Inside the organized crime rings plaguing retailers including Ulta, T.J. Maxx and Walgreens

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In a tony suburban enclave successful nan San Diego foothills, constabulary say, an organized unit crime “queenpin” had built an empire.

Tucked down nan chromatic walls of her 4,500-square-foot Spanish-style mansion, Michelle Mack had stockpiled a mini luck successful cosmetics that had been stolen from Ulta and Sephora stores crossed nan country, authorities said. 

Police don’t fishy that Mack, 53, took the items herself. Instead, they say, she pulled nan strings from nan shadows, employing a web of astir a twelve women who stole nan items for her truthful she could resell them on AmazonWith their airfare, car rentals and different recreation expenses paid by Mack, nan suspects committed hundreds of thefts up and down nan California seashore and into Washington, Utah, Oregon, Colorado, Arizona, Illinois, Texas, Florida, Pennsylvania, Massachusetts and Ohio, investigators said. Mack selected which stores to target and what merchandise to return and nan women were sent to clear retired full shelves of merchandise earlier making disconnected pinch the stolen equipment stuffed into Louis Vuitton bags, investigators said.

Investigators began referring to nan theft group arsenic nan “California Girls” and considered Mack nan crew’s ringleader. She made millions reselling nan stolen items connected Amazon to unwitting customers astatine a fraction of their emblematic unit price, investigators said, earlier she was arrested successful early December.

Law enforcement officials opportunity Mack’s alleged theft ringing is conscionable 1 of nan galore that are plaguing U.S. retailers and costing them billions successful losses annually. Their emergence has led galore companies to lock up merchandise, prosecute information guards and lobby lawmakers for stricter regulations.

These organized theft groups don’t typically transportation retired nan splashy “smash and grab” robberies seen successful viral videos. Instead, they pilfer equipment quickly, softly and efficiently. They often usability wrong elaborate, organized structures that successful immoderate ways mimic nan corporations they’re stealing from, constabulary said.

CNBC has spent astir 8 months embedding pinch various rule enforcement agencies and investigating theft groups to understand what organized unit crime looks like from nan ground. In immoderate cases, CNBC witnessed low-level shoplifting incidents involving group who appeared to beryllium bum aliases mentally ill. In different instances, CNBC saw takedowns of alleged organized theft groups that constabulary said were reselling stolen merchandise astatine flea markets. Mack’s group, from her alleged web of master thieves to her lucrative Amazon marketplace, was by acold nan astir blase 1 CNBC tracked alongside police.

But national agents with Homeland Security Investigations, nan Department of Homeland Security’s rule enforcement branch, said immoderate crime groups are moreover much elaborate — and theft is conscionable 1 facet of their enterprises.

“We’re talking astir operations that person fleets of trucks, 18-wheelers that person palletized loads of stolen goods, that person cleaning crews that really cleanable nan equipment to make them look marque new,” said Adam Parks, an adjunct typical supplier successful complaint astatine HSI, which is nan main national agency investigating unit crime.

“Just for illustration immoderate business, they’ve invested their superior into business assets for illustration shrink wrap machines, forklifts,” Parks, who useful retired of HSI’s Baton Rouge, Louisiana, office, told CNBC successful an interview. “That is what organized theft looks like, and it really is indistinguishable from different e-commerce distribution centers.”

These theft groups successful their myriad forms person go a thorn successful nan broadside of retailers large and small, prompting retailers to cite crime as nan logic for little profits, nan inability to prosecute and clasp staff, and nan degradation of nan in-store experience. They person besides agreed politically divided Americans in their disdain for seeing mundane products locked up down solid cases and witnessing brazen theft gone unchecked successful stores.

Whether organized unit crime is really rising is up for debate. Retailers including Target, Foot Locker, Walgreens and Ulta have said theft is simply a increasing problem in caller years. But fewer person said how often it’s happening or really overmuch money they’re losing from it, fueling accusations from immoderate experts and analysts that they’re blaming crime successful bid to disguise operational missteps.

The National Retail Federation estimates that retailers mislaid $40.5 cardinal to outer theft, including organized unit crime, successful 2022. That represented astir 36% of full inventory losses — somewhat little than nan 37% successful 2021.

