Brash World of Bogus Goods Thrives in L.A.

In a stuffy yellow warehouse, a dozen men cheat the Chanel clothing company of big-time bucks.

Sweating, the men stitch Chanel’s chic double-C logo onto flimsy cotton T-shirts. A few minutes at their sewing machines and they can transform a generic dime-store undershirt into a coveted $50 status symbol.

The same black magic converts cheap Korean handbags into trendy French purses. A pile of newly posh bags, gold chains dangling, sits on a corner table--the fresh, faux Chanel labels worth an instant 500% markup.

Suddenly, sheriff’s deputies bust into the Pico Rivera warehouse and swoop down on the phony goods. They seize the mock Chanels and hunt for the factory’s owner. But they don’t have the resources to prosecute the men in thin white tank tops who patiently churn out the goods. “No one’s going to jail,” one deputy shouts. “We just need to search.”

The workers barely look up. They know the drill.

If the feds shut down this sweatshop, they’ll simply find work elsewhere.

Counterfeiters are always in demand.

In private homes, converted warehouses and makeshift factories throughout Los Angeles County, savvy counterfeiters are rolling out cheap, illegal knockoffs of name brand merchandise.

Veteran fraud-trackers call Los Angeles and New York the nation’s counterfeiting capitals. Darryl Phillips, a special agent for the state Department of Justice, believes the West Coast may have an edge; he pegs L.A. as “the hub for all counterfeiting in this country.”

Los Angeles’ counterfeiters spew a boggling array of impostor merchandise into swap meets, sidewalk stands, discount stores and mom-and-pop retail shops across the nation.

The problem has become so acute that Dist. Atty. Gil Garcetti held a workshop last month for business leaders to discuss trademark fraud.

“The [fashion] industry, local law enforcement and state legislators have realized that this is becoming a very serious crime, and we need to get to the bottom of it very quickly,” said Deputy Dist. Atty. Bill Clark.

The crooks who hijack familiar labels sometimes aim for flawless copies, sometimes settle for poor imitations.

One mastermind dummied up “Gucci” watches that looked so authentic even Swiss experts had trouble distinguishing real from fake. Another produced brazenly phony Louis Vuitton purses by silk-screening the trademark LV pattern on mock-leather imports.

Investigators have tracked down illicit versions of such offbeat products as Filipino soy sauce and doggie chew toys. Far more common are $10 Ray-Ban sunglasses (a cheap pair of shades dressed up with a stick-on logo) or $30 Calvin Klein jeans (generic dungarees plastered with homemade tags).

As crimes go, this type of swindle may seem fairly mild. So, the bargain purse falls apart after a few months. So, the genuine manufacturer loses a sale or two. So what?

As one counterfeiter said, “I knew it was illegal, but I didn’t think I was hurting anybody.”

In reality, however, the hurt can be huge. The International Anti-Counterfeiting Coalition estimates that trademark forgeries cost U.S. industry about $200 billion each year.

Some knockoff products can even endanger public safety: Over the past two decades, bogus airplane bolts have damaged engines, fake birth control pills have caused internal bleeding and counterfeit brake pads have contributed to car crashes.

Experts also fret about poor-quality copies of computers, scientific and electronic equipment and pharmaceuticals. Counterfeiting in these industries has surged in the past decade, as the crooks have learned to mimic sophisticated products. Just this spring, sheriff’s deputies uncovered $400,000 worth of bogus Microsoft CD-ROM encyclopedias in a Rowland Heights home.

These high-tech forgeries tend to grab the most public attention. Meanwhile, clothing counterfeiters quietly plug away at their work--steadily swindling countless customers and companies each year.

“You can tell just by walking down the streets of Los Angeles how bad the counterfeiting problem is,” trademark attorney Genaro Hathaway said.

Indeed, all along Santee Alley--a hustling corridor of discount booths in the Downtown garment district--signs pitch outrageously good deals on Cartier watches, Disney T-shirts or official National Football League jerseys.

The prices may be so ridiculous--a $15,000 watch for $20--that the vendor admits to selling a forgery. But often, the fakes are passed off as real, with price tags that nearly match the originals, such as a $50 Polo shirt “on sale” for $35.

Whether acknowledged as look-alikes or marketed as the genuine article, counterfeits are clearly popular among brand-conscious bargain-hunters.

