fUNdAmENTALS

Feedback from the Dark Side

by Mike Marquis, CFI

Marquis is currently an assistant vice president of loss prevention with the TJX Companies. His more than twenty-four years of LP experience includes senior leadership positions with Limited Brands and Urban Outfitters. Marquis invites your comments at mike_marquis@tjx.com. The opinions and commentary expressed by Marquis do not necessarily represent the TJX Companies or any of its divisions.

Ipromised some feedback from the last couple of columns on “Game Changers.” First out of the box are two from service providers…edited for space reasons. (You know how wordy the dark side can be.)

Mike,

I’m sure every vendor of a product category that you did not list in your January-February 2011 article is already emailing you! I know the success of exception-reporting tools. And I have a brother who designs DVR systems, so I hear and see their benefits first hand.

However, I have never seen a truly measurable revenue impact and ROI like return authorization. Using predictive analytics to distinguish and deter fraudulent or abusive shoppers from performing returns is an offensive-minded LP strategy. But it also allows a retailer to be more customer friendly at the return counter, while still protecting against fraud and mitigating the risk of such a customer experience strategy.

I hope there is a place in future articles for return authorization to make the cut.

Tom Rittman, The Retail Equation

Tom, here’s the cut. I know whether it be small-box specialty or larger formats, refund percentages and shrink results tend to go hand in hand.

Mike,

Here’s an update on our progress regarding theshopliftingstore.com and our efforts to limit their claims and sale of shoplifting devices. Although the website notes that all products sold are “novelties,” we find a clear intention to aiding and abetting shoplifting.

We first encountered Castleton Enterprises last August 2009 through our efforts trying to limit the sale of Alpha S3 keys on different Internet websites. The emergence of theshopliftingstore. com, with links to theblackjack360.com site, in addition to the common denominator of “Castleton Enterprises, Inc.” as the copyright owner of the website, indicates that the same individual is back.

Following are some of the initiatives we took: ■ The website heavily promotes The Shoplifting Book. Through the book’s registration we were able to determine the author. ■ On January 27, 2010, we served suit for a number of offenses.

On January 28, we were contacted to fully comply with our original request if we dismissed the suit. To settle, he must provide the following: 1. A complete list of all products he is currently selling or has sold in the past three years. 2. A complete list of all Checkpoint Systems products, including, but not limited to, all Alpha S3 HandKeys. 3. A complete list of all customers, including complete addresses and contact information, to whom he has made sales of the Blackjack 360 or any other product designed or intended to circumvent Checkpoint’s products. 4. All sales and financial information relating to the Blackjack 360 and all products marketed, designed, or intended to circumvent Checkpoint’s products. 5. A complete list of all pending sales. 6. A complete list of vendors who supplied the Blackjack 360 products, all products marketed, designed, or intended to circumvent Checkpoint’s products and any Checkpoint products. 7. Confirmation that he will take down each of his websites that offer sale of the disputed merchandise. 8. A copy of his book, Shoplifting, Loss Prevention, and

Merchants: The New Generation, autographed. 9. Confirmation that he will ship to us all of the infringing merchandise. ■ Once we receive the complete list of “customers,” we will be sending cease-and-desist letters to all of them, with a brief summary of what happened with Mr. Radford and the penalties they may face if they persist trying to shoplift. ■ Alpha will continue trying to engage the different industry associations, like NRF, RILA, and FMI, to help us fight this growing issue. However, Alpha as an industry vendor partner has limited influence with them. To have any impact, we need the engagement and support of large retailers to help us take on the fight.

Please be assured we take this issue very seriously and will continue taking proactive steps to eliminate its impact as quickly as possible.

Carlos E. Perez, Alpha

Carlos, please provide updates. I’m happy to provide the forum. It looks like Alpha has set a standard by which all of our partners should engage the bad guys. NRF, RILA, and FMI board members—I’m calling you out to engage in the fight. This focus seems like a no-brainer.

PaLmer, reifLer & assoCiates

The Need to Modernize Civil Recovery Statutes

Over the years, states have come to recognize the exorbitant monetary losses that retailers suffer due to incidents of theft. One by one, states have enacted statutes allowing the retailer to request civil statutory damages and/or a civil penalty from shoplifters in addition to any restitution that may be owed. These civil statutes, which were initially enacted to help the retailer defray the financial impact of shrink, partially offset the retailer’s security expenses, and deter repeat offenses, have evolved into an important way for retailers to recoup some of their losses from theft and, in turn, help to keep prices down for the honest consumer.

Changes in Favor of Retailers

In recent years several states have amended these statutes in favor of the retailer, allowing for a greater recovery against the shoplifter. For example, in 2009 the Washington State Senate realized the statute had remained unchanged since its establishment in 1975, a time when the dollar went a lot further. The Senate pointed out that $250 in 1975 was equivalent to $954 in 2007, therefore, the monetary amount that was considered a sufficient recovery in 1975 was no longer sufficient in the 21st century. As a result, Washington’s maximum civil penalty request…provided that the retail price of the merchandise is at the

By Marisa C. McIntyre, J.D.