Even if theft has not meaningfully reduced some retailers’ profits, galore person warned that crime tin frighten nan information of workers and shoppers.

“The financial effect is real, but measurement much important is nan quality impact, nan effect it has to our associates, nan effect it has to our guests,” Ulta CEO Dave Kimbell told CNBC successful a uncommon sit-down interview.

“It besides impacts nan communities successful which we live,” he said. “If group don’t consciousness safe going successful to shop successful definite areas of a community, it really has an effect and tin alteration neighborhoods and alteration communities complete time.”

The authorities consequence to nan issue has grown in turn. Both section and national agencies person stepped up enforcement of laws targeting organized unit crime, and lawmakers are proposing and passing more measures that stiffen penalties for theft offenses.

HSI initiated 59 cases against organized theft groups successful fiscal 2021, resulting successful 55 indictments and 61 arrests, nan agency said.

By nan extremity of fiscal 2023, cases had much than tripled, to 199. Indictments spiked much than fivefold to 284, while arrests soared to 386, much than six times nan number successful 2021.

California Highway Patrol, which runs 1 of nan astir progressive unit crime task forces successful nan country, reports it made 170% much arrests for organized theft offenses successful 2023 than it did successful 2022.

It’s not clear whether organized theft offenses accrued successful that clip aliases officials ramped up enforcement arsenic nan rumor sewage much nationalist attraction and nan unit industry’s lobbying motor pressed them to make it a priority.

CNBC embedded pinch teams from HSI and California Highway Patrol to witnesser 4 organized unit crime operations for this investigation. The probe is besides based connected much than a twelve interviews pinch rule enforcement officers, unit leaders and customers, on pinch records, including tribunal filings, institution reports and spot records.

New Orleans

On a sweltering Monday greeting successful July, astir a twelve agents from HSI New Orleans gathered down nan U.S. Custom House, preparing for Operation French Quarter.

The officers were instructed to airs arsenic shoppers wrong 3 Walgreens stores and one CVS store successful nan area seeing precocious rates of theft, sometimes arsenic galore arsenic 20 to 30 incidents per day, agents said.

As national rule enforcement agents who typically analyse terrorism, activity trafficking and pack leaders specified arsenic Joaquin “El Chapo” Guzman, nan officers weren’t location to apprehension group for petty theft. They had a clear directive: Find retired who’s stealing and travel them retired of nan shop to find who other they whitethorn beryllium moving with.

“Obviously, nan sanction of nan game, guys and girls, is trying to get nan bigger and amended fish,” Assistant Special Agent successful Charge Scott Robles, who led nan operation, told nan assembled officers. “We’re trying to place nan group who are successful complaint of this organized crime.”

At nan bottommost of organized unit crime rings are boosters — nan group who spell into stores and return nan items. Robles was hoping nan serial thieves targeting nan drugstores could lead them to a larger operation.

“It tin beryllium anybody. It could beryllium nan mom pinch 5 kids conscionable looking for other money. It tin beryllium personification that’s portion of a team. ... They whitethorn beryllium getting paid pinch food, they whitethorn beryllium getting paid pinch brew aliases drugs,” Robles said. “Some group get paid rate aliases they’re trying to activity disconnected a debt.”

Throughout nan hourslong operation, agents identified astatine slightest 1 lawsuit that they say plainly showed organized theft.

Surveillance footage of nan incident shows a man participate 1 of nan Walgreens stores, caput to nan cosmetics aisle, region a integrative shopping container from his pants and calmly load it up pinch 17 jars of nail polish, weighted astatine astir $200. He past walked astir a half mile distant to nan New Orleans Public Library’s main branch, wherever he sold nan nail polish to a information guard, constabulary said.

Federal agents concisely questioned nan information guard, and nan incident remains nether investigation.

Beyond that instance, nan immense mostly of nan thefts agents witnessed during nan cognition were low-level and petty, involving group who appeared to beryllium homeless, mentally sick aliases transient. One man stole insubstantial towels and past walked into a bum shelter. A group took a lawsuit of brew and later went to a parkland to portion it. A female stole a lawsuit of water, group up a guidelines to resell it and past defecated connected nan sidewalk.

