The Art of the Steal

9

[WHEN THE

LABEL LIES]

It’s hard to know what you’re getting when you buy something today. And I mean anything. Just ask men in India. Indians, particularly those with money, have a fondness for buying foreign goods. They figure the quality far exceeds domestic brands. And so it’s no surprise that there’s been good business in brand-name, supposedly high-quality prophylactics “imported” from the United States and Singapore. Wealthier Indians don’t mind paying the substantial premiums they command.

The trouble is, many of the condoms are actually imported from no farther away than Calcutta and Bombay. They carry foreign labels and colorful packaging, but they’re decidedly inferior counterfeits, far worse than the cheapest Indian brands. Laboratory tests have concluded that 90 percent of them leak or are of such poor quality that they give dubious protection. Thousands of men have bought the fraudulent condoms, possibly bringing on unwanted pregnancies and exposing themselves to HIV.

But don’t think that counterfeit birth control products are an entirely male issue. Fakery is not a sexist industry. In Brazil, counterfeit Microvlar, the country’s most popular birth control pill, has been actively marketed by thieves. The well-disguised fakes, made out of flour rather than active ingredients, have resulted in a number of women becoming pregnant and/or developing unusual bleeding.

IS IT REAL OR IS IT . . . ?

When you buy something at the mall, the supermarket, or the corner deli today, you really don’t know if you’re getting what you paid for. Is it real or is it fake? Often the experts themselves don’t know. Fake products are hitting store shelves by the bushel, tripling in magnitude in the last decade and costing American companies on the order of $350 billion a year. It’s become a sweet business for scam artists. Dozens of counterfeit wholesalers are said to work in New York alone, with some of them making as much as $3 million a year.

Estimates are that at least 5 percent of all products are phony, and in some industries, the percentage runs much higher. Something like 22 percent of all apparel and footwear is estimated to be counterfeit. No brand has been spared: Lacoste, Armani, Calvin Klein, Tommy Hilfiger, Polo, Donna Karan, Nautica, and so on. Counterfeit leather products have long been popular with tourists, who load up on fake Louis Vuitton, Gucci, and Charles Jourdan bags and wallets. The better the brand awareness, the greater the likelihood of counterfeiting. We all love Swiss watches, and so it’s no wonder that an estimated ten million counterfeit Swiss watches are sold each year. More than a quarter of the computer software being run on computers in the United States is said to be fraudulent, and in some countries, 90 percent of it is fake. I’ve heard that the counterfeit golf equipment business is larger than the real golf equipment business. Hours after the Taylor Made Golf Company introduced a new $300 driver at the Professional Golfers’ Merchandise Show in Orlando not long ago, counterfeiters were selling their own fake replicas for half the price—at the same trade show.

Pretty much anything that sells gets counterfeited these days. Counterfeiters deal in mundane items like ball-point pens, correction fluid, socks, perfume, adhesive tape, stereo speakers, as well as more esoteric products like cargo hold covers for ships. I’ve even heard of counterfeit butterscotch candy.

The problem is not merely a cosmetic one, or one of phony denim that doesn’t fit or wear quite as well as the genuine label. Pharmaceuticals consistently lead the list of counterfeited products, because while medicine is expensive to develop, it’s relatively cheap to reproduce. There is also widespread counterfeiting of automotive and aircraft parts—there are actually decent odds that when you board any commercial plane it contains a few counterfeit parts. These can result in lethal consequences. It’s one thing to be stuck with counterfeit shampoo, deodorant, or talcum powder. It’s quite another to be ingesting fake prescription drugs: fake anti-malarial tablets, fake decongestants, fake aspirin. It’s one thing to be fooled into buying fake athletic socks. It’s quite another to have counterfeit brake pads installed in your new car.

There’s a lot of shoddy counterfeiting of products, and simple side-by-side comparisons generally will separate the genuine from the fraudulent. But, as with other areas of fraud, counterfeiting has improved enormously. Again, technology has been a tremendous boon to the scofflaw. With the work of the best counterfeiters, not only are the products perfect replicas, but so are the labels and the packaging. Even people who work in the industry can’t tell that they’re fakes.