Marisa C. McIntyre is an associate attorney at Palmer, Reifler & Associates, P.A. where she represents clients in structuring and negotiating settlements, in mediation, and in small-claims court. She received her bachelor’s degree in English from Furman University and her juris doctor from the University of Louisville Louis D. Brandeis School of Law. McIntyre is licensed to practice law in Florida.

statutory maximum…was increased from $1,200 to $3,500 in addition to any restitution.1

Maryland also revised its statute in 2001 when the state House and Senate voted in favor of the amended bill with overwhelming support, 138–0 in the House and 47–0 in the Senate. While calculation of the civil penalty remained at two times the retail value, the maximum allowable recovery was raised from $500 to $1,000 in addition to any restitution request.2

Similarly, in 2006 in response to the rising costs of loss prevention, merchandise, and court proceedings, the Retail Merchants Association requested a bill to raise the maximum allowable request in New Hampshire, which had remained unchanged since 1992. The state House and Senate voted in favor of amending the statute, increasing the maximum allowable request from $200 to $400 plus any restitution.3

In 2010 the statute was changed again and “shoplifting” was replaced with “willful concealment,” the distinction being that in New Hampshire the act of willful concealment occurs within the boundary of the merchant’s premises while the act of shoplifting occurs outside that boundary.4 While willful concealment had been previously referred to in the statute, deleting shoplifting reinforced the retailer’s right to make a civil damages request not only once a shoplifter has exited with unpurchased merchandise, but when he or she conceals unpurchased merchandise before or without exiting.

Changes that Disfavor Retailers

Not all recent amendments have favored the retailer, however. There have also been some amendments that have negatively impacted the retailer’s request. The latest was in North Dakota, which amended its statute to only allow a civil request for restitution and/or statutory damages upon completion of the criminal matter.

Now, in North Dakota if the police are called at the time of the incident and charges are pressed, no civil requests can be made until the criminal matter is resolved. This differs from the majority of other statutes that state that a conviction or plea of guilty to the offense of theft is not a prerequisite to the bringing of a civil action.

1 S. 6167, 61st Leg., Reg. Sess. (Wash. 2009) 2 S. 265, 2001 Leg., 415th Sess. (Md. 2001) 3 H.R. 1361, 159th Gen. Ct., 2d. yr. Sess. (N.H. 2006) 4 State v. Thiel, N.H. 462 (2010).

PaLmer, reifLer & assoCiates

Additionally, in 2009 the Arkansas statute was changed to apply only to adults, eliminating any juvenile or parental liability. In 2006 Rhode Island, in a perplexing move, eliminated the availability to demand a civil penalty until a lawsuit has been filed.

For these reasons it is vital for retailers to lobby each state’s legislature to stress the importance of these statutes and their value to the retail industry in helping to recoup a portion of the losses resulting from theft.

Lobbying State Legislatures

While some statutes have been amended in favor of the retailer, other amendments have disfavored the retailer and many statutes have not been amended at all. It is important for retailers to work together in requesting that each state’s legislature revisit the civil theft statutes, amending them to allow a greater recovery against those that are the root cause of the loss.

We recommend that retailers unite to lobby for increased demand amounts where appropriate and to expand the scope of the civil theft statutes to include theft of cash, time-card fraud, gift-card fraud, and other forms of employee theft.

Recent amendments benefitting the retailer have been overwhelmingly supported and, just as the Retail Merchants Association in New Hampshire demonstrated, a request can go a long way in helping to grant retailers the utmost protections that the law can afford.

Civil Recovery and Brand Protection

Sound risk management is an essential ingredient of loss prevention. This is certainly the case when applying state civil statutes in the pursuit of losses caused by theft offenders, whether employees or shoplifters. Commonly known as “civil recovery,” it is no less than the practice of civil law. As in all matters of law, it is wise to seek quality legal representation. The law office of Palmer, Reifler & Associates, P.A. is a full-service law firm with a focus on civil recovery law.

We believe sound risk management in civil recovery is defined as quality legal resources applied to sound processes and practices. For over twenty years Palmer, Reifler & Associates has developed and refined our signature attorney-supervised recovery process. Early on, this meant working with the Federal Trade Commission, state attorneys general, and state bar associations to coordinate legislative requirements and proper civil recovery procedures.

In 1994 this meant successfully arguing a civil case, Shorts v Palmer, that became a landmark case in establishing important rights and protections for retailers and other victims of theft.

Legal Involvement with Clients

Today, this body of work has culminated into the ability to provide our clients with a high level of legal assurances and a low level of associated risk. While not an exhaustive list, the following are just some examples of the important involvement of our legal staff in the civil recovery process. ■ High level of attorney involvement in the recovery process, with every aspect of recovery directly managed by attorneys. ■ When requested, a timely, thorough, and accurate case review process by our legal staff, prior to civil recovery demands being sent. ■ Tracking daily shifts and changes in the ever-evolving legal landscape that may impact civil recovery statutory law and case precedent, as managed by our director of legal compliance. ■ Provide on-going sound legal counsel to our clients regarding state civil recovery statutes and best practices in all fifty states. ■ Pursue a policy of comprehensive engagement with opposing parties, their parents, legal guardians, and/or attorneys, when applicable, throughout the case life cycle.

Each and every theft offender that writes our office receives a response in writing by a member of our legal staff. ■ Adapt our civil recovery process to unique statutory circumstances, client needs and culture, and particular risk management model requirements. ■ Leverage technology for the highest level of case data capture, attorney follow-up, case notation, document capture/storage, and opposing party communication. ■ Provide our clients with civil litigation services, filing law suits on their behalf against theft offenders.

Practically speaking, this level of applied legal resources provides a high degree of assurance that the right statutes are being applied to the right cases, which are being pursued in the correct way with absolute consistency. Without this level of assurance, your civil recovery program is exposed to litigation risk.

Protect Your Brand

In matters of civil recovery law, insist on a quality, experienced law firm focused on civil recovery law to represent your company. Settling for anything less is less than sound risk management.