Operation French Quarter showed really nan lowest level of a unit crime cognition tin function, and really moreover mini thefts tin impact coordination among bad actors. Still, nan incidents underscore nan challenges investigators look erstwhile trying to build cases; they besides show conscionable really petty galore thefts are, particularly successful municipality areas pinch precocious rates of homelessness and addiction.

A Walgreens spokesperson told CNBC that nan concatenation is “focused connected nan information of our patients, customers and squad members” and is taking steps to “safely deter theft” and “deliver nan champion diligent and customer experience.”

“We are moving intimately pinch rule enforcement, elected officials and organization leaders to tie greater attraction to and amended our consequence to unit crime,” nan spokesperson said.

San Jose

Crates filled pinch unopened jugs of Gain, Tide and Downy detergent. Boxes stuffed pinch Gillette razors, Olay moisturizer and Allegra allergy pills. A heap of sparkly metallic boots successful sizes 8, 9 and 10 pinch nan T.J. Maxx tags still on.

This is conscionable immoderate of nan merchandise that California Highway Patrol recovered wrong a location and retention instrumentality belonging to suspected members of an organized unit crime ringing during a ambush successful November.

In all, investigators uncovered astir 20,000 items weighted astatine much than $550,000 crossed 5 locations connected pinch nan group, according to CHP. Police fishy nan mostly of nan items were stolen from T.J. Maxx stores and a assortment of drugstores and market stores successful and astir nan Bay Area.

CHP’s probe began successful September, erstwhile investigators from TJX Companies, nan proprietor of T.J. Maxx, reached retired to nan agency’s organized unit crime task unit pinch accusation astir a crime ringing that it said was buying and reselling stolen equipment — a “fencing” operation.

When boosters request to rate successful connected nan items they take, they move to fencers, who bargain nan products for pennies connected nan dollar and resell them astatine a separator Wall Street could only dream of, unit crime investigators person said.

Experts said retailers tin person a difficult clip persuading rule enforcement to analyse theft astatine stores because it is often considered a spot crime, which constabulary thin to spot arsenic little urgent than homicides, shootings and narcotics crimes.

To show rule enforcement nan scope of nan problem, TJX investigators began conducting surveillance connected nan alleged crime ring. CHP agreed to return nan case. Sgt. Manny Nevarez, who oversees each organized unit crime investigations successful nan Bay Area for CHP, told CNBC nan group had deed stores successful aggregate counties in an effort to evade detection.

“They are not catching connected that immoderate of nan retailers person their ain nonaccomplishment prevention unit and typically, if you target 1 shop successful San Jose, past nan connection gets retired and past nan adjacent shop is notified,” said Nevarez. 

Police learned that alleged members of nan group were reselling nan suspected stolen merchandise retired of their homes and astatine nan section Capitol Flea Market — a sprawling switch meet connected nan outskirts of San Jose. Officers besides witnessed members of nan unit receiving suspected stolen merchandise, transferring those equipment to others successful their web and exchanging money.

At nan extremity of November, dozens of CHP investigators moving pinch TJX descended connected nan 5 locations connected pinch nan alleged fencing ringing and carried retired hunt warrants successful a ambush cops dubbed “Operation Kingsfall.” The locations included galore homes on pinch a retention unit. 

“Nosotros somos policia,” nan officers shouted successful Spanish extracurricular 1 of nan homes. “Police, hunt warrant. Open nan doorway pinch your hands up,” they continued, switching betwixt English and Spanish earlier utilizing a battering ram to sound down nan door.

The location, an innocuous single-family location pinch Christmas decorations retired front, looked for illustration immoderate different connected nan block. But connected nan sidewalk and writer adjacent nan spot statement sat dozens of discarded clothing tags, anti-theft devices, hangers and different unit shop detritus.

Inside nan home, CHP officers and TJX unit recovered mountains of equipment they fishy were stolen to resell, including bags of apparel pinch nan tags still affixed, boxes of Huggies diapers, liquor and powerfulness tools.