A few years ago, Alfred Dunhill, the British luxury goods and tobacco company, was experiencing highly sophisticated counterfeiting of its purses and billfolds. A seizure of the products took place in Oregon, and a chain of counterfeiters was brought to trial. Naturally, the prosecution needed to demonstrate in court that the seized goods were in fact fake, or else there was no case. But the goods were so precisely counterfeited that prosecutors had to trot out an entire team of experts to testify. The fakes, which were being made in Asia, were so good that it took forensic analysis to identify them. Despite this, the result was a hung jury. The jury may have been sending any number of messages, including that it was utterly confused, but I suspect that one of them was that they weren’t entirely convinced that the counterfeits were truly counterfeits.

These days, the counterfeiter often uses the same machinery that the genuine manufacturers do, as well as the same packaging. Unilever came across a group of thieves in Chicago who were counterfeiting brands of their liquid detergent. They were ordering bottles from the same place Unilever got them in Canada. Then they filled them with cheaper soap and sold them to bodegas. Counterfeiting liquid detergent hardly seems worth the effort, but they were doing it with gusto.

Allied Domecq, a big wine and spirits distributor, found that a large proportion of its Fundador Brandy sold in the Philippines was counterfeit. It had been going on for so long, in fact, that local residents had come to believe there was a Philippine version of the product. The counterfeit bottles were perfect imitations, and in fact, were often empty Fundador bottles that were refilled. The only way you could tell the difference was when you tasted the brandy. There were actually different levels of the counterfeit brandy, some better tasting than others. Counterfeiters pretty much put anything in the bottle, as long as it had the same color and general flavor of brandy, but a few were more artful. But none of it truly tasted like brandy, since the thieves used sugar cane and flavors like rum.

Determined to put a stop to the counterfeiting, Allied Domecq changed the look of its bottles. It designed a new, hard-to-counterfeit label and it added a plastic cap and a guala, which is a plastic ball inside the neck that prevents the bottle from being refilled. The counterfeiting declined significantly.

IT’S NOT JUST FAKE FUR

To a large extent, counterfeiting is ruled by organized crime syndicates. Like other forms of fraud, it is growing so rapidly because penalties are inadequate and rarely enforced. There are extremely high profits and low risk, a combination that will always attract criminals. A number of years ago, the former head of the Born to Kill gang in New York said he made $13 million a year selling counterfeit Rolex and Cartier watches. Think about it. Low-grade quartz watches were shipped in from Hong Kong that cost $3.00. Fake trade names and logos were slapped on for an additional 50 cents. Then the watches were sold on the street for thirty dollars.

Dunhill pens sell for one hundred twenty dollars or so. Counterfeiters sell them for half that. And they look great, pretty much indistinguishable from the real thing. How do they do it? Well, they’re selling you virtually the real thing. Counterfeiters go to the same factory in Korea that makes the plastic barrel for Dunhill and buy the same barrel. Then the crooks go to the company that makes the cap for Dunhill and buy that. Well, then isn’t it the same pen? Just about. Dunhill’s clip that allows you to attach the pen to your pocket is 18-karat gold. The counterfeit pen has a gold-plated clip. And since the counterfeiters don’t have anything like the overhead and marketing budget that Dunhill has, they can settle for much less markup.

With organized crime involved, there’s enough money available that counterfeiters establish factories that rival those of legitimate manufacturers. I heard about a counterfeit coffee facility in Dagestan, a Russian republic, that can churn out 1.2 million units of coffee a month. An Asian facility making counterfeit athletic shoes is said to employ more than a thousand workers.

Counterfeiting often plays a significant role in money laundering, because laundering always works best when there’s a product involved. Authorities believe that the reason inexpensive items like correction fluid and trash bags are counterfeited is to wash money from other criminal activities like weapons smuggling and loan-sharking. Police using trained drug dogs have found heroin stuffed inside counterfeit Chanel and Louis Vuitton handbags. Criminals were doubling up, importing counterfeit products and drugs all at once. You have to realize, crime syndicates are business operations, and their executives sit around and make strategic decisions just like executives in Fortune 500 companies. One day, at the weekly marketing meeting, some guy probably spoke up and said, “Look, we’re bringing in these counterfeit purses and we’re bringing in drugs, why not combine the two? It’ll be more cost-effective.” The idea probably got him employee of the month.

