In a tony suburban enclave within the San Diego foothills, police say, an organized retail crime “queenpin” had built an empire.
Tucked behind the stone partitions of her 4,500-square-foot Spanish-style mansion, Michelle Mack had stockpiled a small fortune in cosmetics that had been stolen from Ulta and Sephora stores across the country, authorities said.
Police don’t suspect that Mack, 53, took the items herself. As an alternative, they are saying, she pulled the strings from the shadows, employing a network of around a dozen women who stole the items for her so she could resell them on Amazon.
Michelle Mack’s home in Bonsall, California, Dec. 6, 2023.
CNBC
With their airfare, automobile rentals and other travel expenses paid by Mack, the suspects committed a whole bunch of thefts up and down the California coast and into Washington, Utah, Oregon, Colorado, Arizona, Illinois, Texas, Florida, Pennsylvania, Massachusetts and Ohio, investigators said. Mack chosen which stores to focus on and what merchandise to take and the ladies were sent to filter entire shelves of merchandise before making off with the stolen goods stuffed into Louis Vuitton bags, investigators said.
Investigators began referring to the theft group because the “California Girls” and thought of Mack the crew’s ringleader. She made tens of millions reselling the stolen items on Amazon to unwitting customers at a fraction of their typical retail price, investigators said, before she was arrested in early December.
Michelle Mack is taken into custody, Dec. 6, 2023.
CNBC
Law enforcement officials say Mack’s alleged theft ring is just certainly one of the various which can be plaguing U.S. retailers and costing them billions in losses annually. Their rise has led many firms to lock up merchandise, hire security guards and lobby lawmakers for stricter regulations.
These organized theft groups don’t typically perform the splashy “smash and grab” robberies seen in viral videos. As an alternative, they pilfer goods quickly, quietly and efficiently. They often function inside elaborate, organized structures that in some ways mimic the companies they’re stealing from, police said.
CNBC has spent about eight months embedding with various law enforcement agencies and investigating theft groups to know what organized retail crime looks like from the bottom. In some cases, CNBC witnessed low-level shoplifting incidents involving individuals who gave the impression to be homeless or mentally sick. In other instances, CNBC saw takedowns of alleged organized theft groups that police said were reselling stolen merchandise at flea markets. Mack’s group, from her alleged network of skilled thieves to her lucrative Amazon marketplace, was by far probably the most sophisticated one CNBC tracked alongside police.
California Highway Patrol officers arrest a retail crime suspect.
CNBC
But federal agents with Homeland Security Investigations, the Department of Homeland Security’s law enforcement branch, said some crime groups are much more elaborate — and theft is only one facet of their enterprises.
“We’re talking about operations which have fleets of trucks, 18-wheelers which have palletized a great deal of stolen goods, which have cleansing crews that really clean the products to make them look brand latest,” said Adam Parks, an assistant special agent in charge at HSI, which is the predominant federal agency investigating retail crime.
“Just like every business, they’ve invested their capital into business assets like shrink wrap machines, forklifts,” Parks, who works out of HSI’s Baton Rouge, Louisiana, office, told CNBC in an interview. “That’s what organized theft looks like, and it actually is indistinguishable from other e-commerce distribution centers.”
These theft groups of their myriad forms have turn into a thorn within the side of outlets big and small, prompting retailers to cite crime as the explanation for lower profits, the lack to rent and retain staff, and the degradation of the in-store experience. They’ve also united politically divided Americans of their disdain for seeing on a regular basis products locked up behind glass cases and witnessing brazen theft gone unchecked in stores.
Suspected stolen cosmetics found inside Michelle Mack’s home.
CNBC
Whether organized retail crime is definitely rising is up for debate. Retailers including Goal, Foot Locker, Walgreens and Ulta have said theft is a growing problem in recent times. But few have said how often it’s happening or how much money they’re losing from it, fueling accusations from some experts and analysts that they are blaming crime with a purpose to mask operational missteps.
The National Retail Federation estimates that retailers lost $40.5 billion to external theft, including organized retail crime, in 2022. That represented about 36% of total inventory losses — barely lower than the 37% in 2021.
