News Lawyer

What do you get when you combine four FBI Agents, 62 Chinese smugglers, and a billion counterfeit cigarettes? Besides the plot of a Hollywood potboiler, you get the tale of an intricate counterfeit cigarette bust that spanned several continents, a slew of agents, six years, 1,000 meetings, and enough fake smokes to supply every American man, woman and child with more than a few carcinogenic puffs.

Writing for the Center for Public Integrity, Te-Ping Chen brings her readers into the murky world of counterfeit cigarettes. Through bribery and sheer volume, Chinese cigarette counterfeiters overwhelm the inspection infrastructure in China and the United States. The numbers are startling. A shipping container of one million counterfeit cigarettes can cost about $120,000 to make, but can sell for as much as $2 million in the United States. A bribe of $20,000 can ensure safe passage out of China, and then it becomes a game of chance stacked in favor of the counterfeiter. Cargo containers are only inspected 22% of the time on average in the United States. While seizures are considered a cost of doing business for these smugglers, a run of bad luck seizures tempted the counterfeiters in the story to attempt to purchase protection from the Italian Mafia. Unfortunately for the villains, the Mafia fixers turned out to be FBI agents.

Te-Ping Chen does an excellent job of detailing the intricate nature of the smuggling world. Through the well-worn trade paths of cigarettes also comes counterfeit money, fake pharmaceuticals, and weapons. Notorious bad actors like the North Korean government profit greatly from the criminality. No doubt, a weapon of mass destruction could conceivably slip through safeguards using these same trade routes.

And what does this have to do with PRO-IP Act? Plenty, in fact. The PRO-IP Act goes to the root of the counterfeiting problem by increasing the price of doing business in counterfeits. Doubling the fines per counterfeit violation is a good start. Increasing diplomatic resources will also help, as it could enhance cooperation with law enforcement at the point of origin. And with counterfeit cigarettes often unhealthier than the real thing, criminal penalties for selling counterfeit items that do bodily harm could possibly ensure long jail sentences for the counterfeiters of cigarettes and other types of potentially harmful contraband.

This is an excellent article – entertaining, informative and even poignant in parts. Towards the end of the tale, two of the counterfeiters at the center of the investigation presented their undercover FBI Agent with two Rolexes as a wedding present for the mock gangster. “These aren’t counterfeit, are they?” asked the agent. “No,” replied the suspect, “these are the real deal.”

You’ll think Goodfellas, and you won’t be far off – or disappointed. Read the whole thing.

Not what you think, but the august and aptly-named Foreign Policy details some foreign policy implications of counterfeiting (paid registration may be required).

The article details the culprits (China and India are the biggest) and introduces the reader to several law enforcement figures who are simply overwhelmed at the sheer volume of the problem. Some enforcement may also require individual acts of heroism. In Nigeria, Dora Akunyili, a 54-year-old pharmacy professor, took over Nigeria’s drug watchdog industry in 2001 and fought hard to reduce the percentage of counterfeit drugs in Nigeria. Akunyili succeeded. The Nigerian drug supply chain from 70% in 2001 to close to 10% today. Her efforts are helping to prevent counterfeit drugs from killing innocent Nigerians, like her own sister who died after taking fake diabetes medicine in 1988. These efforts have also endangered Akunyili, who narrowly escaped assassination, had her office blown up, and now lives with round-the-clock bodyguard protection.

On the demand side, humanitarian groups seeking to provide drugs to treat third world health problems are left with a stark choice. Either these groups purchase expensive medications through legitimate sources, or they go through more shadowy channels to purchase drugs that may be counterfeit and do not work.

And publicizing the counterfeiting of any drug is often a losing proposition for these drug companies: when counterfeiting of particular drugs is publicized, the public demand for the drug drops even through legitimate channels.

The World Health Organization (WHO) has taken a lead in trying to stem the tide of counterfeit drugs in the world pharmaceutical supply chain. They face real opposition – often, the governments they attempt to influence are also directly involved in profiting from the trade of counterfeit drugs. And even a powerful and influential organization like the WHO is not immune to political pressure. Quoting from the article:

The WHO has been vocal about combating fakes, but even it hesitates to embarrass member countries who allow fake drugs to enter the market. Unfortunately, many observers believe it may take large-scale casualties for real action to occur. As one British drug-security expert put it to me in April, “Action against al Qaeda really only took off after September 11.”

From Industry Week, an article about Beijing’s efforts to clean up counterfeiting before hosting this year’s Summer Olympics. Essentially, the article implies that the Chinese Government’s desire not to be embarrassed on the world stage by dodgy counterfeit operations exceeds the power of local muckety-mucks to bribe their way into lax enforcement on the local level. The implication, of course, is that the Chinese government can do more in normal times to stop counterfeiting.