The money is so good in counterfeit products, that terrorists are believed to often fund their activities by trafficking in fake goods. Terrorists in Northern Ireland are thought to have supported their violence by selling counterfeit veterinary products, perfume, video games, and computer software. The FBI believes the bombing of the World Trade Center was financed by the sale of counterfeit T-shirts and sportswear.

“MADE IN CHINA” MORE THAN YOU KNOW

Counterfeiters live all over, but a great deal of the merchandise originates in places like China, Korea, and Vietnam. China may well be the leading supplier of counterfeit products to the world, and just about anything the Chinese consumer buys is quite likely not real. You go to the store in China and there’s fake Skippy peanut butter, fake Gillette razor blades, fake Knorr chicken soup, fake Hellmann’s mayonnaise, fake Kellogg’s Corn Flakes, fake Lux soap, fake Rejoice shampoo, fake Huggies diapers, fake fertilizer, fake liquor, fake motor oil, fake chewing gum, fake cell phone batteries, even fake toilet paper. The goods are probably rung up on a counterfeit cash register and packed in counterfeit grocery bags.

Procter & Gamble began selling its products in China in 1991, and that same year counterfeits were already on shelves. The soap company says counterfeiters make fraudulent copies of their shampoo bottles and fill them up with the cheapest blend of raw ingredients. Then they’ll top off the product with a touch of the real shampoo to make it look and smell authentic. Each year, the problem worsens.

Royal Philips Electronics has said 40 percent of counterfeit Philips light bulbs in the Philippines come from China. Volkswagen said two-thirds of the car parts sold in China under its brand name are fakes. Hitachi has the same problem with counterfeit electronic products. The Chinese press wrote up some thieves who put together an entire car from used and counterfeit parts that they tried to sell as a new Audi.

China has begun cracking down on the problem, under pressure from foreign companies. But some pretty major cultural shifts have to take place. Local governments have been famous for protecting factories churning out counterfeit goods. Philips said that the prime counterfeiter in Zhangzhou in the Fujian province was even given an “outstanding youth” award by the local government.

All these cheap Asian fakes serve as fodder for all types of little scams. You know when you take transatlantic flights and the airline crews come around with little trolleys of duty-free items you can buy? Some dishonest crew members on British Airways figured out a way to augment their income. They bought counterfeit products like Raymond Weil watches, Chanel perfume, and Gucci sunglasses while on layovers in Hong Kong and Singapore. Then they substituted the fakes for the genuine products on the trolleys they wheeled around, and passengers unwittingly bought them. The crew members then sold the legitimate goods back in England to stores or on the black market. They would take watches to jewelers and tell them they had gotten them as unwanted gifts, and the jewelers would gladly buy them.

A big part of the problem is that most consumers don’t care if something is fake, as long as it looks like the real thing and it costs less. And it’s not just penny-pinchers who buy phony Gucci and Fendi bags. One counterfeiter said he had a steady client who was a neurosurgeon’s wife. Some rich people, he said, buy fake handbags and luggage from him for trips, so they don’t have to worry if they get stolen in hotels. Then they had the real thing for dinner parties and local use. The business has become very open. Counterfeit items are easily obtained on the streets of all large American cities. In Italy, they’re sold by street peddlers known as “Vu cumpra,” which means “wanna buy.” They even take out ads in the local papers. In Sweden, there was a mail order catalogue that sold all manner of counterfeit merchandise. It was called, “Fake.”

SALTING TALES

In few areas of fraud have technological advances been more welcome than among counterfeiters. “Cyberfakes” is the name that the garment industry has given to computer-generated logos and designs. The counterfeiter scans a real logo into his computer. Then he transfers it to a computerized embroidery machine. Using the image as a master, it recreates the design on just about any garment he chooses. Counterfeiters can buy an embroidery machine small enough to fit inside a suitcase for just three thousand dollars. Label-making machinery can be acquired in the same way, but it is much more expensive. More commonly, counterfeiters will farm out the work of counterfeit labels to factories in developing countries.

