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Ben Dugan Works for CVS. His Job Is Battling a $45 Billion Crime Spree.



Ben Dugan, seen above in a CVS store, the company’s top investigator, is charged with combatting
a boom in organized theft from retail stores. ZACK WITTMAN FOR THE WALL STREET JOURNAL

Retailers are spending millions to combat organized rings that steal from their stores in bulk and peddle goods online, often on Amazon

Ben Dugan sat in an unmarked sedan in San Francisco’s Tenderloin neighborhood one day last September waiting for the CVS to be robbed.

He tracked a man entering the store and watched as the thief stuffed more than $1,000 of allergy medicine into a trash bag, walked out and did the same at two other nearby stores, before loading them into a waiting van, Mr. Dugan recalled.

The target was no ordinary shoplifter. He was part of a network of organized professionals, known as boosters, whom CVS had been monitoring for weeks. The company believed the group responsible for stealing almost $50 million in products over five years from dozens of stores in northern California. The job for Mr. Dugan, CVS Health Corp.’s top investigator, was to stop them.

Retailers are spending millions a year to battle organized crime rings that steal from their stores in bulk and then peddle the goods online, often on Amazon Inc.’s retail platform, according to retail investigators, law-enforcement officers and court documents. It is a menace that has been supercharged by the pandemic and the rapid growth of online commerce that has accompanied it.

“We’re trying to control it the best we can, but it’s growing every day,” said Mr. Dugan.

The Coalition of Law Enforcement and Retail, a trade association, which Mr. Dugan heads, estimates that organized retail theft accounts for around $45 billion in annual losses for retailers these days, up from $30 billion a decade ago. At CVS, reported thefts have ballooned 30% since the pandemic began.

Mr. Dugan’s team, working with law enforcement, expects to close 73 e-commerce cases this year involving $104 million of goods stolen from multiple retailers and sold on Amazon. That compares with 27 cases in 2020, involving half the total. CVS has doubled its crime team to 17 over the past two years and purchased its own surveillance van with 360-degree cameras and a high-powered telescope.
 

A clear plastic container is used to protect CBD products at a CVS store, one of several items
at high risk of being stolen. | PHOTO: ZACK WITTMAN FOR THE WALL STREET JOURNAL

Home Depot Inc. says the number of its investigations into these kinds of criminal networks has grown 86% since 2016 and exceeded 400 cases last year. The majority involved e-commerce. The company has doubled the size of its investigative unit over the past four years, a spokeswoman said, and the unit works alongside thousands of “asset protection specialists” stationed in stores to spot suspected thieves.

“The digital world has become a pretty easy way to move this product,” Home Depot Chairman and CEO Craig Menear told investors in December 2019, becoming one of the first executives to highlight organized retail crime. “It is literally millions and millions of dollars of multiple retailers’ goods.”

Target Corp. , Ulta Beauty Inc. and TJX Cos., which includes TJ Maxx and Marshalls, have also bulked up their resources.

Complicating the battle is Amazon itself, which investigators and law-enforcement officials say is one of the biggest outlets for criminal networks, given its huge pool of potential customers and, in investigators’ view, insufficient vetting of sellers or their listings.

Retail and law-enforcement investigators say they struggle to obtain information about potentially illicit sellers from the online giant, which generally declines to provide information about sellers without a subpoena or other legal action. Other online selling platforms such as eBay Inc. are more willing to cooperate without legal intervention, investigators say.

Amazon “may be the largest unregulated pawnshop on the face of the planet,” said Sgt. Ian Ranshaw of the Thornton, Colo., police department. “It is super hard to deal with them.”

Amazon spokesman Alex Haurek said the company doesn’t tolerate the selling of stolen goods and works with law enforcement and retailers to stop bad actors, including by withholding funds, closing accounts and making law-enforcement referrals. He said the company spent $700 million last year to combat fraud on its platform.
 

Above, various surveillance devices that keep tabs on stores.
PHOTO: ZACK WITTMAN FOR THE WALL STREET JOURNAL (4)

Mr. Haurek said Amazon doesn’t share customers’ and sellers’ personal information without a subpoena due to privacy concerns.