Even when theft has not meaningfully reduced some retailers’ profits, many have warned that crime can threaten the protection of employees and shoppers.
“The financial impact is real, but far more vital is the human impact, the impact it has to our associates, the impact it has to our guests,” Ulta CEO Dave Kimbell told CNBC in a rare sit-down interview.
“It also impacts the communities through which we live,” he said. “If people do not feel protected getting into to buy in certain areas of a community, it really has an impact and might change neighborhoods and alter communities over time.”
The federal government response to the difficulty has grown in turn. Each local and federal agencies have stepped up enforcement of laws targeting organized retail crime, and lawmakers are proposing and passing more measures that stiffen penalties for theft offenses.
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HSI initiated 59 cases against organized theft groups in fiscal 2021, leading to 55 indictments and 61 arrests, the agency said.
By the tip of fiscal 2023, cases had greater than tripled, to 199. Indictments spiked greater than fivefold to 284, while arrests soared to 386, greater than six times the number in 2021.
California Highway Patrol, which runs one of the energetic retail crime task forces within the country, reports it made 170% more arrests for organized theft offenses in 2023 than it did in 2022.
It isn’t clear whether organized theft offenses increased in that point or officials ramped up enforcement as the difficulty got more public attention and the retail industry’s lobbying engine pressed them to make it a priority.
CNBC embedded with teams from HSI and California Highway Patrol to witness 4 organized retail crime operations for this investigation. The probe can also be based on greater than a dozen interviews with law enforcement officers, retail leaders and customers, together with records, including court filings, company reports and property records.
Recent Orleans
On a sweltering Monday morning in July, a couple of dozen agents from HSI Recent Orleans gathered behind the U.S. Custom House, preparing for Operation French Quarter.
The officers were instructed to pose as shoppers inside three Walgreens stores and one CVS store in the realm seeing high rates of theft, sometimes as many as 20 to 30 incidents per day, agents said.
As federal law enforcement agents who typically investigate terrorism, sex trafficking and gang leaders reminiscent of Joaquin “El Chapo” Guzman, the officers weren’t there to arrest people for petty theft. That they had a transparent directive: Discover who’s stealing and follow them out of the shop to find out who else they might be working with.
“Obviously, the secret, guys and girls, is attempting to get the larger and higher fish,” Assistant Special Agent in Charge Scott Robles, who led the operation, told the assembled officers. “We’re attempting to discover the people who find themselves in command of this organized crime.”
Assistant Special Agent in Charge Scott Robles of Homeland Security Investigations addresses a team of undercover agents in Recent Orleans, July 17, 2023.
CNBC
At the underside of organized retail crime rings are boosters — the individuals who go into stores and take the items. Robles hoped the serial thieves targeting the drugstores could cause them to a bigger operation.
“It might be anybody. It could possibly be the mom with five kids just searching for extra cash. It might be any person that is a part of a team. … They might be getting paid with food, they might be getting paid with beer or drugs,” Robles said. “Some people receives a commission money or they’re attempting to work off a debt.”
Throughout the hourslong operation, agents identified not less than one case that they are saying plainly showed organized theft.
Surveillance footage of the incident shows a person enter certainly one of the Walgreens stores, head to the cosmetics aisle, remove a plastic shopping bag from his pants and calmly load it up with 17 jars of nail polish, valued at around $200. He then walked a couple of half mile away to the Recent Orleans Public Library’s predominant branch, where he sold the nail polish to a security guard, police said.
Federal agents briefly questioned the safety guard, and the incident stays under investigation.
Beyond that instance, the overwhelming majority of the thefts agents witnessed in the course of the operation were low-level and petty, involving individuals who gave the impression to be homeless, mentally sick or transient. One man stole paper towels after which walked right into a homeless shelter. A gaggle took a case of beer and later went to a park to drink it. A lady stole a case of water, arrange a stand to resell it after which defecated on the sidewalk.