As U.S. Customs has gotten sharper at detecting illegal apparel imports, counterfeiters have introduced new tricks. They import what they call “blanks,” perfectly legal unlabeled apparel. The clothes will then be taken to factories, usually around New York or Los Angeles, and low-wage laborers will attach the counterfeit brand-name labels and logos to them.

Another nettlesome issue is what are known as “overmakes,” “backdoor,” or “cabbage.” A factory making legitimate clothing for a brand will deliberately make extra garments and then sell these “overmakes” to criminals.

A related concern is diversion and the gray market. For instance, products merchandised in the United States are also sold in Africa, but at a lower price to meet the local market. So, a legitimate company will ship goods to a wholesaler in Africa, who will divert them to someone in Milwaukee, where he can get a bigger return, because while there might be a 40 percent discount off the list price in Africa, there’s only a 15 percent discount in the United States. This is often a fraud against the sales contract, but it’s difficult to enforce because it’s so hard to trace where shipments wind up. In the 1990s, for instance, Unilever sent a lot of soaps, shampoos, salves, and creams to Russia. Most of it ended up back in Brooklyn.

Like many other companies, Unilever has attacked the diversion problem by conducting a little contest. It’s called “Lucky Bonus.” When it sends out a pallet of goods, it will tuck three $25 coupons inside. When the pallet is unloaded and the product removed to put on store shelves, the handlers will find the coupons. The instructions tell them that if they fill them out with their name and address and return them to Unilever, they’ll get a check for $25. The key is having that name and address. That tells Unilever whether the pallet got to its intended destination. The concept is known as “salting,” and was developed by American Cyanamid for its Old Spice cologne, which was being diverted. It’s neither a high-cost solution nor a high-tech solution, but it works.

BUYER BEWARE

I do occasional work for Microsoft, which, given its dominant market presence, has been a principal target of counterfeiters for years. It’s gotten so bad that Microsoft can barely get a new piece of software out before counterfeit versions make their own debut. In some instances, counterfeit versions of Microsoft products have beaten the real thing to market. You can go to various Internet auction sites and bid on fraudulent Microsoft programs that sell for a fraction of their retail price.

In early 2000, a guy was busted in the state of Washington, Microsoft’s home state, for making counterfeit Microsoft products, including Office 97, Office 2000 Professional, and Office 2000 Premium. He was turning out tens of thousands of copies in his apartment. When they raided it, the FBI found several computers, a sixteen-tray replicator, a color copier, a shrink-wrapping machine, and packaging materials.

A few years ago, an Asian ring was busted in South El Monte, California. The ring had two locations, one to manufacture fake Microsoft CD ROMs and disks, and another to make counterfeit manuals, certificates of authenticity, boxes, and even contest entry forms for free trips. Nothing was omitted. The products seized were estimated to have a market value of more than $10 million.

In Digital Park, a high-tech business center just outside Cambridge, England, a young Texan opened a company several years ago called PolyMould that made counterfeit versions of the most popular software products, including Microsoft Office and Windows NT. Down the road from the facility was one of Microsoft’s own research and development centers.

An Asian gang took a different approach to scamming Microsoft. They established a fake school they called West Hill College. Then they ordered software from Microsoft at the education discount of one-third the retail price. They repackaged the CDs in counterfeit boxes, and sold them at full price through a phony computer wholesaler they created.

Microsoft puts a ton of security features in their products, everything from edge-to-edge holographic images to watermarked security paper with an embedded thread and a heat-sensitive strip that reveals “Genuine” when rubbed for a few seconds, but they face an ongoing struggle. I’ve worked on the Microsoft warranty that’s contained in all of the company’s software. It has to be changed every couple of years because it keeps getting counterfeited. For instance, within days of the Windows 98 OEM security manual cover being introduced, a counterfeit product was already identified and confiscated in several cities. The knock-offs imitated both the manual cover and the security devices.