By nan clip authorities completed nan raids, they had capable suspected stolen merchandise to capable 3 20-foot-long U-Haul trucks. A spokesperson for nan Santa Clara County District Attorney said it is charging 9 defendants successful relationship pinch nan alleged crime ring.

The rule enforcement cognition witnessed by CNBC showed nan breadth of immoderate of nan fencing rings successful nan U.S. and really flea markets tin play a domiciled successful nan waste of stolen goods. Capitol Flea Market didn’t respond to a petition for comment. 

“There’s definite crimes that travel up wherever nan nationalist reaches a constituent wherever they’re like, ‘We person had capable of this,’ right?” Lt. Michael Ball, who helped oversee nan operation, told CNBC. “And this is 1 of those that’s reached that level wherever group are saying wide and shouting it each nan measurement up to our governor’s agency that they person had capable of this.”

In a statement, a TJX spokesperson said nan institution is “thankful” for CHP’s efforts and is taking organized unit crime “very seriously.” The spokesperson said TJX is “laser-focused connected ways to mitigate theft successful our stores.”

The institution told CNBC it will not resell nan recovered merchandise. If TJX considers nan items to beryllium successful suitable condition, it will donate them to charities successful nan area wherever they were found, nan institution said. If it deems nan products unsuitable, it will activity to dispose of them “responsibly,” it said.

San Diego

When Donna Washburn started shopping for a Christmas gift for her girl successful December, she wanted to “splurge” and bargain her a vessel of Nars foundation. But she couldn’t find it successful banal astatine a shop adjacent to home.

So, for illustration galore consumers, she Googled nan product. She saw it was disposable connected Amazon and costs astir $38 earlier tax, astir 30% cheaper than its emblematic unit value of $52.

“I said, you know, ‘It’s Amazon, it’ll travel fast.’ It was nan opening of December. So I really didn’t want to hold excessively overmuch longer for Christmas,” Washburn told CNBC successful an interview, adding she was told it would get by Dec. 11.

Unknown to Washburn, constabulary say, that vessel of instauration had apt been stolen by nan unit of boosters allegedly employed by Mack — nan suspected unit crime mastermind accused of moving an illicit business from her San Diego mansion.

The Christmas gift yet ne'er arrived, because Mack was arrested earlier she could vessel nan package, which was 1 of galore recovered successful Mack’s residence by investigators.

“I salary attention, but not that much, you know?” said Washburn, a 63-year-old objective acquisition subordinate successful St. Augustine, Florida. “I’m shopping from Amazon. Hopefully you tin spot it. So now that we cognize amended ... we’ll deliberation twice.”

Washburn had bought nan instauration from an Amazon storefront dubbed Online Makeup Store, which Mack had opened successful 2012. CNBC viewed it earlier it was taken down successful precocious 2023.

On its face, Mack’s storefront looked nary different from nan millions of others connected Amazon’s marketplace. It had 4.5 stars connected much than 100 reviews, and featured cosmetics from celebrated brands specified arsenic Mac, Tarte and Charlotte Tilbury that shoppers tin find successful vicinity beauty stores.

There was conscionable 1 reddish flag: nan prices. Many of nan products for waste astatine Mack’s shop were listed astatine a fraction of nan emblematic unit price, including a $25 vessel of Estee Lauder foundation that typically retails for $52 and Too Faced mascara that typically goes for $29 and was being sold for $17.

The shop brought successful millions. Since 2012, Mack sold astir $8 cardinal successful cosmetics done nan storefront earlier it was unopen down, and she brought successful $1.89 cardinal successful 2022 alone, Amazon income records provided to investigators show.

Mack could connection specified debased prices, constabulary suspect, because her unit of boosters had stolen nan products successful hundreds of incidents complete much than a decade. Some of nan thefts brought successful astir $2,000 successful merchandise while others netted arsenic overmuch arsenic $50,000 worthy of merchandise, prosecutors said.

Mack’s business was humming on up of nan vacation shopping season until nan cautiously crafted empire constabulary opportunity she built crumbled. On a cool December greeting conscionable earlier dawn, a convoy of CHP and HSI agents, equipped pinch a hunt warrant, raided her sprawling mansion.

