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Big Counterfeiting Busts in Chinatown


Mayor Bloomberg posed for pictures holding a bright orange sign marked "closed" in celebration of the $1 million worth of counterfeit goods that investigators in his office of special enforcement had seized from several shops in the Canal St. area of Manhattan this Tuesday. Although 32 stores were temporarily shut by court order, the associated parties are unlikely to face criminal charges, as according to Bloomberg, such cases frequently rely on civil law. The property where these operations were taking place is owned by the estate of Vincent Terranova, sued in 2005 by Marc Jacobs, Burberry, Givenchy, and five other luxury brands for renting its space to vendors of counterfeit goods. 


In January of 2006, Paul Kurland, a lawyer for the Terranova Estate, was quoted in the New York Times as saying,“We’re doing our best to rid our properties of any counterfeit sales.” 


While after two years of continued counterfeit activity at this same location, Bloomberg's $1 million bust may seem like a bull's eye, it's just a beginning. New York City Comptroller reports indicate that the counterfeit trade industry is worth over $23 billion dollars and costs the city an estimated $1 billion in lost sales tax revenue per year. Aside from fiscal concerns, counterfeit goods also represent a threat to security. Their sale has been tied to funding for the 2004 train bombings in Madrid, as well as to Hezbollah and the Muslims of the Americas, an Islamic organization associated with Al-Fuqra. 


"And counterfeiting is on the rise," said Matthew Schmidt, Communications Manager at the International Trademark Association (INTA).


"As a result of the internet, small businesses and big businesses can all compete in the same region and sell their brands globally," said Schmidt, who explained that the INTA’s focus is increasingly on the internet. "It's a whole new playing field, and it’s providing new opportunities for criminals.” 


Mike Kessler, President and CEO of Kessler International, a firm specialized in forensics and corporate investigations, agrees that the internet presents new counterfeiting opportunities, but insists that until counterfeit cases are considered criminal, they will not be taken seriously. Offenders will get a slap on the wrist and find a new product to counterfeit, as has been the case with the Ben-Menachem family.   


 ___________________


  


Dr. David Ben-Menachem holds a PhD in linguistics from UCLA, has been a college professor for over 30 years, and is the author of 3 books. On the popular website, ratemyprofessor.com, students at Yeshiva University, where he worked for 5 years, describe him as an “Excellent teacher. Very methodical. Very clear.” “Knows his stuff well” and quite simply,“Best Hebrew teacher around.” What students didn’t know about their professor when his teaching contract was mysteriously discontinued in 2005, however, was that Ben-Menachem, his wife, and two sons, were generating several hundred thousand dollars a month from the counterfeit watch business they were running out of their Brooklyn home.


   


In August 2005, an investigator for Cartier International, the French jewelry and accessories giant, ordered a Cartier men’s watch from Kingreplica.com. Thirteen  days later, he received a package containing a red leather box marked “Cartier” and a watch that also bore the Cartier mark on its face, back, and clasp. The return address for the package was in China. Investigators determined that the watch was a counterfeit item of inferior quality to its original, which retails at around $3,500. As reported in documents filed in U.S Federal Court for the Southern District of New York, the database search revealed that Kingreplica.com was associated with 15 other domain names on the same server, all of which sold similar goods and were registered under Ben-Menachem’s home address. 


A seizure order was issued two months later by Judge Robert Sweet, and when investigators arrived, Chana, Ben-Menachem’s wife, denied knowledge of a counterfeit watch operation and attempted to block entry to her home. Once investigators, attorneys, and a police officer managed to enter, they encountered Aviv, one of Ben-Menachem’s two sons.


Aviv was forced to lead investigators around the home and seized evidence revealed that the Ben-Menachem family was selling several hundred thousand dollars worth of watches on their websites per month. An estimated activity of $600,0000 was indicated on the merchant application for credit card processing on bagsnstyle.com; only one of the 15 sites which their products were sold on. Items recovered during the seizure also revealed that the family was corresponding with contacts in Hong Kong and China to import and distribute their products, and that they had set up off-shore accounts in places including in Panama City, to hide their transactions. 


Left alone with one investigator on the first floor of the house, Aviv and an unidentified accomplice attempted to push an investigator and gain possession of a large box of documents in his hands, according to a summary of events of the court-ordered seizure granted to the defendant, Cartier International on May 23, 2006. The box ripped open and papers scattered, but were recovered by Aviv and his accomplice who escaped out the front door. 


When a lockbox was confiscated from Chana, who also ran a travel agency out of the basement, she aggressively tried to get it back from the police officer holding it. Chana called her lawyer, Asher White, and as a Cartier attorney was on the phone with him outside on the front porch, she locked him and approximately 10 police officers out of the house and drew the blinds. While they were outside, she hid the evidence bag and laptop computer that investigators had collected, which upon re-entry to the house they were unable to recover. 


Court documents maintain that Cartier attorneys threatened to file a Motion for Contempt until defendants agreed to return all evidence hidden during the seizure. When the evidence was delivered, files named “Cartier” had been erased from the seized laptop and documents proving sales of counterfeit products across various websites were missing. The defense produced 200 pages of documents, while investigators reported collecting approximately 1,600. 


Ben-Menachem and his wife admitted to transferring $300,000 to their sons in order to fund the counterfeiting operations, and to wiring funds to China for purchase of counterfeit goods. Ben Menachem’s sons, Aviv and Ilan, also admitted to starting foreign businesses, but refused to provide information about the transfers to overseas accounts maintained by their father. The Ben-Menachem family declined to appear at the depositions or to produce the additional documents that were hidden on the day of the seizure. 


Nineteen different Cartier registered trademarks were proven infringed upon, and Cartier was awarded $950,000 in statutory damages on January 31st 2008. Lawyers from neither party were available for comment. 


Ben-Menachem’s son, Ilan, has already been sued twice for counterfeiting, once by Rolex, once by Louis Vuitton. Evidence suggests that Ilan may have moved onto the sale of counterfeit male enhancement drugs.


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