The problem is that software counterfeiting keeps getting easier. CD recordable drives that allow anyone to make copies of software cost a few hundred dollars. With desktop publishing programs and document scanners, it’s simple to duplicate manuals and warranties. But even though counterfeit software closely resembles the real thing, it doesn’t always work as well. Often, counterfeiters sell untested software. It may have been copied hundreds or thousands of times from a real version and is defective. The result can be viruses that corrupt your hard drive or cause system failure.

KA-CHING!

I’ve always figured that security at casinos is as tight as it gets, and there was no reasonable hope of replicating the chips and tokens in casinos. That was before I spoke to a guy from Rhode Island, who had recently been released from prison for perpetuating a massive slot machine token fraud. He had scammed virtually every major casino in the country with counterfeit five-dollar to hundred-dollar slot machine tokens.

Originally, the man had been a tool and die maker who made custom jewelry for dealers, but he got tired of the business and retired at an early age. He had been a real workaholic, and had too much time on his hands. He broke up with his fiancée. He was at loose ends. The Foxwoods Resort Casino in Connecticut had recently opened, and a friend dragged him there to cheer him up. He wasn’t really into gambling, but he was mesmerized by the hundred-dollar slot machine token. He admired the intricate detail of it. It reminded him of a piece of jewelry that he might manufacture. That set wheels turning in his head, and he found himself drawn to the challenge of making a counterfeit token.

He found out it was no simple project. Slot machines are equipped with sophisticated electronic coin comparators. These measure everything about any coin that gets deposited, to make sure it’s a legitimate token. The comparators confirm the outside and inside diameter of the coin, the center of the coin, the magnetic image the coin throws, the number of serrations on the outside of the coin, the weight, and so on. A coin has something known as a “closed collar,” the raised outside border of the coin. For a counterfeit coin to pass muster, it has to have a closed collar that is just the right height. Hence, a counterfeit coin has to be exact. There are a lot of difficult-to-duplicate features.

So this guy got to work, acquiring equipment, and then modifying it for his precise needs. He made coins, tested them at Foxwoods, found they wouldn’t work, made changes, tested the new coins, and on and on. It took him more than a year before he had a counterfeit token that beat the machine. At that point, he became addicted. He made tens of thousands of tokens. To keep from arousing suspicion, he began playing at casinos in Atlantic City and Las Vegas. Different casinos had different tokens, and he had to replicate theirs. But he had become an expert. When he was caught at Caesar’s in Atlantic City in late 1996, he had 750 pounds of coins in the trunk of his car, one of the biggest cases on record of gambling token counterfeiting.

To prevent further counterfeiting, token manufacturers have been offering security alloys, which are metals with very limited availability and unique properties. The latest protection is a code engraved in the token. Slot machines are programmed to read the code, and if it’s not there, the token is rejected.

STICKER SHOCK

Underwriters Labs (UL) has faced one of the more unusual counterfeiting problems. UL, a non-profit organization founded in 1894, doesn’t make any products, a fact which by itself, one would think, would make the company impervious to counterfeiting. What it does do is test and certify the safety of more than 14 billion electrical products a year, things like power supply cords, ceiling fans, night lights, transformers, switches, and surge suppressers. Its testing engineers simulate power surges. They bend wire to see if it breaks. They dunk products in water. If something survives a UL testing, it’s good. Once a product has been certified by the organization, it is allowed to display the UL provided tag. It’s often referred to as the “American Mark of Safety.”

Starting in the early 1990s, UL became aware of untested products bearing counterfeit UL tags that were coming into the United States, primarily from China. It first learned of the counterfeiting when it caught phony seals of approval on Christmas lights. Then they began showing up on other electrical goods. The products were not only inferior, but also dangerous. There were lights, fans, electric surge protectors, and other products that were improperly grounded or wired with incorrect polarity. There were dummy surge protectors that would overload if you turned on a computer, printer, and TV simultaneously. Plugs were so inferior that chunks of them would fall off when you pulled them out of a socket. Extension cords were liable to give a user a shock. Fans were at risk of catching fire. In one tragic case, a young girl was electrocuted by sucking on an incorrectly wired and falsely labeled Christmas candle.

