- Chris Swecker
- Assistant Director, Criminal Investigative Division
- Federal Bureau of Investigation
- House Judiciary Committee Subcommittee on Crime, Terrorism, and Homeland Security
- Washington, DC
- March 17, 2005
Good morning Mr. Chairman and members of the Judiciary Committee. On behalf of the Federal Bureau of Investigation, I would like to express my gratitude to the committee for affording me the opportunity to speak with you concerning the FBI's efforts in addressing the nationwide problem posed by criminal enterprises involved in the theft, diversion, repackaging, and ultimate resale of consumer products, to include such items as over-the-counter medications, prescription drugs, health and beauty aids, and infant formula.
This problem is significant for the economic losses it brings to manufacturers and retailers, which are then passed on to consumers. Ultimately, the American consumer ends up paying significantly higher prices for these products. This problem is particularly acute in the area of Organized Retail Theft (ORT) by criminal enterprises. It is estimated that the retail industry loses between $15 to $30 billion annually to such theft.
The unsuspecting consumer also faces potential health and safety risks from legitimate products which may have been mishandled by the criminal enterprises who stole them for resale to consumers. In many cases, stolen infant formula, pharmaceuticals, and other consumables are not stored under proper conditions. When these items are reintroduced into the retail market, they can pose a significant health hazard to the consumer.
The potential threat to the health and safety of unsuspecting consumers is most evident in cases in which infant formula is stolen, repackaged and then resold to both knowing and unknowing wholesalers, who then sell the infant formula to government food programs and discount stores.
The first phase of the ORT Initiative included the formation of a National Retail Federation (NRF)/FBI Intelligence Network. This network is a partnership between the FBI, state and local law enforcement, and corporate security entities; to establish an effective means of sharing ORT information/intelligence; to discuss ORT trends as they relate to specific areas of the retail market; and, to identify and target the most significant ORT criminal enterprises, particularly those that may be involved in the funding and/or supporting of terrorist organizations or activities.
Stolen prescription and over-the-counter medications and health and beauty aids are also sold to illegitimate wholesalers who specialize in the repackaging and reintroduction of these products into the retail market, creating the same health and safety concerns. These illegitimate wholesalers also work with other criminal enterprises to facilitate the introduction of counterfeit prescription and over-the-counter medications and health and beauty aids to unsuspecting retailers and consumers. In addition to these concerns, the potential for intentional product tampering prior to the reintroduction of the stolen merchandise into the retail market is significant.
These sophisticated ORT criminal enterprises can best be dismantled through a coordinated and cooperative effort between law enforcement and the manufacturing and retail industry. In December 2003, the FBI established an ORT Initiative to identify and ultimately to disrupt and dismantle the most sophisticated, multi-jurisdictional ORT criminal enterprises, using the Interstate Transportation of Stolen Property, Money Laundering, and RICO statutes.
Increased information sharing and cooperation between law enforcement and the private sector will enable both to gain a better understanding of the full nature and extent of this crime problem, as well as to identify the best methods for law enforcement and the manufacturing and retail industry to attack this serious crime problem.
The FBI's ORT Initiative and the formation of the Intelligence Network has received strong support from the retail/food industry. Information obtained through this initiative has been furnished to appropriate FBI field offices to initiate investigations and to facilitate a more effective, intelligence-driven investigative response to the significant problem of ORT criminal enterprises.
As part of the Intelligence Network, the NRF is creating a Retail Loss Prevention Intelligence Network Database (RLPIN). This database will provide retail entities and law enforcement with an ORT information/intelligence sharing capability. The FBI is serving on the RLPIN committee in an advisory capacity.
In addition to the ORT Initiative, the FBI is identifying and targeting multi-jurisdictional ORT criminal enterprises utilizing joint Major Theft Task Forces. These task forces, which combine the resources of local, state and federal law enforcement, as well as manufacturing or retail security personnel, are applying investigative techniques and strategies which the FBI has successfully utilized to target traditional organized crime, including the development of a solid intelligence base and the use of undercover operations and various electronic surveillance techniques. These task forces increase the effectiveness and productivity of limited personnel and logistical resources, avoid the duplication of investigation resources, and expand the cooperation and communication among federal and state law enforcement agencies.
Currently there are 9 FBI-led Major Theft Task Forces located in the Houston, Memphis, Miami (2 Task Forces), Newark, New York, Philadelphia, San Juan, and Washington DC Field Offices. These task forces are responsible for conducting investigations of all major theft violations to include retail, cargo, vehicle, and jewelry and gem theft. As of this date, the 9 FBI-led Major Theft Task Forces are staffed by FBI Agents and other federal, state and local law enforcement officers.
In FBI Field Offices that do not currently have formal Major Theft Task Forces, significant ORT investigations are being conducted by criminal enterprise squads. Many of these investigations are worked in coordination with state and local law enforcement agencies, and include assistance from manufacturing and retail security entities.
In summary, Major Theft Task Forces are an extremely effective manner by which to combat ORT criminal enterprises. They "force multiply" federal resources, benefit local law enforcement efforts, eliminate redundant investigative efforts, reduce concurrent jurisdictional issues, encourage information sharing and intelligence development, and reduce substantial organized retail theft.
The use of Major Theft Task Forces, coupled with a partnership with the retail industry, is seen by the FBI as one of the most effective and efficient tools by which to identify, disrupt and dismantle organized retail theft criminal enterprises impacting the health, safety and pocketbook of American consumers.