Mack, dressed successful a babe pinkish pajama group and a brace of fuzzy mule slippers, was handcuffed and put into a constabulary car arsenic her teenage daughters stood successful nan driveway, watching.

Inside her garage, investigators recovered what they described arsenic a “mini-store” — shelves and shelves of beauty products, sunglasses and designer bags organized successful neat bins and categorized by product. They besides recovered hundreds of postmarked yellowish envelopes destined for unwitting customers, including Washburn, pinch “Online Makeup Store” marked arsenic nan return address.

Police recovered astir 10,000 items worthy a full of much than $387,000, CHP said.

In February, California Attorney General Rob Bonta revenge a full of 140 felony charges against Mack; her husband, Kenneth Mack; and 7 different alleged members of nan crew. The charges included conspiracy to perpetrate organized unit theft, expansive theft and receipt of stolen property. The defendants person each pleaded not guilty. CNBC contacted each suspect aggregate times for comment, but nary of them responded.

“This is simply a multimillion-dollar criminal scheme. It was complex. It was orchestrated,” Bonta said erstwhile announcing nan charges. “We are not talking astir garden-variety shoplifting.”

Court records revenge successful relationship with the case provide a uncommon glimpse into nan soul workings of an alleged organized unit crime ring. They show matter messages betwixt nan suspects and specifications astir nan operation.

“I’m not stealing regular I’m going to commencement filling up my container quick. So I want to cognize worldly I tin drawback successful bulks too,” Kimora Lee Gooding texted Michelle Mack on Jan. 7, 2023.

Between Jan. 30 and Feb. 16, 2023, Gooding committed astatine slightest 10 abstracted thefts astatine Ulta stores crossed California, prosecutors allege successful tribunal records. In each case, Gooding took much than $950 worthy of goods, nan records say.

On Feb. 21, a fewer days aft Gooding’s drawstring of thefts, Mack sent her a screenshot of “Online Makeup Store” pinch an reside she could vessel nan stolen products to. It was nan aforesaid business reside that was listed connected Mack’s Amazon page earlier it was unopen down, and traced backmost to a station agency container a fewer miles from her home.

“Even without lancome we still did well,” Michelle Mack texted her hubby 2 days later, allegedly referencing a prestige cosmetics marque owned by L’Oreal.

Soon, orders were pouring into Michelle Mack’s Amazon store.

“Lots of orders let’s get shipping,” Kenneth Mack texted Michelle Mack alongside an image that showed a bin afloat of paper.

By July 8, it appeared that nan haul Gooding and others had allegedly brought successful had dried up. Michelle Mack needed much things to sell.

“Did you get immoderate caller girls?” Michelle Mack texted Alina Franco, different personification charged successful relationship pinch nan theft crew. “I really request merchandise truthful if you person thing please fto maine know.”

A time later, 2 much thefts connected to nan ringing were committed and galore much followed, prosecutors said.

In summation to Ulta and Sephora, nan theft statement targeted a scope of different retailers, including Macy’s-owned Bloomingdale’s, Prada, Bath & Body Works, Victoria’s Secret, and Luxottica’s Sunglass Hut and LensCrafters, prosecutors said.

Sephora and Bath & Body Works declined to talk nan lawsuit pinch CNBC. Victoria’s Secret, Macy’s, Prada, Sunglass Hut and LensCrafters didn’t respond to requests for comment.

Despite nan caller surge of headlines and commentary connected nan topic, organized theft groups person agelong operated astir nan world. But unit manufacture leaders and immoderate rule enforcement officials reason nan emergence of online marketplaces and e-commerce has caused specified incidents to summation aliases person made it easier for theft groups to operate.

“There’s an easiness of distribution that has go moreover much prevalent for stolen equipment done online marketplaces. ... You utilized to person to waste stolen equipment astatine flea markets aliases retired of nan trunk of your car aliases possibly conscionable locally,” said Ulta’s Kimbell. “Now, you person much blase devices to person a broader scope crossed nan state aliases moreover internationally.”

While Kimbell didn’t sanction Amazon specifically, he said online marketplaces are “part of nan problem” and should beryllium utilizing nan data, analytics and different exertion disposable to them to beryllium much “proactive” successful shutting down bad-actor sellers.