Disturbed by the implications of this counterfeiting, UL in 1994 began using silver, tamper-evident holographic labels for all of its certified Christmas products, and has since required them on an array of electrical products coming out of China. In addition, it’s trained U.S. Customs inspectors to identify counterfeit labels and has put retailers on alert as well. One of the problems for U.S. Customs officials is that there is no legal requirement for electrical equipment to carry the UL labels, though if they do have the labels, it’s a crime for them to be counterfeit. The new label has been doing a good job in controlling the threat, though it hasn’t stopped altogether.

A DIFFERENT KIND OF DRUG PROBLEM

Remember that classic film The Third Man based on the haunting Graham Greene thriller? The movie is set in post-World War II Vienna, where Holly Martins, an American, goes in search of his old college buddy, Harry Lime. He discovers that Lime is dead, and hears disturbing stories of how he made a fortune trafficking in fraudulent drugs. One of his schemes was selling counterfeit penicillin. Martins has a hard time accepting some of the bad things he hears about him, until he visits a hospital and sees all the children whose health has been threatened by injections of Lime’s penicillin.

That’s fiction, but there’s plenty of fact in it. It takes at least a decade and upward of $150 to $200 million to bring a new pharmaceutical to market. Counterfeiters, with the assistance of a chemist, can copy it in a matter of days, using equipment that costs a few thousand dollars. But they don’t trouble themselves worrying too much about the safety of their product. Counterfeits that hurt and kill are the dark side of fraud, and it’s the part that really disturbs me. Counterfeit drugs are a threat to public health. They’re very difficult to detect and control, and they’ve led to illnesses and death. In 1997, the World Health Organization estimated that more than five hundred people had died from fake medicines.

In the United States, dozens of deaths and hundreds of adverse reactions have been connected to a counterfeit intravenous antibiotic from China that is used to treat serious blood infections. There were 3,000 deaths in Nigeria in 1995 attributed to fake meningitis vaccines. Counterfeit antibiotics made from talcum powder and counterfeit eye drops made from contaminated water were discovered in Africa. Brazil has suffered deaths from bogus antibiotics and cancer treatments. In southern Vietnam, police raided a gang and found a thousand fake Viagra tablets.

Some counterfeiters ply their trade without even making a product. Criminals regularly go to wholesalers and buy expired aspirin and other ordinary over-the-counter medications that were going to be junked. They pay twenty cents on the bottle, and the wholesalers are happy to get it. The criminals then change the dates on the boxes and resell them to drugstores.

Crooks root through Dumpsters outside of hospitals and look for syringe bottles that have been discarded in hazardous materials bags. The thieves take them, refill them with sugar water, and sell them as medicine. The only way to tell is to turn the bottle over and look for two pinholes. A fraudulent one has to have a second pinhole in it made by the criminal when he inserted a needle to refill it.

DIFFICULT TO DIGEST

It’s not just drugs that can cause harm. So can foods and food supplements, drinks, vitamins, literally anything that you digest. A number of individuals were caught in 1999 for selling expired baby formula and nutritional products for invalids. They had obtained them under the false pretense that the products would be used for animal food. In 1995, two California men intended to distribute a half million cans of counterfeit Similac baby formula. Fortunately, the illegal operation was busted before most of the products were distributed, and there were only a few reports of illnesses. But there have been other instances where counterfeit formula has caused rashes and seizures. In Mexico, fake Tequila and other alcoholic beverages have caused illness and some deaths. “Collectors” pay for empty bottles outside stadiums, and then refill them with other liquids and pass them off as the real thing.

Anything you apply to your skin, if it’s counterfeit, puts you at risk. A phony version of a popular shampoo was found to contain bacteria that could cause infections. Another counterfeit brand has led to hair loss. Counterfeit cosmetics have been found to contain residue of industrial solvents and carcinogens. When you use them, you can suffer severe allergic reactions.

Counterfeit pesticides and fertilizers have decimated crops in developing countries, contributing to famine and death. A counterfeit chemical fungicide containing chalk was said to have been responsible for destroying two-thirds of the coffee crop in Kenya and Zaire. In Kenya, criminals were caught with counterfeit “Super Doom” insecticide. They diluted the weed product with kerosene and other ingredients and resold it, considerably diminishing its effectiveness.

