wherever these people are carrying it out,” he wrote, “and the court will purse this every way within the law that it can be done.”

The October raids were 2002’s second breakup of a major counterfeiting ring in New York. In May, law enforcement officials cracked one near Chinatown which made fake watches, handbags, sunglasses, videos, computer games, DVDs and CDs.