Operation French Quarter showed how the bottom level of a retail crime operation can function, and the way even small thefts can involve coordination amongst bad actors. Still, the incidents underscore the challenges investigators face when attempting to construct cases; in addition they reveal just how petty many thefts are, especially in urban areas with high rates of homelessness and addiction.
A Walgreens spokesperson told CNBC that the chain is “focused on the protection of our patients, customers and team members” and is taking steps to “safely deter theft” and “deliver the perfect patient and customer experience.”
“We’re working closely with law enforcement, elected officials and community leaders to attract greater attention to and improve our response to retail crime,” the spokesperson said.
San Jose
Crates full of unopened jugs of Gain, Tide and Downy detergent. Boxes filled with Gillette razors, Olay moisturizer and Allegra allergy pills. A pile of sparkly silver boots in sizes 8, 9 and 10 with the T.J. Maxx tags still on.
That is just a number of the merchandise that California Highway Patrol found inside a house and storage container belonging to suspected members of an organized retail crime ring during a raid in November.
A bin full of sparkly silver boots that police suspect an alleged San Jose, California, crime ring stole from T.J. Maxx.
Gabrielle Fonrouge
In all, investigators uncovered nearly 20,000 items valued at greater than $550,000 across five locations connected with the group, in response to CHP. Police suspect the vast majority of the items were stolen from T.J. Maxx stores and a wide range of drugstores and grocery stores in and across the Bay Area.
CHP’s probe began in September, when investigators from TJX Corporations, the owner of T.J. Maxx, reached out to the agency’s organized retail crime task force with details about a criminal offense ring that it said was buying and reselling stolen goods — a “fencing” operation.
When boosters must money in on the items they take, they turn to fencers, who buy the products for pennies on the dollar and resell them at a margin Wall Street could only dream of, retail crime investigators have said.
Experts said retailers can have a tough time persuading law enforcement to analyze theft at stores since it is commonly considered a property crime, which police are likely to see as less urgent than homicides, shootings and narcotics crimes.
To indicate law enforcement the scope of the issue, TJX investigators began conducting surveillance on the alleged crime ring. CHP agreed to take the case. Sgt. Manny Nevarez, who oversees all organized retail crime investigations within the Bay Area for CHP, told CNBC the group had hit stores in multiple counties in an effort to evade detection.
“They should not catching on that a number of the retailers have their very own loss prevention personnel and typically, in case you goal one store in San Jose, then the word gets out after which the subsequent store is notified,” said Nevarez.
Sgt. Manny Nevarez oversees organized retail crime investigations within the Bay Area for California Highway Patrol.
CNBC
Police learned that alleged members of the group were reselling the suspected stolen merchandise out of their homes and on the local Capitol Flea Market — a sprawling swap meet on the outskirts of San Jose. Officers also witnessed members of the crew receiving suspected stolen merchandise, transferring those goods to others of their network and exchanging money.
At the tip of November, dozens of CHP investigators working with TJX descended on the five locations connected with the alleged fencing ring and carried out search warrants in a raid cops dubbed “Operation Kingsfall.” The locations included quite a few homes together with a storage unit.
“Nosotros somos policia,” the officers shouted in Spanish outside certainly one of the homes. “Police, search warrant. Open the door together with your hands up,” they continued, switching between English and Spanish before using a battering ram to knock down the door.
Officers from California Highway Patrol approach a house suspected to be connected with an organized retail crime ring in San Jose, California, Nov. 28, 2023.
CNBC
The situation, an innocuous single-family home with Christmas decorations out front, looked like every other on the block. But on the sidewalk and grass near the property line sat dozens of discarded clothing tags, anti-theft devices, hangers and other retail store detritus.
Contained in the home, CHP officers and TJX personnel found mountains of products they think were stolen to resell, including bags of apparel with the tags still affixed, boxes of Huggies diapers, liquor and power tools.
By the point authorities accomplished the raids, that they had enough suspected stolen merchandise to fill three 20-foot-long U-Haul trucks. A spokesperson for the Santa Clara County District Attorney said it’s charging nine defendants in reference to the alleged crime ring.