NUTS AND BOLTS—AND EVERYTHING IN BETWEEN

Counterfeiters are without scruples. They’ll put anyone at risk for profit (law enforcement agents once came across a shipment of counterfeit Cabbage Patch dolls that had been doused with kerosene to keep rats away while they were transported from overseas). Industrial valves have a long life cycle and are easy to recondition, and so they’ve been targets of counterfeiters for years. The FDA recalled $7 million of intra-aortic pumps used during open-heart surgery, after it discovered malfunctioning counterfeit parts in the devices. Sometimes, genuine used valves are improperly reconditioned so they can be resold as new. In one case, graphite seals that made the valves fire-safe were removed and not replaced.

Counterfeit nuts and bolts caused parts of a building to collapse during an earthquake. In the early 1980s, a contractor building a Saturn plant in Tennessee died because a counterfeit bolt snapped. It looked like the real thing but was made of cheap metal, not the specified high-quality carbon steel. In 1992, a fire erupted on a Navy destroyer, killing two sailors, after a counterfeit bolt connecting a steam line broke in the ship’s engine room. One of the problems with small parts is that to determine if a bolt is inferior, you need to subject it to metallurgical tests, and analyzing a simple 40-cent bolt can cost two hundred dollars.

Every type of car and machine part is counterfeited—brakes, horns, oil filters, radiators, suspensions. Counterfeit brakes were found in Nigeria that were made from compressed grass that burst into flames when they were tested. In 1991, a woman and her child were killed in an auto accident in the United States that was precipitated by a counterfeit brake pad. The pad was made out of wood chips. The U.S. Department of Commerce estimates that 210,000 American workers could be added to the work rolls if the parts were made legally.

THE FRIGHTENING SKIES

Equally frightening is the number of counterfeit parts flooding the airline industry, a full 75 percent of which are used in critical applications. According to the Federal Aviation Authority (FAA), between 1973 and 1993 bogus parts played a role in at least 166 U.S.-based aircraft accidents or less serious incidents. The worst accident of all occurred in September 1989. The tail section of a turboprop plane tore loose, causing the plane to crash into the North Sea. All fifty-five people on board were killed. The cause was eventually traced to counterfeit bolts in the tail. It was never determined where they came from, because the repair station that installed them didn’t have a parts and supplier registration system.

In 1990, Bruce Rice, the president of Rice Aircraft, a Long Island airplane parts distributor, was jailed for four years for stripping and replacing used parts and falsifying documents to suggest that they were new. Between 1977 and 1988, Rice sold counterfeit rivets and fasteners to Grumman, Air France, the Israeli Government, United Airlines, and American Airlines, among others, posing a serious safety threat to thousands of aircraft. Fortunately, no accidents were known to have resulted from the phony parts.

A few years ago, a company in Southern California was caught selling counterfeit parts to McDonnell Douglas. They were small devices that keep an airplane’s landing gear from shaking, and were used on Douglas’s DC-9 commercial airplanes. In 1995, in a separate incident, six hundred light planes were grounded after a supply of parts for Textron’s Lycoming engines were discovered to be fake.

But there have been crashes involving Bell Helicopters in which the only thing truly Bell about the craft was the nameplate. The rest of it was rebuilt with scrap or counterfeit parts. In 1987, a traffic reporter riding in a helicopter was killed when the helicopter crashed while he was broadcasting live. It was determined that the accident was caused by a clutch made of counterfeit parts.

Who’s to blame? A lot of people. And it’s not enough just to make sure there’s good paperwork on a part. Forgers can forge the paperwork. One of the best safeguards is to know your supplier.

A few years ago, undercover Congressional investigators paid a visit to a Miami scrap yard. They came across some jet engine blades marked with a red tag saying they were “unserviceable.” But when the dealer saw they were interested in the blades, he removed the tag. He told them: “I know some of you boys rework these things, but that’s not my concern.” The blades sell for around $1,500 new. The investigators bought them for $1.30.

