Deluxe: How Luxury Lost Its Luster (33 page)

The market stalls were clean and well appointed with glass display cases; vendors had catalogs, business cards, and a genial, courtly manner. It was hard to imagine that it was all completely illicit. The only differences between Xinxing and a legitimate wholesale market were the prices and the customers. I watched as a rotund middle-aged British man with a sweaty red face and balding pate negotiated with a Chinese vendor for an order of bogus Louis Vuitton bags. Going rate:
18
yuan ($
2
) for a monogram wallet,
150
yuan ($
19
) for the classic monogram purse. The price dropped by
30
percent for orders of more than one hundred. A pair of veiled Muslim women who were on our train from Hong Kong that morning were there, too, placing orders. “Gucci definitely has a problem,” the expert said as he clocked the glut of double-G logo bags on display—almost as many as the ubiquitous LV fakes.

Across the street in another warehouse are the lower-quality goods: the stuff that looks fake and is often a bastardization or mélange of brand names—like Bossco or Emilio Valentino—and costs next to nothing. Small wholesale orders are taken along in a suitcase by the customer or a courier. Big orders are far more complicated. An order of ten thousand handbags would be divided into ten groups of a thousand to be made by workshops around Guangzhou. Counterfeit workshops are light and mobile; after two weeks, they pack up and move to escape detection. Once the order is completed, it is wrapped up and deposited in a neutral place, like the courtyard of a local school, where it will be picked up by a local transporter, often simply a guy on a bike with a cart. The local transporter will deliver it to the wholesaler in Xinxing, who will have it taken to another neutral place to be picked up by the international shipping agent and put in a shipping container. The goods are often packed in shipments of foodstuffs or legitimately manufactured clothing to escape detection by receiving customs officials. Sometimes the goods (particularly watches) are shipped in pieces or without labels or monograms, and are finished, assembled, or stamped by illegal immigrants in clandestine workshops at the destination. Each time the goods change hands, the prices double. All transactions are done in cash.

Hong Kong used to be the primary port, but its container fees have become prohibitive for counterfeiters, so more and more shipments leave directly from the ports of China: Shanghai, Dalian, and Guangzhou. From there, the ship goes to a “cleansing port” such as South Korea to change its point of departure and then onward to Japan, the United States, Italy, or Belgium. Shipments directly from China are more carefully checked; by passing through a cleansing port they become less suspicious.

On occasion, the shipment gets discovered during inspection by receiving customs officials. In June
2004
, the U.S. Bureau of Immigration and Customs Enforcement (ICE) arrested a dozen people and seized six shipping containers—five with bogus handbags, luggage, and wallets, and the sixth with counterfeit cigarettes—coming into the United States from China, valued at $
24
million. ICE agents also seized $
174
,
000
in cash and eleven bank accounts. Officials said the suspects probably imported about two containers per week, each container earning $
2
to $
4
million in profit. That same month, seventeen Chinese men were arrested in a government sting operation for paying $
1
million in bribes to undercover ICE agents at Port Elizabeth, New Jersey, to guarantee entry of thirty shipping containers of fake Louis Vuitton, Cartier, Gucci, and other luxury brand handbags, luggage, wallets, and sunglasses. The goods were to be sold by New York City retailers and street vendors. The smugglers, members of the Li Organization, one of the most powerful gangs on Canal Street, wired thousands of dollars in proceeds back to China.

The street value of Chinese goods carrying counterfeit trademarks seized by the United States doubled between
2005
and
2006
to $
125
million, and counterfeit goods from China and Hong Kong made up
90
percent of all U.S. Customs and Border Protection’s intellectual property seizures. The same is true in Europe: Nearly three-fourths of all counterfeit luxury goods seized at ports originated in China or Hong Kong.