Organized retail crime has moved away from flea markets and corner stores and onto the Internet, where criminals can move their product quickly and anonymously. Boosters, often drug addicts targeted by crime rings, typically sell their goods for about 5% to 10% of retail value to a street-level fence, who then sells them to a larger-scale distributor.

Retail investigators blame changes in sentencing laws in some states for an uptick in thefts. In California, a 2014 law downgraded the theft of less than $950 worth of goods to a misdemeanor from a felony. Target recently reduced its operating hours in five San Francisco stores, citing rising thefts.

The corporate investigators charged with tackling the problem are often former police. They tail thieves, compile investigative reports, stalk storefronts for stolen goods and comb through trash outside suspects’ houses. They pore over videos from stores that have been robbed and scour profiles on online marketplaces.

Mr. Dugan rarely wears hats, after boosters said they assumed anyone wearing a hat was a cop. (The exception, Mr. Dugan said, is Boston, where everyone wears hats.)

Store staff are instructed not to apprehend thieves for safety reasons. Retail investigators will sometimes let a theft unfold to help identify a fence.

Earlier this year, an e-commerce analyst on Mr. Dugan’s team who looks for sellers hawking high-risk products such as allergy medicine or razorblades identified an Amazon account with over $1 million in suspicious listings. It was linked to a video store in Leominster, Mass. Local law enforcement, working together with CVS and other retailers, arrested the owner of the video store in May. Amazon kept the store up for at least six more weeks after the arrest.

Amazon’s Mr. Haurek said the account was closed “at the earliest appropriate time after reconciling inventory and completing necessary documentation.”

In late 2017, CVS investigators interviewed three different shoplifters who all said they worked for “Mr. Bob,” a man named Robert Whitley, who owned a business in Atlanta. Mr. Dugan shared pictures of the thieves with his counterparts at Target, Publix and Walgreens. They were getting hit by the same people, according to investigators and case documents.

The four teams, working with the FBI and the U.S. Postal Service, took two years to unravel the network of shoplifters who had stolen over-the-counter medicines from hundreds of stores in nearly a dozen different states.

Mr. Whitley operated an Amazon store, Closeout Express, for about seven years and sold $3.5 million in stolen goods on the platform, according to court documents. In April, Mr. Whitley pleaded guilty to transporting stolen property across state lines; his daughter pleaded guilty to conspiracy to do so. They await sentencing. Amazon said it cooperated with the investigation.

Donald Beskin, the Whitleys’ lawyer, disputed the characterization of the case, but declined to elaborate.

Law enforcement has become more focused on organized retail crime in recent years. Some states have formed regional task forces devoted to the issue.

To help those efforts, Walmart sometimes gives detectives a corporate credit card to use for undercover sting operations. In the Atlanta investigation, CVS’s Mr. Dugan said he provided FBI agents with cases of electric toothbrush heads and Fusion razorblades to help an agent make an undercover sale to Mr. Whitley.

Last year, Home Depot paid for more than $400 in equipment, including a GPS tracker, to help Colorado police follow a member of a crime ring who was transporting stolen power tools to a house 1,000 miles away in Katy, Texas.
 

The view inside Steven Skarritt's house, which was stacked with allegedly stolen goods from Home Depot.
Through his attorney, Mr. Skarritt denied wrongdoing.

The Katy house had been turned into a warehouse, complete with an elevator moving goods between floors, where Steven Skarritt, a former painting contractor, allegedly ran an Amazon storefront that sold almost $5 million in stolen goods between 2018 and 2020, according to a search warrant investigators served Amazon with in January.

The elevator was “something I’ve never seen in my career,” said Jamie Bourne, a Home Depot organized retail crime investigator involved in the case, who was there when law enforcement raided Mr. Skarritt’s house last October. They recovered 55 pallets of stolen Home Depot merchandise, including power drills, levels and vacuums.