Investigators examine suspected stolen merchandise connected with an alleged organized retail crime ring in San Jose, California.
CNBC
The law enforcement operation witnessed by CNBC showed the breadth of a number of the fencing rings within the U.S. and the way flea markets can play a task within the sale of stolen goods. Capitol Flea Market didn’t reply to a request for comment.
“There’s certain crimes that come up where the general public reaches some extent where they’re like, ‘We’ve got had enough of this,’ right?” Lt. Michael Ball, who helped oversee the operation, told CNBC. “And that is certainly one of people who’s reached that level where persons are saying widely and shouting all of it the best way as much as our governor’s office that they’ve had enough of this.”
In an announcement, a TJX spokesperson said the corporate is “thankful” for CHP’s efforts and is taking organized retail crime “very seriously.” The spokesperson said TJX is “laser-focused on ways to mitigate theft in our stores.”
The corporate told CNBC it’s going to not resell the recovered merchandise. If TJX considers the items to be in suitable condition, it’s going to donate them to charities in the realm where they were found, the corporate said. If it deems the products unsuitable, it’s going to work to eliminate them “responsibly,” it said.
San Diego
When Donna Washburn began purchasing for a Christmas gift for her daughter in December, she desired to “splurge” and buy her a bottle of Nars foundation. But she couldn’t find it in stock at a store near home.
So, like many consumers, she Googled the product. She saw it was available on Amazon and price around $38 before tax, nearly 30% cheaper than its typical retail price of $52.
“I said, you already know, ‘It’s Amazon, it’ll come fast.’ It was the start of December. So I actually didn’t need to wait an excessive amount of longer for Christmas,” Washburn told CNBC in an interview, adding she was told it might arrive by Dec. 11.
Donna Washburn bought a beauty product from Michelle Mack’s Amazon store that police suspect had been stolen.
CNBC
Unknown to Washburn, police say, that bottle of foundation had likely been stolen by the crew of boosters allegedly employed by Mack — the suspected retail crime mastermind accused of running a bootleg business from her San Diego mansion.
The Christmas gift ultimately never arrived, because Mack was arrested before she could ship the package, which was certainly one of many present in Mack’s residence by investigators.
“I listen, but not that much, you already know?” said Washburn, a 63-year-old clinical education associate in St. Augustine, Florida. “I’m shopping from Amazon. Hopefully you may trust it. So now that we all know higher … we’ll think twice.”
Washburn had bought the inspiration from an Amazon storefront dubbed Online Makeup Store, which Mack had opened in 2012. CNBC viewed it before it was taken down in late 2023.
Suspected stolen cosmetics found inside Michelle Mack’s home.
CNBC
On its face, Mack’s storefront looked no different from the tens of millions of others on Amazon’s marketplace. It had 4.5 stars on greater than 100 reviews, and featured cosmetics from popular brands reminiscent of Mac, Tarte and Charlotte Tilbury that shoppers can find in neighborhood beauty stores.
There was only one red flag: the costs. Most of the products on the market at Mack’s store were listed at a fraction of the standard retail price, including a $25 bottle 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 in tens of millions. Since 2012, Mack sold nearly $8 million in cosmetics through the storefront before it was shut down, and he or she brought in $1.89 million in 2022 alone, Amazon sales records provided to investigators show.
Mack could offer such low prices, police suspect, because her crew of boosters had stolen the products in a whole bunch of incidents over greater than a decade. Among the thefts brought in around $2,000 in merchandise while others netted as much as $50,000 value of merchandise, prosecutors said.
Mack’s business was humming along ahead of the vacation shopping season until the fastidiously crafted empire police say she built crumbled. On a cool December morning just before dawn, a convoy of CHP and HSI agents, armed with a search warrant, raided her sprawling mansion.
Mack, wearing a baby pink pajama set and a pair of fuzzy mule slippers, was handcuffed and put right into a police automobile as her teenage daughters stood within the driveway, watching.
