Crackdown on Black Market for Counterfeit CDs

The last time county investigators showed up at the Waterman Discount Mall and Indoor Swap in San Bernardino, they collected an assortment of counterfeit music CDs and warned vendors against hawking them.

“After the investigators were gone, I asked my people, ‘Hey, are you guys selling fake CDs?’ ” recalled flea market Manager Tack Choi. “They said, ‘Not anymore.’ I believed them.”

The establishment’s problems were far from over. The Waterman Discount Mall and its owner now are facing a lawsuit brought by the San Bernardino County district attorney’s office. It is believed to be among the first cases in which a law enforcement agency has filed civil charges for turning a blind eye to the sale of pirated music, authorities said.

The lawsuit filed last month in San Bernardino County Superior Court accuses flea market owner Ho Suh Jin, employee Gustavo Zarate and 50 other unnamed defendants of failing to stop the illegal activity despite repeated warnings to do so, said Deputy Dist. Atty. Glenn Yabuno.

The case is part of an emerging nationwide crackdown on illegal trafficking of counterfeit music, a problem blamed for record industry losses of $300 million a year.

Until now, the job of policing CD sales had been left to the music industry.

Over the past two years, the Recording Industry Assn. of America -- a trade group whose members create, manufacture or distribute about 90% of all legitimate recordings sold in the United States -- has filed similar civil lawsuits against flea market owners and operators in Houston; Marysville, Calif., near Sacramento; and Columbus, N.J.

“We are grateful for the efforts of San Bernardino County district attorney Michael A. Ramos and his team,” RIAA President Cary Sherman said. “It sends a clear signal that flea markets can no longer ignore the obvious: They’re harboring pirates engaged in criminal activity on their premises for profit.”

“This strong deterrent,” he said, “should further up the ante for those who think they can flout the law and rob artists, songwriters, music publishers and record companies by illegally selling copyrighted music.”

Under federal copyright law, the trade group’s member record companies have the exclusive right to reproduce and distribute their recordings. Those convicted of illegally producing and selling their works can be sent to prison for up to five years and/or fined up to $250,000 for each unlawful act.

Civil penalties can reach as high as $2,500 per violation, authorities said.

Yet the black market for counterfeit CDs remains big business.

Over the past three years, artists whose work has been pirated include Ashanti, Christina Aguilera, Alicia Keys, Britney Spears, Radiohead, Los Temerarios, Madonna, the Rolling Stones, Los Tigres Del Norte, Cher, Janet Jackson, Destiny’s Child, Mary J. Blige and Barry White, authorities said.

A complaint filed against the Columbus Flea Market -- one of the largest on the East Coast -- followed three state and local law enforcement raids in which 26 vendors were arrested and more than 26,000 illegal CDs and 4,000 illegal cassettes were seized.

In San Bernardino, the Waterman Discount Mall has been a concern since June 25, when investigators seized hundreds of CDs characterized by telltale signs of counterfeiting: one-sided black-and-white insert cards printed on thin, low-quality paper; translucent discs with a bluish tint on one side and a paper label on the other displaying little more than the artist’s name.

In subsequent visits, investigators from the RIAA and the county prosecutor’s office purchased more bogus CDs, and charged two employees from separate vending booths with multiple misdemeanor counts of failing to disclose the origin of a recording.

Each time, they followed up verbal warnings with written advisories. They also provided the flea market with cardboard “warning” signs -- printed in English and Spanish -- to be prominently displayed on the premises.

Those signs have been gathering dust in Choi’s chilly, cluttered office. Tossing one of them on his desk, he scowled and said, “I’m not hanging that thing.”

“We just manage the vendors,” he said. “They don’t pay, we kick them out. That’s all.”

Waterman Discount Mall owner Jin could not be reached for comment. But his Los Angeles attorney, Kevin Kim, said, “Mr. [Jin] was not aware that the alleged counterfeit sales were taking place in his discount mall until police came and seized counterfeit products sometime last year.”

“He has not aided anyone in selling counterfeit products,” Kim said. “But he cannot check every single tenant to make sure they don’t sell counterfeit products.”

Gabriel Mora, 21, one of dozens of employees in the sprawling flea market that houses 80 vendors, agreed.

“Yeah, they found one fake CD here,” he said. “The investigators said, ‘Don’t do it anymore.’ We don’t.”

“But hey, you can’t easily tell the difference between a good one and a bad one,” he said, holding up a CD by rap artist 50 Cent. “A crackdown is cool with me. But if the record industry lowered its prices, there wouldn’t be a problem with counterfeiting.”

The RIAA’s Sherman would say that Mora misses the point.

“Our prices are not what’s at issue here,” Sherman said. “Theft of intellectual property is at issue. Flea markets have no right to engage in theft because they think our prices are too high.”