While customs seizures of counterfeit goods continue to rise, a vast amount makes it through. The shipping containers are put directly onto trucks and hauled either to warehouses to be stored or to workshops to be assembled or stamped by clandestine workers. This is where human trafficking fits into the puzzle: the workers, sometimes children, have been sold into labor. They, too, have been shipped over and smuggled in. They are taken to tenement factories and often locked in. There they live, work, sleep. “I went on a raid in a sweatshop in Brooklyn, and illegal workers were hiding in a rat hole,” Barbara Kolsun, senior vice president and general counsel for Kate Spade, told me. “It was filthy, and it was impossible to know how old the workers were.”

The gangs then have the counterfeit goods transported to stores in wholesale markets like Canal Street and Santee Alley, where they are purchased by tourists, flea market merchants, purse-party ladies, and suburbanites who believe that buying, selling, or owning fakes is, as McDonald put it, “a victimless crime.”

S
HORTLY AFTER LUNCH
in Guangzhou, we drove over to a Chinese law enforcement agency, a typical linoleum-floored, fluorescent-lit office that could be found anywhere in the world. The officers, most in their thirties or forties, were friendly and polite—offering us green tea as they spoke proudly of the success they had recently in fighting counterfeiting. After a few minutes the chief came in and announced that they’d gotten a tip about a counterfeit workshop across town. The informant was the landlord: he rents to the counterfeiter with full payment up front in cash, calls the cops and gets a reward for the tip, then rents the space again. “There are no ethics in this business,” the expert tells me. “None.” The cops strapped on their holsters, and a few put on bulletproof vests. Raids can be dangerous: sometimes workshop owners will pull a knife or have thugs there to beat up the cops. During one raid in Xinxing market, someone shot a gun in the air; when everyone hit the ground, the counterfeiters fled.

We all went downstairs, hopped into a pair of official vans and sped across town. Guangzhou is an industrial city with impenetrable smog, dingy high-rises, elevated highways slicing this way and that, and traffic congestion that would make Los Angeles look fluid. We pulled into the courtyard of a white stucco tenement. The cops jumped out, guns drawn, ran up seven flights of an open-air stairwell to the top floor, scurried across the balcony, looked through the window of one of the flats to confirm it was the right place, saw the door open, and went in. If it had been closed, the cops would have needed a warrant. Once they checked out the place to make sure it was safe, they waved us up.

We hoofed it up the steps, over empty Coke cans and other trash, and as we approached the top, the acute toxic smell of glue burned in our noses. We walked into the workshop—a long, wide room with barred windows—and before us stood two dozen Chinese boys and girls, roughly eight to fourteen, sitting at old sewing machines and standing behind plywood worktables littered with scraps of black leather, gooey pots of glue, and a cookie tin filled with stamps reading Versace, Boss, Dunhill. The children stopped midwork. One bag was stuck in a machine, half sewn. In the corner were big cardboard cartons filled with counterfeit luxury brand handbags in black leather. I picked one up and checked it out: the materials were cheesy, the sacks lined with plastic, the seams uneven. “Cheap fakes,” the expert declared.

The cops told the children to line up single file. They looked at us with their sweet faces filled with confusion, their eyes tired and sad: they didn’t know why they were told to stop working. As they walked out, some stopped to punch their time cards in hope of getting paid. Some glared at the owner, an overweight middle-aged Chinese man, and his factory manager, a Chinese woman in her thirties who sat in the small office next to the door, glum over a cold pot of tea. The investigators said it was rare to find the owner onsite. Both were arrested. The cops started to box up the handbags, the machines, the materials, everything. It would take two hours. A truck pulled up in the courtyard to haul it all off to a scrap yard, where it would be immediately destroyed. “They are out of business now,” the expert said. The squad does at least two of these raids each day.

When it was time to leave, we had to run across the courtyard to the vans to shield ourselves from debris that the kids threw from the balconies. To the children, the cops are the bad guys. Many of the children in counterfeit workshops have been sold into labor by their families in the countryside. The children used to be picked up at the train station and taken to the factories, but the police started to stake out the stations and make arrests. Now factories hire agents, usually a man and woman who will pose as a married couple and go to the country in a truck to get one or two children. If the agents are stopped by police, the agents say that the children are theirs. Some families in the country sell their children because they believe that the children will have a better life in the city. But selling children has become a big business in China. The children work in factories or turn to prostitution and send their money home or bring it to their parents when they return home for the Chinese New Year. Most earn between $
50
to $
100
a month in factories.

