Rival Athletic Shoe Makers Formed an Alliance to Battle Counterfeits
When U.S. Customs officials in Arizona called Van Doren Rubber Co. last August to notify the company that a shipment of counterfeit Vans athletic shoes had been seized, officials at the Orange-based company were not surprised.
Not only did the company know its goods were being counterfeited, it had already joined forces with two competitors--Reebok and Converse--in an unprecedented joint investigation to find out who was responsible.
The international probe involved a remarkable degree of cooperation among three rivals in the fiercely competitive athletic shoe business and among law enforcement officials in the United States Mexico, and Chile, according to attorneys involved in the case.
It culminated in Friday’s indictment of 18 individuals, including eight San Diego residents and three South Korean businessmen, on charges of trafficking in counterfeit goods, money laundering and making false statements to customs authorities. The conspirators allegedly sold millions of pairs of counterfeit sneakers bearing the labels of Reebok, Converse, Vans, L.A. Gear and others through two rings in San Diego.
Stephen M. McNamee, U.S. Attorney for the district of Phoenix, said the criminal investigation began in August when Mexican customs agents refused to allow the importation of a shipment of athletic shoes from Korea. U.S. Customs agents at the international port of entry in Nogales, Ariz., examined the rejected goods and found sneakers with the “Vans” label in boxes indicating that they were manufactured in Korea.
But Vans shoes are all made by the Van Doren Rubber Co. at its plant in Orange, and customs agents notified the company that they had seized what appeared to be counterfeit goods. Vans, in the meantime, was engaged in a private investigation of counterfeiting in conjunction with Reebok and Converse, and the three firms were able to provide valuable information to law enforcement authorities.
The investigation was spearheaded by New York attorney Harley I. Lewin, who initially had been retained by Reebok. Converse eventually joined in the investigation after discussions among the attorneys. Vans became involved when it asked its local attorney to look into the counterfeiting problem, and the attorney approached Lewin.
“Counterfeiting is expensive for us,” said Richard Leeuwenburg, president of Van Doren.”It costs us well in excess of $1 million a year.”
“They all decided it would be best to pool information,” said Lewin. “Doing this kind of investigation, which involves attorneys and investigators in multiple countries, is very expensive.” He declined to say how much had been spent by the three companies.
Lewin said the investigation included substantial undercover work involving people posing as buyers and sellers of athletic shoes. That effort, combined with the efforts of Mexican customs authorities, brought about the arrest of Coronado residents Nathan and Marcos Betech in Mexico City last September.
At the same time, authorities in San Diego raided the Betech companies’ offices there in response to civil lawsuits initiated by Lewin on behalf Reebok, Converse and Vans, and a federal judge subsequently ordered a freeze on all the assets of the Betech firms, known as Marnatech Enterprises Inc. and Conatech S.A.
After the seizure of Vans shoes in August, customs authorities began closing in on a second ring, allegedly run by brothers Byron and Glenn McLaughlin of San Diego. Byron McLaughlin was arrested in San Diego on Nov. 28, and his brother was arrested the same day in Miami after being lured there from Chile by customs agents posing as shoe buyers, according to an account of the case provided by Reebok.
Last Thursday and Friday, additional warrants were served and arrests made in various U.S. cities and in Mexico and Chile. About $4.5 million in assets has been seized in connection with the case, according to the U.S. Attorney’s office. The money-laundering charges, which allege the transfer of funds for criminal purposes, extended the reach of the investigation as far as Luxembourg.
The case appears to be one of the first in which the money-laundering statutes, which are aimed primarily at drug dealers, have been used against counterfeiters, McNamee said.