Phillips tells tales of champagne-splashed “handbag and accessory” parties in Beverly Hills--upscale versions of old-fashioned Tupperware parties, featuring sales of forged luxuries. One counterfeiter even boasts of stocking charity auction fund-raisers with phony name brands.

As Los Angeles Police Detective Greg Schwein said: “It’s running rampant.”

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Nabbing the Chanel sweatshop in Pico Rivera was easy: A fire inspector wandered in during a neighborhood safety check and spotted the fake garments. But other investigations require more detective work.

With law enforcement generally too busy to track down fake Ferragamo purses or bogus Batman baseball caps, private sleuths take charge of most anti-counterfeiting investigations.

In Southern California, Bill Ellis and Kathy Braunstein often get the call.

Veteran private eyes, they have specialized in anti-counterfeiting work for 15 years, scratching up dossiers on 20,000 suspected forgers while working for clients such as Cartier, Gucci, Warner Bros. and Louis Vuitton. Ellis and Braunstein were among the first to focus on this field, although other detective firms now conduct similar investigations in the Los Angeles area.

“The nice thing about our job is, we’re always riding the white horses,” Braunstein said. “If someone hires you to trail a child, I don’t know how you know if you’re on the side of the right parent. We’re always on the side of law and order. We’re the good guys.”

To hunt down the bad guys, Ellis and Braunstein employ 11 detectives in their Culver City firm, National Trademark Investigations.

A few of the private eyes ferret out run-of-the-mill trademark violations--determining, for example, whether a restaurant in South Carolina named Field of Greens is infringing on the protected movie title “Field of Dreams.” The rest focus on counterfeiting, frequently slipping undercover to set up stings or infiltrate secret factories.

They’ve learned to sleuth on the most subtle of clues.

Ellis once pegged a set of Gucci watches as fakes because their plush green boxes opened only part-way--whereas the authentic boxes swung wide to a perfect right angle.

He nabbed a crate of fake perfume because of an extra “No. 5” imprinted on the glass bottles. And he scored hundreds of faux Louis Vuitton handbags when he noticed that the zipper sliced right through the interlocking LV logos.

“Counterfeiters,” Ellis said gleefully, “always make mistakes.”

But no matter how sloppy they are, counterfeiters rarely land in jail.

Although a knockoff artist can be sent to prison for five years, most garment forgers skate for a simple reason: Compared to murderers and rapists, “counterfeit handbags and Giorgio Armani apparel are not considered to be much of a public harm,” said Los Angeles trademark attorney Richard Wallen.

Prosecutors focus largely on those who run major counterfeiting operations. Even when private investigators build strong cases, prosecutors may not have the resources to take small-time counterfeiters to court.

Wily defendants can sometimes evade prison by snitching on their cohorts. Or, by simply pleading guilty.

This spring, for example, three Downtown businessmen who admitted to selling bogus Dooney & Bourke, Louis Vuitton and Chanel merchandise were ordered to serve on a graffiti-removal crew and pay a combined $7,300 in fines. And two brothers who were caught fabricating Guess? and Nautica apparel received just 180 days in County Jail after pleading guilty.

As for the minimum-wage workers who actually run the counterfeiting machines, they are rarely even arrested. For instance, the workers in the Pico Rivera Chanel factory were not charged, even though sheriff’s deputies saw them manufacturing counterfeits. Authorities could not nab the factory owner because workers who identified him later refused to testify in court.

Such mild punishments frustrate trademark holders--and scare few counterfeiters.

“I haven’t seen anybody quitting the business,” one Chanel copycat said. “Even if they get busted and go to court, they keep on doing it.”

Aiming to break that cycle, a California law that took effect in January makes it a felony to possess, manufacture or sell more than 1,000 counterfeit goods. California’s statute also allows law enforcement officials to confiscate all equipment used to make counterfeit goods--including silk-screens, button presses and elaborate stitching machines that can cost more than $45,000 apiece.

And, as before, all phony goods seized during investigations are slashed, burned or donated to charity.

Backed by the new felony penalties, county prosecutors intend to vigorously go after counterfeiters, said Deputy Dist. Atty. Bill Clark. “Before, you could get a whole warehouse of stuff [confiscated] and still only get a misdemeanor charge. It was discouraging,” he said. “Everybody will start to take notice if [counterfeiters] start going to prison.”