Inside her garage, investigators found what they described as a “mini-store” — shelves and shelves of beauty products, sunglasses and designer bags organized in neat bins and categorized by product. In addition they found a whole bunch of postmarked yellow envelopes destined for unwitting customers, including Washburn, with “Online Makeup Store” marked because the return address.
Police recovered nearly 10,000 items value a complete of greater than $387,000, CHP said.
A California Highway Patrol evidence photo of suspected stolen goods taken from the garage of Michelle Mack, who’s accused of masterminding an organized retail crime network from her home in San Diego.
Source: California Highway Patrol
A California Highway Patrol evidence photo of suspected stolen goods taken from the garage of Michelle Mack, who’s accused of masterminding an organized retail crime network from her home in San Diego.
Source: California Highway Patrol
A California Highway Patrol evidence photo of suspected stolen goods taken from the garage of Michelle Mack, who’s accused of masterminding an organized retail crime network from her home in San Diego.
Source: California Highway Patrol
In February, California Attorney General Rob Bonta filed a complete of 140 felony charges against Mack; her husband, Kenneth Mack; and 7 other alleged members of the crew. The fees included conspiracy to commit organized retail theft, grand theft and receipt of stolen property. The defendants have all pleaded not guilty. CNBC contacted each defendant multiple times for comment, but none of them responded.
“It is a multimillion-dollar criminal scheme. It was complex. It was orchestrated,” Bonta said when announcing the costs. “We should not talking about garden-variety shoplifting.”
Court records filed in reference to the case provide a rare glimpse into the inner workings of an alleged organized retail crime ring. They show text messages between the suspects and details in regards to the operation.
“I’m not stealing regular I’m going to start out filling up my bag quick. So I would like to know stuff I can grab in bulks too,” Kimora Lee Gooding texted Michelle Mack on Jan. 7, 2023.
Between Jan. 30 and Feb. 16, 2023, Gooding committed not less than 10 separate thefts at Ulta stores across California, prosecutors allege in court records. In each case, Gooding took greater than $950 value of products, the records say.
On Feb. 21, just a few days after Gooding’s string of thefts, Mack sent her a screenshot of “Online Makeup Store” with an address she could ship the stolen products to. It was the identical business address that was listed on Mack’s Amazon page before it was shut down, and traced back to a post office box just a few miles from her home.
“Even without lancome we still did well,” Michelle Mack texted her husband two days later, allegedly referencing a prestige cosmetics brand owned by L’Oreal.
Soon, orders were pouring into Michelle Mack’s Amazon store.
California Highway Patrol Officer Andrew Barclay outside Michelle Mack’s home during her arrest.
Scott Zamost
“A number of orders let’s get shipping,” Kenneth Mack texted Michelle Mack alongside a picture that showed a bin filled with paper.
By July 8, it appeared that the haul Gooding and others had allegedly brought in had dried up. Michelle Mack needed more things to sell.
“Did you get some latest girls?” Michelle Mack texted Alina Franco, one other person charged in reference to the theft crew. “I actually need product so if you’ve gotten anything please let me know.”
A day later, two more thefts connected to the ring were committed and plenty of more followed, prosecutors said.
Along with Ulta and Sephora, the theft organization targeted a spread of other 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 debate the case with CNBC. Macy’s, Prada, Sunglass Hut and LensCrafters didn’t reply to requests for comment.
A spokesperson for Victoria’s Secret said the corporate cooperated with CHP’s investigation.
“We take matters of theft seriously and all the time prioritize the protection of our associates and customers,” the spokesperson said.
Despite the recent surge of headlines and commentary on the subject, organized theft groups have long operated all over the world. But retail industry leaders and a few law enforcement officials argue the rise of online marketplaces and e-commerce has caused such incidents to extend or have made it easier for theft groups to operate.
“There’s an ease of distribution that has turn into much more prevalent for stolen goods through online marketplaces. … You used to need to sell stolen goods at flea markets or out of the trunk of your automobile or perhaps just locally,” said Ulta’s Kimbell. “Now, you’ve gotten more sophisticated tools to have a broader reach across the country and even internationally.”