The children who work in counterfeit factories are usually housed by the owners; the kids in the raid I witnessed lived across the courtyard in slum dorms. When a counterfeit factory is raided and the owner arrested, the children are left not only out of work but also homeless. One investigator who often assists on raids in China was so moved by the plight of the child workers that he and a handful of colleagues founded a charity, which helps place the children from shut-down factories in schools and underwrites their education and living costs.

Sometimes the cases are truly horrific. “I remember walking into an assembly plant in Thailand a couple years ago and seeing six or seven little children, all under ten years old, sitting on the floor assembling counterfeit leather handbags,” the investigator told me as we drove away from the raid. “The owners had broken the children’s legs and tied the lower leg to the thigh so the bones wouldn’t mend. He did it because the children said they wanted to go outside and play.”

O
NE DAY IN 2004
,
New York security expert Andrew Oberfeldt and lawyer Heather McDonald were participating in a raid in a counterfeit mall on Canal Street in downtown Manhattan, when they saw a petite blond woman sobbing hysterically. In a thick Texas drawl, she pleaded with McDonald: “This is my first time to New York and this is awful! I just want to take my things and go home.”

McDonald asked the police what the Texan’s “things” were: “She had fifty-eight of the same bag,” McDonald says incredulously.

McDonald said no, and the Texan left in a huff.

Five minutes later she returned, tears gone.

“I’m on the cell phone with my lawyer, and he says you can’t do this without my day in court, so I’ll take my bags and go,” she declared.

“No,” McDonald responded. “I’ll take your bags and see you in court.”

“Two weeks later we’re doing a raid at a nearby location,” McDonald recalled when we met in June
2005
. “And who do we see? The same Texan. I told her, ‘I thought you said you were never coming back here.’ And you know what she said?”

“What?” I asked.

“‘Bite me!’”

I laughed out loud.

“I’m sure,” McDonald said, “that she was a purse-party lady.”

Purse-party ladies are the drug dealers of the counterfeit trade: they buy from the wholesalers and sell to suburban users, folks with a craving for the goods but not enough dough for the genuine thing. Like teenagers gathering at a friend’s upper-middle-class home to buy a couple of joints with their allowance or babysitting money, suburban women converge in well-appointed living rooms for wine, hors d’oeuvres, gossip, and fake Vuitton or Gucci handbags. The women hosting these fetes will make a killing—they double their investment—and never declare it to the IRS. Take Virginia Topper, the wife of a lawyer in Long Island, New York. When she was busted in
2003
, she had $
60
,
000
in cash stashed in her underwear drawer and a Jaguar in the driveway. She was found guilty and sentenced to community service. “She was the ultimate Amway lady,” Oberfeldt laughed.

Most purse-party ladies don’t see buying or selling fake handbags as a real crime. It seems so innocuous that churches, synagogues, and schools host purse parties to raise money for charities or in-house events. In a survey by the Anti-Counterfeiting Group, one-third of those questioned said they would knowingly buy counterfeit goods if the price and quality were right, and
29
percent said they saw no harm in the selling of fake goods unless the purchaser was at risk. “We’ll go on raids in Chinatown wholesalers and we’ll find five or six suburban women standing there—customers,” Oberfeldt tells me. “We’ll say to these women, ‘The dealers take you down dark corridors, through locked doors. The police say, “Open up!” The lights are turned out, and everyone is told to be quiet. At what point did you realize that something was amiss here?’”

Some take it one step further, passing off fakes in stores as the real thing. Buckner had gotten a tip from an informant that the wife of a professional athlete sold fake luxury brand handbags in her northern California boutique for $
1
,
800
a pop. Buckner had his operatives purchase a couple of bags, which he sent to the brands’ headquarters to be verified. Turned out the bags were, as Buckner put it, “grade AA counterfeit. It’s all counterfeit.”