“We shouldn’t person an situation wherever it’s imaginable to bargain from 1 retailer and [have it] extremity up connected immoderate different platform, immoderate different large-scale, mainstream platform” that group see legitimate, said Kimbell.

Bonta called connected Amazon and different marketplaces to “do more.” He said they could pass rule enforcement, aliases astatine slightest talk to a seller, erstwhile reddish flags specified arsenic unusually inexpensive equipment popular up.

“If you frost retired nan request and region nan marketplace by closing retired nan marketplace wherever nan stolen equipment are truthful easy sold, you make organized unit crime arsenic an organized crime little attractive. And we request to create barriers, alternatively of ease, for nan expertise to perpetrate these crimes,” Bonta said successful an interview.

In response, an Amazon spokesperson said that nan institution has “zero tolerance for nan waste of stolen goods” and that nan institution invests much than $1 cardinal annually successful preventing fraud and abuse.

“We leverage blase discovery and prevention solutions crossed our stores and fulfillment operations, allowing america to quickly spot a scope of organized unit crime (ORC) schemes,” nan spokesperson said successful a statement.

The spokesperson said Amazon supports efforts to trace items passim nan proviso concatenation and investigates allegations of stolen merchandise to find retired really products were obtained.

“When we place an issue, we activity intimately pinch rule enforcement, retailers, and brands to extremity bad actors and clasp them accountable, including withholding funds, terminating accounts, and making rule enforcement referrals,” which person led to arrests, merchandise seizures and nan disruption of unit crime rings, nan spokesperson wrote.

The institution said it assisted pinch nan investigation into Michelle Mack’s alleged theft unit and provided grounds to investigators. It said it’s “pleased” nan suspects were arrested because it “sends a beardown connection that nan waste of stolen equipment has terrible consequences.”

Consumers, galore of whom are quiet for deals arsenic they contend pinch lingering ostentation and precocious liking rates, whitethorn consciousness that buying stolen equipment is simply a victimless crime, experts say.

Michael Krol, HSI’s typical supplier successful charge, disagrees pinch that idea. He said not only does theft lead to higher prices for consumers but besides nan items they’re buying could beryllium unsafe because of really they were stored aliases different manipulated.

“Those items mightiness not person nan value assurance and compliance that we expect successful nan United States. Baby formula, your medicines ... [Consumers] could beryllium buying babe look that’s expired by 3 months,” said Krol.

The Inform Consumers Act, which took effect successful June, was designed to curb nan waste of stolen, counterfeit aliases different harmful products connected online platforms by requiring marketplaces to verify and stock identifying accusation connected definite third-party sellers.

The rule was designed to forestall nan nonstop type of illicit business Michelle Mack is accused of conducting connected Amazon. If sellers are required to supply their interaction accusation to marketplaces and connected their listings, bad actors whitethorn beryllium deterred from trading illicit goods.

However, Michelle Mack’s business sanction and an reside belonging to it had been verified and was publically disposable connected her seller’s page. She’d already been connected nan level for much than a decade by nan clip nan Inform Act rolled around.

The verification process that Amazon conducted for Michelle Mack’s shop aft nan Inform Act passed wasn’t capable to raise nan company’s suspicions, either.

“In this instance, we did not person signals to place nan seller was engaged successful trading stolen goods,” Amazon said.

As portion of nan law, marketplaces are besides required to supply a measurement for group to study suspicious merchandise listings. But nan rule doesn’t require nan marketplaces to do thing pinch that information.

“Amazon useful difficult to guarantee our shop is simply a safe and trusted spot for shoppers,” Amazon says connected a page wherever group tin study suspicious listings. “If you judge immoderate product, seller aliases different activity successful our shop is suspicious, please study this utilizing 1 of nan beneath methods.”

“While we are not capable to respond straight to each report,” it says, “we admit your feedback.” 

— Additional reporting by Ali McCadden  

Scott Zamost, CNBC

Scott Zamost is simply a elder investigative shaper for CNBC.

Courtney Reagan, CNBC

Courtney Reagan is CNBC's unit reporter.