The first high-profile case prosecuted under the law involved Richard Isaacson, a high-rolling Florida businessman who sold “fabulous fakes” in swank communities nationwide, including Beverly Hills and Pacific Palisades.

In what investigator Stephen Lawrence called “a traveling trunk show,” Isaacson arranged parties--often complete with valet parking--at the homes of prominent socialites. Hundreds of wealthy guests would swarm in to purchase obviously bogus merchandise: a $5,000 men’s Rolex watch for $65, a $100 Mont Blanc pen for $25. From Hermes scarves to Donna Karan sweaters to Swiss Army knives, Isaacson sold every impostor product imaginable.

Convicted of selling fakes in 1993 and again in 1994, he managed to avoid jail by agreeing to community service and probation. But this spring, he landed in court a third time--and was sentenced under the felony law. He is now serving a two-year term in San Quentin prison.

Private eye Lawrence calls the felony law “a great step forward.”

But some counterfeiters remain unimpressed. “This thing will never stop,” said Omar Syed, a 34-year-old engineer who has sold fake clothing in Los Angeles.

In fact, Syed said, young hustlers continue to eagerly enter the business. As proof, he pointed to the competition that has knocked down prices on Santee Alley. A mock Chanel bag that three years ago fetched $100 now commands just $50. A pair of bogus designer earrings these days sells for $3.50, only about a dollar above the manufacturing cost.

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Along with New York and Miami, Los Angeles ranks as a counterfeiter’s paradise because its port offers the perfect front for forgers.

The crooks can legally import no-name T-shirts or jeans. They then manufacture fake labels or smuggle them through customs. With a few sewing machines, some cheap labor and a bit of heavy-duty glue, they can turn out credible replicas of Guess? or Levis or Ralph Lauren in minutes.

It’s easy. Sometimes, too easy.

Counterfeiters produce so many knockoff goods so quickly that they often raise suspicions when they try to unload their wares.

No one may look twice at an advertisement offering 50 pairs of Reebok sneakers for sale. But when a self-described wholesaler puts 70,000 pairs of identical shoes on the market at a huge discount--and claims to have no access to other Reebok models--suspicions surge.

Informants pass word of such shady deals to Ellis and Braunstein.

And that’s how the private investigators first caught wind of Al Litwin.

Litwin, a Beverly Hills businessman who described himself as a “distributor of consumer goods,” was trying to peddle 3,000 Gucci watches at less than half price on the wholesale jewelry market. He was offering a $900 diamond-studded model for just $390.

Not only was the price too good, but the watches were too plentiful. No one sells 3,000 real Gucci watches at one pop.

As Ellis explained: “If I offered you two Mona Lisas, you might get a clue that something was amok.”

The 3,000 Guccis gave Ellis his clue. So he ordered his detectives to start snooping.

Braunstein, posing as an out-of-state buyer with Mexican connections, called Litwin and bargained a price for 50 Gucci watches and several dozen Mont Blanc pens. She faxed the dealer a fake business card to bolster her cover, then told him her nephew (undercover investigator Mike Duffield) would trade cash for loot in a Los Angeles bank.

The deal went off so well that Litwin wrote a thank-you note, praising the handoff as a “textbook transaction.”

Meanwhile, agents staked out the suspect’s suburban house. Using a classic ploy, Braunstein called and said she needed 20 watches within three hours. The counterfeiter dashed off to his supplier to pick up the goods. And was tailed.

Duffield then arranged a meeting with Litwin in a local Chinese restaurant. As they nibbled dim sum, another undercover agent decked out as a tourist snapped photos of her friend at an adjoining table. Somehow, her focus kept slipping toward the suspect.

The investigators had captured him on film.

Backed up by federal marshals, Braunstein and Ellis made the bust days later, seizing $300,000 worth of Litwin’s fake watches at an airport freight warehouse. Through his phone records, they traced his connections to Hong Kong, where the bogus Gucci watches apparently were manufactured.

Because Litwin cooperated with the investigation, he received a typically light sentence. He paid Gucci damages, surrendered his fake goods and walked away.

Ellis and Braunstein might have wished for harsher punishment. But they rarely waste time complaining. After all, they have plenty of bad guys to tail, plenty of factories to raid. And they always will--at least, as long as consumers covet name brands and cherish good deals.