$5 Million Nike, Yeezy Bust Reflects Growing Cargo Theft Problem

Glenn Taylor
·7 min read
3

Illinois police recovered nearly $5 million worth of high-end sneakers from a warehouse in Chicago’s Austin neighborhood where a theft ring targeted freight trains nationwide.

The suspects stole footwear including Nikes, Yeezys, Supremes and Ugg boots from rail cars across the country and sold them to unsuspecting retailers.

More from Sourcing Journal

The investigation was initiated by the Lyons Police Department after a cargo theft was reported in the village about a week ago, according to a local CBS news affiliate. Police charged two individuals so far, and several others are under investigation.

Police will hold a press conference later this week to provide more details on the case, including information on the suspects and what additional charges they may face.

Sourcing Journal reached out to the Lyons Police Department for comment.

According to the report, the site was already on the radar of multiple railroad companies and the Illinois Attorney General’s Office as rail cargo thefts have surged nationwide.

The cargo bust comes two months after police arrested two men in Memphis, itself a hotbed for cargo theft, who burglarized a box car at a CSX railyard and stole $400,000 worth of Nike products. Eighteen boxes of Nike shoes and multiple other unknown boxes were found at the scene.

And in Pennsylvania, the Philadelphia Police Department is investigating a cargo theft ring that has been active in the area, turning to truckers for information regarding the potential thefts. Between Oct. 1, 2022 and Aug. 31, 2023, carriers at three locations were victims of cargo theft.

Beyond the big cities, cargo theft has become a larger problem in North America, with total incidents across the U.S. and Canada jumping 57 percent year over year to 582 in the second quarter of 2023, according to cargo theft security network CargoNet. These shipments were valued at a combined $44.8 million altogether. Notably, the average shipment value per theft increased nearly $100,000 to $260,703 as criminals focused increasingly on high-value shipments.

The topic even got the attention of Ryan Petersen, the outspoken returning CEO of digital freight forwarder Flexport, who said last month that rail cargo theft in New Mexico has risen since August.

While Petersen addressed the concerns affecting his company, CargoNet suggests that much of 2023’s growing cargo theft problem stems from ongoing shipment misdirection attacks. This is when criminals use stolen motor carrier and logistics broker identities to obtain freight and reroute it away from the intended receiver.

Scott Cornell, national practice transportation lead, Travelers, identified this “strategic theft” as the category that encompasses identity theft, fictitious pickups and double brokering scams—where a bad actor poses as a legitimate freight broker or carrier who then offers to arrange shipping services for a customer at a discounted rate.

“They’re using things like online load boards [which match shippers with carriers] to hide behind the internet, be that anonymous person and pretend to be somebody that they’re not in order to get booked on the load so that they can steal that load,” Cornell told Sourcing Journal. “A pickpocket preys on the fact that your attention is elsewhere. They want you to be focused on something else so that they can take from you without you noticing it.”

According to a second-quarter report from supply chain risk management platform Overhaul, full truckload theft is the most prevalent theft method in 35 percent of cases, while pilferage—stealing smaller amounts of cargo and individual items from trucks—was second at 31 percent.

But deceptive pickup has had the biggest increase, aligning with CargoNet’s data. This represents 24 percent of cargo theft incidents, up from just 8 percent in the first quarter.

“In the U.S. post-Covid world, things have changed from the cargo theft perspective,” said Ron Greene, vice president of business development at Overhaul. “Criminals have set up their own trucking companies with the primary intent intended to ship cargo. It’s more difficult to prevent when you have a criminal actor being contracted to move freight.”

Many of these actors cover their tracks by legitimately moving freight most days until they get a high-value load that could be resold, Greene said. From there, they may steal a percentage of the load, and then alter the bill of lading to reflect the amount left in the truck.

“A lot of these thefts don’t even get noticed for days, weeks or months down the road, because the recipient thinks they got what was delivered to them intact, because the documents reflect that,” Greene said.

Cornell noted that trucking companies usually deal with issues like full truckload theft and pilferage, while transportation intermediaries like freight brokerages, freight forwarders and 3PLs more commonly have to navigate strategic theft alternatives due to the virtual nature of their business.

Travelers’ cargo theft investigation team leverages a three-layered approach to cargo theft prevention, Cornell said. The first step involves establishing process and procedures that are typically low cost, such as opening lines of communication and educating stakeholders about current cargo theft concerns.

Second, Cornell looks to align shippers with trucking companies and freight brokers on the type of security locks necessary to fortify their operation, such as preventative seal locks, high-security rear door locks, landing gear and air cuff locks.

The third recommendation is to use technology like covert tracking devices or remotely operated locks installed on trailers that can be operated from company headquarters.

“With today’s technology, if the driver has to stop in a high-theft area, you can geofence the load when it’s stopped,” said Cornell. “You can route fence the load to make sure that it doesn’t go off route, or it doesn’t go through vulnerable areas. So you dovetail those three layers together, I think you have much better chances of preventing cargo theft than anybody who’s not using that approach.”

U.S. reps call for national cargo theft task force

Regardless of the method used, the issue has gotten big enough that some lawmakers want to create a permanent national task force to address supply chain thefts.

In a letter to the U.S. Department of Transportation’s Office of Inspector General on May 22, Sen. Mike Braun (R-Ind.) and Rep. Mike Bost, (R-Ill.) and six other lawmakers highlighted the severity of the problem.

“Of note, the victims of this type and magnitude of supply-chain fraud are not merely truckers, motor carriers, and brokers,” the letter said. “The harm from such crimes also falls upon shippers, financial services, manufacturers, wholesalers, retailers and consumers. The harmful economic ripples cause the cost of doing business to increase, as well as the price retailers and consumers pay for replacement products and other uncompensated costs.”

In an Aug. 22 letter to the other lawmakers, DOT Inspector General Eric Soskin said the office would continue to collaborate with the Federal Motor Carrier Safety Administration to investigate double brokering and other fraud schemes, but has not committed to a national task force.

Task forces fighting cargo theft are active in cities such as Memphis and Miami, while the California Highway Patrol (CHP) operates its own Organized Retail Crime Task Force (ORCTF) dedicated to retail and cargo theft.

In May, the ORCTF scored its biggest bust yet when investigators assigned to the state’s Cargo Theft Interdiction Program (CTIP) arrested 40 suspects as part of a $150 million cargo theft ring responsible for stealing more than 200 cargo loads. Major retailers were among the victims of the investigated thefts.

“A change has occurred in the level of cooperation from the victim retailers,” Jaime Coffee, director of communications for the California Highway Patrol, told Sourcing Journal. “Over time, CHP investigators have proactively engaged with, and educated, key contacts and stakeholders within the retail industry, which has made it easier to identify and recover stolen cargo/merchandise.”

“Operation Overloaded” led to the recovery of over $50 million of the $150 million in stolen merchandise and 20 stolen cargo trailers. Stolen products recovered during this investigation included fashion garments, textiles, electronics and food products. Over 200 CHP personnel were involved in the statewide investigation, Coffee said.

Such successes may have led Governor Gavin Newsom to triple CHP’s resources in aiding local Los Angeles law enforcement to create a citywide organized retail crime task force.

Click here to read the full article.