Mr. Skarritt was charged in mid-July with first-degree felonies for money laundering and engaging in organized criminal activity. Amazon closed his account later in July. Amazon spokesman Mr. Haurek said it had agreed with Texas law enforcement to temporarily keep the account open to support the investigation.

In a recent court filing, Mr. Skarritt’s attorney, Q. Tate Williams, said there was no direct evidence Mr. Skarritt was aware of the thefts or that any of the stolen merchandise from Colorado was part of his inventory. “He denies and intends to vigorously defend these charges,” Mr. Williams said.
 

Mr. Skarritt's house included an elevator for moving goods between floors.

In recent years, retailers have pressed Congress to pass legislation requiring e-commerce sites to verify details for third-party sellers and make certain information public, making it harder for people to sell stolen goods.

Amazon, along with other online marketplaces including eBay, has lobbied against the bill, saying such measures would invade sellers’ privacy. Mr. Haurek said the legislation would favor large retailers at the expense of small businesses that sell online.

“We believe the most effective way to stop fraud and abuse is for Congress and the states to increase penalties and provide law enforcement with greater resources,” he said.

Last year, Amazon began conducting interviews to verify seller identities, and now does so for the “vast majority” of prospective sellers, Mr. Haurek said. The company also requires prospective sellers to provide government-issued identification, addresses, credit cards, bank accounts and taxpayer information. It also makes public some seller information. The verification process last year stopped more than six million attempts by apparent bad actors to create new seller accounts, he said.

In last autumn’s San Francisco case, CVS investigators for weeks tracked a ring of nearly two dozen boosters targeting their stores who were stealing up to $39,000 a day in merchandise.

They followed the stolen goods to two units in a warehouse facility in Concord, Calif. When investigators, working with local law enforcement, ran the address through an online database, one business stood out: D-Luxe.

The company was owned by a man named Danny Drago—known to boosters as “Daniel the Medicine Man” for the types of products he bought—and his wife, Michelle Fowler. A website for the company said it did business with Amazon’s “Top Rated Sellers.”

On Sept. 10, CVS’s Mr. Dugan asked Amazon for more details on its relationship with D-Luxe. Amazon refused, saying it would respond only to a subpoena from law enforcement.

When the San Mateo sheriff’s department served a search warrant to banks associated with Mr. Drago and Ms. Fowler on Sept. 28, investigators realized the Drago enterprise was bigger than they had thought, according to people close to the investigation. The district attorney’s office, through a court order, froze the accounts.

Investigators believed Mr. Drago and Ms. Fowler were involved in a nearly $30 million operation, the people close to the investigation said. Between 2017 and 2019, they operated at least two Amazon storefronts, the people said. They also sold to at least three other sellers on Amazon, one of the people said. CVS estimates the operation was selling $5 million a year in stolen goods on Amazon or to other Amazon sellers in recent years.
 

A haul of stolen goods seized by authorities in San Mateo, Calif., just one small part of the estimated
$45 billion in annual losses for retailers from theft.

Amazon suspended at least one of the accounts in 2019 and both are now closed. “The account was blocked after we suspected the seller could be listing improperly obtained product, and the seller couldn't produce valid invoices,” Amazon’s Mr. Haurek said.

Mr. Haurek declined to comment on CVS’s estimate of the Drago operation’s sales.

He said the company worked closely with law enforcement to help break up an additional ring Mr. Drago had supplied, including closing four seller accounts. When Amazon suspects a seller may be hawking goods it purchased from a retail crime ring, it requests invoices, purchase orders or other proofs of sourcing, he added.

The bank accounts indicated that Mr. Drago and Ms. Fowler also operated a smaller eBay account, the people said. An eBay spokeswoman said stolen goods aren’t tolerated on the site and that the company is committed to cooperating with law enforcement and retailers.

Law-enforcement officers served Amazon and eBay with search warrants seeking records for its accounts.

Amazon provided correspondence with Mr. Drago regarding complaints about his suspended account, but didn’t hand over financial details of transactions or internal notes about suspicious activities, despite repeated requests by law enforcement, a person close to the investigation said.