WHAT’S BEING DONE

Because of the sophistication and growth of counterfeit products, far more attention is being paid to preventing them, but a lot more needs to be done. Packaging is an essential ingredient in deterring counterfeiters, particularly in the pharmaceutical industry, where bottles are reused by counterfeiters. I do a fair amount of work with drug companies, and I find that the best security is to combine overt with covert security features, features you can see with features you can’t see.

The most common overt technique is the tamper seals common on over-the-counter medications. These days, that technology is being combined more and more with holograms. They’re a very strong tool, and are widely used on closure seals and hang tags. They’re even increasingly put on packaging to make a product more visibly vibrant. If you go to the toothpaste aisle at the supermarket, you’ll notice that all the premium toothpastes have holographic packaging.

I like holograms, but the problem is that they’re normally not registered. Anyone can go to a company in Taiwan and get a hologram duplicated. Often, they’re silver foil with white screen printing on them. Counterfeit holograms are easy to slip through Customs. You can stuff enough fake holograms in a matchbox to put on ten thousand dollars or twenty thousand dollars worth of counterfeit packages.

So a hologram is fine if it’s in conjunction with another feature that you can’t see. For instance, you could use a hologram combined with a covert feature like machine-readable information encrypted on the hologram. Other covert features include putting a fluorescent dot on the label of the packaging that’s invisible to the naked eye and which can’t be removed even by washing—you use a reader light to pick it up. There are also special coatings like microthin metals that change when slit or punctured. There is reactive invisible ink or visible coloring-changing inks. There are reactive threads that are woven into fabrics and emit a fluorescent color when put under a hand-held ultraviolet reader. There are scratch and view labels that reveal the words “original.” And there is chemical tagging, for fuels, drugs, and pesticides. There’s even a “biocode technology” where marker chemicals can be added to capsules of drugs that can then be authenticated with test strips.

Another new technique is DNA (deoxyribonucleic acid) marking. Joe Barbera, the creator of “The Flintstones,” and “The Jetsons,” used to employ a DNA pen with ink that contained fragments of his own genetic code to authenticate his drawings. And now a company called DNA Technologies has come up with a means of mass-marking items with an ink containing DNA. The company marked millions of items of official merchandise at the Sydney Olympics, using an ink that contained DNA strands from an Australian athlete and a chemical that can be identified with an optical scanner. The company gets the DNA either from a blood sample or a swab of the mouth, and then makes copies of it that it mixes into the ink. The ink was put right on the souvenirs or on a tag attached to them. Among other things, DNA Technologies put a DNA tag on Mark McGuire’s seventieth homerun ball.

Holograms can be copied, but DNA is pretty much counterfeit-proof. The company estimates that there’s about one chance in a trillion that a counterfeiter could duplicate the DNA sample. Those aren’t the kind of odds that any sane criminal would take.

One shortcoming is there’s no hand-held device that can test for the DNA. Vendors can scan a shirt and pick up the chemical in the ink, but not the DNA. If something seems fishy, the product has to be sent to the company for further testing.

EVERYONE HAS TO GET INVOLVED

Fighting counterfeit goods is going to take a lot more dedication, and I don’t mean simply on the part of manufacturers. Stores have to do a better job of training their employees to discriminate the real from the fake. Packaging with blurry lettering or misspellings—“certifidate” instead of “certificate” of authenticity—is a giveaway. Sometimes, counterfeiters will try to protect themselves by slightly altering a product name—for instance, “Yeal” locks that resemble and are packaged to look like “Yale” locks.

If the problem is ever going to be contained, the general public has to start to care. You can’t perpetuate a scam unless there’s an honest person willing to go along. Years ago, I was visiting New York with my family. My boys were young then. We had eaten lunch at Wolf’s Delicatessen, and while I was paying the check, my kids asked if they could wait outside. I said, fine, as long as they were close enough so I could see them through the windows. Almost immediately, some guy came up to them with a satchel. He swung it open and it was filled with watches. By the time I hurried out to them, they were already picking out famous designer watches at ludicrously low prices. I shooed the guy away, and I had to explain to my kids that the watches were counterfeit and the guy was a crook.

Adults know better, and ought to behave better. Do you really want to keep buying those fakes on the street corner and putting money in the pockets of criminals, or do you want to support legitimate business?