Ulta Beauty CEO Dave Kimbell said online marketplaces must do more to forestall the sale of stolen goods.
CNBC
While Kimbell didn’t name Amazon specifically, he said online marketplaces are “a part of the issue” and needs to be using the info, analytics and other technology available to them to be more “proactive” in shutting down bad-actor sellers.
“We shouldn’t have an environment where it’s possible to steal from one retailer and [have it] find yourself on every other platform, every other large-scale, mainstream platform” that individuals consider legitimate, said Kimbell.
Bonta called on Amazon and other marketplaces to “do more.” He said they might inform law enforcement, or not less than confer with a seller, when red flags reminiscent of unusually low-cost goods pop up.
“If you happen to freeze out the demand and take away the market by closing out the marketplace where the stolen goods are so easily sold, you make organized retail crime as an organized crime less attractive. And we’d like to create barriers, as a substitute of ease, for the flexibility to commit these crimes,” Bonta said in an interview.
California Attorney General Rob Bonta discusses Michelle Mack’s case in an interview on Feb. 16, 2024.
CNBC
In response, an Amazon spokesperson said that the corporate has “zero tolerance for the sale of stolen goods” and that the corporate invests greater than $1 billion annually in stopping fraud and abuse.
“We leverage sophisticated detection and prevention solutions across our stores and achievement operations, allowing us to quickly spot a spread of organized retail crime (ORC) schemes,” the spokesperson said in an announcement.
The spokesperson said Amazon supports efforts to trace items throughout the availability chain and investigates allegations of stolen merchandise to learn how products were obtained.
“Once we discover a problem, we work closely with law enforcement, retailers, and types to stop bad actors and hold them accountable, including withholding funds, terminating accounts, and making law enforcement referrals,” which have led to arrests, product seizures and the disruption of retail crime rings, the spokesperson wrote.
The corporate said it assisted with the investigation into Michelle Mack’s alleged theft crew and provided evidence to investigators. It said it’s “pleased” the suspects were arrested since it “sends a powerful message that the sale of stolen goods has severe consequences.”
Consumers, lots of whom are hungry for deals as they contend with lingering inflation and high rates of interest, may feel that purchasing stolen goods is a victimless crime, experts say.
Michael Krol, HSI’s special agent in charge, disagrees with that concept. He said not only does theft result in higher prices for consumers but in addition the items they’re buying could possibly be unsafe due to how they were stored or otherwise manipulated.
“Those items won’t have the standard assurance and compliance that we expect in the USA. Baby formula, your medicines … [Consumers] could possibly be buying baby formula that is expired by three months,” said Krol.
The Inform Consumers Act, which took effect in June, was designed to curb the sale of stolen, counterfeit or otherwise harmful products on online platforms by requiring marketplaces to confirm and share identifying information on certain third-party sellers.
The law was designed to forestall the precise form of illicit business Michelle Mack is accused of conducting on Amazon. If sellers are required to offer their contact information to marketplaces and on their listings, bad actors could also be deterred from selling illicit goods.
Nevertheless, Michelle Mack’s business name and an address belonging to it had been verified and was publicly available on her seller’s page. She’d already been on the platform for greater than a decade by the point the Inform Act rolled around.
The verification process that Amazon conducted for Michelle Mack’s store after the Inform Act passed wasn’t enough to boost the corporate’s suspicions, either.
“On this instance, we didn’t receive signals to discover the vendor was engaged in selling stolen goods,” Amazon said.
As a part of the law, marketplaces are also required to offer a way for people to report suspicious product listings. However the law doesn’t require the marketplaces to do anything with that information.
“Amazon works hard to make sure our store is a protected and trusted place for shoppers,” Amazon says on a page where people can report suspicious listings. “If you happen to imagine any product, seller or other activity in our store is suspicious, please report this using certainly one of the below methods.”
“While we should not in a position to respond on to each report,” it says, “we appreciate your feedback.”
— Additional reporting by Ali McCadden
— Clarification: This story was updated to incorporate a comment from Victoria’s Secret after publication.