Amazon provided “extensive information,” Mr. Haurek said, but didn’t provide sales data because the warrant and follow-up requests didn’t explicitly request it.
 

Mr. Dugan holds up a foil-lined bag used to evade a CVS alarm system in a Daytona Beach, Fla., store.
PHOTO: ZACK WITTMAN FOR THE WALL STREET JOURNAL

EBay was more responsive to a search warrant, handing over detailed financial transactions for Mr. Drago’s account on its platform, said the person close to the investigation. Before the warrant, the company had also allowed a CVS investigator to access more than 15,000 financial transactions for the account associated with Mr. Drago’s storefront without any legal intervention. It subsequently shut down the account.

Days before police arrested Mr. Drago and Ms. Fowler on Sept. 30, the pair attempted to sell $1 million of stolen merchandise to an Amazon seller, according to a person close to the investigation. CVS investigators set up outside the Concord warehouse saw hundreds of boxes leaving the warehouse and alerted law enforcement and United Parcel Service Inc., which stopped the shipment. The seller no longer appears to have a storefront on Amazon.

When police raided the warehouse and other properties associated with Mr. Drago and Ms. Fowler on Sept. 30, they found more than $8 million in over-the-counter medication and other products from various retailers, along with $85,000 in cash, according to the California attorney general’s office.

Mr. Drago, Ms. Fowler and three others were charged with criminal profiteering, money laundering, conspiracy to commit a felony, possession of stolen property and organized retail theft. Both Mr. Drago and Ms. Fowler pleaded not guilty and await trial. Their lawyers either didn’t respond to requests for comment or declined to comment.

For Mr. Dugan, it was on to the next case. This week, he hired two more investigators. wsj.com
 

The INFORM Consumers Act

Buy Safe America Coalition
 

WSJ Article: Ben Dugan Works for CVS. His Job Is Battling a $45 Billion Crime Spree.

Call to Action for Every LP & AP Executive & Even the Industry's Solution Providers
Letters from you and your team & from your CEO & Legal Council

Objective: Get You Congressional Representative & Senator to Read The WSJ Article & Support The INFORM Consumers Act

This WSJ article is probably one of the most thorough and well researched articles on ORC that we've ever seen. Every elected official should read this and especially now, given the current bill sitting dormant in the Senate Commerce Committee. Which has not seen any movement since its reading in March.

We've had a couple of opportunities to get some movement when Congress has focused and was probing Amazon. And when RILA engaged them with letters and formed the Buy Safe America Coalition. Which gathered some great retail support.

But in order to motivate Congress, especially now with the focus on Cybersecurity and online criminal activity, we need every executive in the industry to get this article on your elected official's desk. And even more importantly, you need to get your CEO and legal council to send them a letter as well with the article attached and the Bill linked - demanding action!

Make sure you include and provide a link to the Buy Safe America Coalition group as well. Make sure the official has all the resources and sees the support for the Integrity, Notification, Fairness in Online Retail Marketplaces (INFORM) Act, otherwise referred to as:

S.936 INFORM Consumers Act.

Sponsor: Sen. Durbin, Richard J. [D-IL] (Introduced 03/23/2021)

Committees: Senate - Commerce, Science, and Transportation

How to Contact Your Elected Officials
● Locate your U.S. senators' contact information.
● Find your U.S. representative's website and contact information.

Folks, for years everyone has talked about the need for a Federal ORC law and now we have Bill sitting in Congress that tackles the issue. But like so many times before, Congress is dealing with issues that far out weight this issue, speaking realistically, and if we want to get it at least to the floor for a vote it's going to take a Herculean effort on the industry's part to get it there. And it needs an article of this caliber and a massive lobbying effort. Which is all of you, your teams, your solution providers, and especially your senior management teams - your CEO's and Legal Council.

Write a template letter everyone can sign. Make the effort easy for everyone. And include the Buy Safe America Coalition information.

Every Retail CEO & Chief Legal Council Should Demand Action
It's their fiduciary responsibility