Undercover federal agents rented a booth at Patapsco Flea Market to gain access to its management as part of a 2
-year sting targeting merchants selling counterfeit and pirated goods — an investigation that resulted in a raid Sunday on the Southwest Baltimore marketplace, according to a search warrant and affidavit released Monday.
Capping the intensive investigation into fake brand-name clothes and accessories, as well as pirated DVDs and musical recordings, special agents with U.S. Immigration and Customs Enforcement Homeland Security Investigations confiscated numerous items being sold at the sprawling market.
"In order not to compromise this ongoing enforcement action, no additional information can be disclosed at this time," said Nicole A. Navas, a spokeswoman for Immigration and Customs Enforcement.
Vendors at the Patapsco Flea Market, open weekends year round, allegedly have a history of selling counterfeit and pirated merchandise, according to federal documents.
Federal authorities released few details about the raid, but the affidavit detailed the investigation, which began in November 2009 with multiple undercover purchases. Agents found 70 percent of many name-brand items sold at the flea market were counterfeit. Labels included Louis Vuitton, Gucci, Tiffany, Nike, Uggs and North Face.
Agents alleged in the affidavit that the flea market's management was aware of the illegal practice. A former vendor told agents that the market's owner and employees knew that many of the goods for sale were counterfeit.
The flea market, in the 1400 block of W. Patapsco Ave., is owned by Management Inc., whose principal is listed as Joseph Brzuchalski, state records and the affidavit show. Calls to Brzuchalski's Millersville residence were not returned Monday.
The market for counterfeit goods and pirated and unlicensed merchandise has exploded, especially with the proliferation of online marketplaces. The Washington-based International AntiCounterfeiting Coalition puts the global trade in illegitimate goods at $600 billion a year, up from $5.5 billion three decades ago.
In the fiscal year ended Sept. 30, Homeland Security Investigations looked into 2,300 cases involving counterfeits and the illegal trafficking of goods, resulting in 574 arrests, 355 indictments and 291 convictions. In 2010, for instance, nine people were indicted for smuggling millions of dollars in counterfeit shoes, handbags and watches manufactured in Asia through the port of Baltimore.
"They're being much more attentive to the problem because of the way it is having an impact on legitimate businesses; and, of course, these people don't pay taxes," said Daniel E. Karson, a senior executive at security consulting firm Kroll.
Luxury brands, too, devote significant resources to identifying fake goods online, at flea markets and on city streets. They gather intelligence on wholesalers and manufacturers of these counterfeit products and report their findings to authorities, Karson said Monday.
As a key part of the investigation, undercover agents paid $2,000 plus $125 a week to rent a small booth at the flea market from April 23 to May 28, 2011. They sold clothes and cosmetics, including counterfeit Polo shirts and NFL jerseys.
The agents identified more than 300 vendors at the market, of whom 200 were selling fake items, the affidavit said. At one point, wearing a hidden video-recording device, the agents met with a flea market employee to inquire about renting a larger booth and said they wanted to avoid so-called knock-off merchandise.
An employee identified as Phyllis said, "Most of this is not knock-offs around here," motioning to several booths, according to a transcript included in the affidavit.
"The only thing I think you have, you have some Polo T-shirts on that side," she said, motioning to some other booths.
That exchange led agents to believe the flea market's management "knows what is counterfeit and what is not, and where counterfeit is sold within the market," the affidavit said.
No vendor was identified by name in the affidavit. About 250 vendors listed their business at the flea market last year, according to a list obtained by federal agents from the Maryland Comptroller's Office.
During a buying spree in 2011, in which undercover agents bought goods from vendors at the flea market, 91 of 98 items were found to be counterfeit, pirated or unlicensed, the affidavit said.
The agents bought items such as True Religion jeans, which normally retail for more than $100 each, for $30; and a Louis Vuitton handbag, which can cost several hundred — if not thousands — of dollars, for $35. All the purchases were made in cash, and none of the vendors collected Maryland sales tax, according to the affidavit.
In another outing, on March 31 and April 1, agents bought a set of novelty contact lenses that were found to be dangerous. The lenses could fuse to the eye, causing permanent vision loss, according to the affidavit.
Joy Cosby, who closed a business selling body oil at the flea market last year amid rising competition, said she wasn't surprised to hear about the raid.
"Actually, I'm familiar with authentic products and I knew they weren't real," said Cosby, citing handbags in particular. "Gucci bags, Louis Vuitton bags and Chanel bags. They were all knock-off bags ... There's no way you could go to the Gucci store in Bethesda and buy a Gucci pocketbook for $40. A key chain alone is $250."
Ned T. Himmelrich, who heads the intellectual property and technology practice group at the Baltimore law firm Gordon Feinblatt LLC, said the counterfeit market deprives companies of revenue and debases the quality of brand names.
"It's more than just the one sale or a thousand sales," he said. "It's the ripple effect on the quality of the brand."
Baltimore's Under Armour, whose well-known apparel is believed to have been sold at the flea market, said in a statement that the counterfeit trade hurts the U.S. economy.
"The reality of counterfeiting is that it's much greater than just buying a knock-off item at a discounted price, it's a multibillion-dollar a year problem that undermines corporations," the company said.
The federal search warrants covered the flea market, Brzuchalski's residence and his business account with Carrollton Bank. Every Monday for several months, large cash deposits were made into the account, which show the "flow of illicit funds generated from the sale of counterfeit merchandise," which were then paid to management through rents and fees, according to the affidavit.
Over the past decade, law enforcement officials have seized thousands of pieces of fake merchandise from the flea market.
On separate occasions, in 2004 and 2006, Baltimore police nabbed counterfeit professional sports league apparel and items with brand names such as Nike and Lacoste, the affidavit said.
In 1996, Baltimore police charged 30 vendors at the market with selling counterfeit clothing. Authorities confiscated more than $1 million worth of what police alleged was counterfeit Nike, Timberland and Tommy Hilfiger apparel.