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Major Rolex AD Accused Of Racketeering And Selling Directly To Grey Market

  1. dsacks30 Feb 15, 2021

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    BREAKING: Major Rolex AD Accused Of Racketeering And Selling Directly To Grey Market - ATELIER DE GRIFF

    A while ago, we explained the concept of the grey market right here. We drew it with little pictures for everyone, so it was all easy to digest and understand. But, even the worst of the best business schools will tell you, nothing beats a good old Case Study to really transfer knowledge. Well my friends, it seems you are in luck…

    As we dove into our long weekend, a lawsuit popped up in Chicago: Krajisnik v. C.D. Peacock, Inc. (1:21-cv-00775). A former Rolex AD employee is directly accusing one of Chicago’s oldest jewellers and Rolex Authorized Dealer for “terminating her employment in retaliation for whistleblowing and refusing to engage in flagrant illegal activity and engaging in racketeering“. The plaintiff is essentially accusing this major Authorized Dealer for selling watches directly into the grey market, not limited to Rolex and allegedly also – you probably guessed it already – Patek Philippe.

    This allegations made in this case are just about as juicy as they get and puts the spotlight dead center on the terrible practice of Authorized Dealers directly selling popular watch models into the grey market. This practice of course artificially increases the rather silly prices customers have to pay on the grey market in order to avoid decades long waiting lists. If you’re not following, I insist you go the first paragraph and click that link to our past explanation on the topic.

    The 50-page and highly detailed complaint that has been submitted to the District Court for the Northern District of Illinois Eastern Division is filed by a team of lawyers. As such it is not the most exciting read but since I’m a nice guy (allegedly) I will condense the essentials of the case hereunder after having analyzed the complaint filed by the former employee. Note that for the detail oriented readers, the filed complaint can be found on Pacer if you have an account (link below).

    Complaint Summary

    As per the filed complaint three employees of CDP, referred to as the whistleblowers allegedly “uncovered a Scheme of illegal activity. They discovered that the Scheme was being perpetrated by a coworker and multiple management-level employees, including the CEO”.

    The complaint continues stating that “the heart of the Scheme was a conspiracy by the Defendants to illegally sell Rolex watches to foreign grey market resellers in order to enrich themselves. In order to further the Scheme, the Defendants conspired to violate numerous federal and state laws including but not limited to racketeering, money laundering, mail, wire, immigration, and credit card fraud, and Illinois sales tax evasion”. I guess when it comes to a life of crime, better go big or go home? Allegedly.

    They further allege that the scheme was not limited to Rolex watches but also involved “other luxury watch and jewellery brands, including, but not limited to Patek Phillipe“.

    And how did that all get to court then you ask? Well, allegedly “the Plaintiff, and the two other innocent co-whistleblowers, repeatedly notified management of the illegal and fraudulent activities while refusing to participate in the Scheme. In response, Plaintiff and the two other co-whistleblowers, respectively, were summarily fired for their knowledge, their unwillingness to be complicit in the Scheme, and their protected whistleblowing activities”.

    The complaint goes even further and alleges that “commencing in late 2018, Plaintiff noticed another newly hired employee, who also had no previous jewellery sales experience, engaging in flagrantly illegal behavior”. This new employee “in concert with members of management” allegedly “committed an ongoing pattern of mail and wire fraud, money laundering, tax evasion, and defrauding Rolex (the “Scheme”) thereby allegedly aiding “CDP management and ownership in fraudulently and intentionally violating the Rolex Distribution Agreement”.

    Fast forward a bit and “as the illegal behavior accelerated in early 2019, it became clear to Plaintiff that store management was complicit in the Scheme. Later it was discovered that the entire chain of management was participating in the Scheme… The Plaintiff escalated their complaints to higher levels of management, including CDP’s CEO and ultimately to CDP’s owner”. Fast forward a little bit more and allegedly “in June 2019, C.D. Peacock commenced firing whistleblowers”.

    Case Example

    The filed complaint is highly detailed and all allegations are accompanied by numerous examples and information. It is a fascinating read once you get into the rhythm of it all. One case example that is perhaps the most recognizable would be the one stated hereunder…

    “One example was the incident in approximately July 2019, in which the Director berated Plaintiff for selling two watches, “Black and Blue Bezel GMT Master” (a “Batman watch”), which Plaintiff had ordered and procured lawfully, and Director berated Plaintiff for allowing her to do her job and sell the watches, rather than giving them to X in furtherance of the Scheme. In turn, Director precluded all other sales staff from accessing and/or selling Rolex products to their actual existing customers. He also barred the store’s Rolex Manager, from access to inventory, and precluded anyone but X from selling the Rolex products”. Note that X in this example stands at the center of the alleged scheme.

    As of yet neither Rolex nor Patek Philippe has joined the dispute. That will be almost inevitable if the alleged scheme is proven true in court.
     
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  2. RealFire Feb 15, 2021

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    Lol, as if we didn't know this was going on! Just saw that article too
     
    i20rider likes this.
  3. sleepyastronaut Feb 15, 2021

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    That took long enough. Hopefully this is enough to get Rolex to stop forcing their undesirable precious metal models on the AD's, but probably not. In the end Rolex will probably still continue to operate how they do, forcing AD's into this exact behavior in order to keep their contracts with Rolex.
     
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  4. YY77 Feb 15, 2021

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    Check out the ongoing discussion about this here.
     
    cvalue13 likes this.
  5. Meyrin Feb 15, 2021

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    Thank you for this! I was aware of this case through Atelier de Griff. While I sincerely hope that the plaintiff wins her case against such crooked practices I somehow doubt it would have much effect on the watch industry. And I don't think Rolex and Patek will enter the legal fray...certainly Rolex will just say that they have no influence over what happens to their products once they have been paid for and left Geneva. And basically I don't think they really care. I may be wrong in my reading of this...I hope I am!
     
  6. Evitzee Feb 15, 2021

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    These prosecutions usually center on 'wire fraud' and 'tax evasion'. Rolex, PP and all the players know this stuff goes on, they will try to avoid getting drawn into the fray.
     
  7. greyfox422 Feb 15, 2021

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    I hope this case gives employees around the country the courage to step forward when they see something illegal or shady.
     
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  8. Fatcat Feb 15, 2021

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    Nothing new appends even in Switzerland allways the same resellers fueled by the same AD.
     
  9. calalum Feb 15, 2021

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    Curious that the plaintiff (watch salesperson) can get a lawyer to file the case and incur the significant fees and costs if it proceeds. Could be a contingent fee but what kind of damages award might be anticipated?
     
  10. calalum Feb 15, 2021

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    Hmmm. Not sure why the cross out.
     
  11. Darlinboy Pratts! Will I B******S!!! Feb 15, 2021

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    It means the text has been deleted. Usually something new is then added. Pretty standard when editing documents. :thumbsup:
     
  12. asrnj77 Feb 15, 2021

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    Its a civil suit though. No criminal prosecutions. The plaintiff is just trying to show that they should be covered under whistleblower protection because she exposed criminal activity. It’ll help her get money from the company. They’ll counter and say she was fired because of poor performance. In the end the jury will decide. For sure Rolex will pull their AD status because they don’t want the bad publicity
     
  13. sleepyastronaut Feb 15, 2021

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    You may have found a code shortcut to the strike through formatting.
     
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  14. SpikiSpikester @ ΩF Staff Member Feb 15, 2021

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    I assume the lawyer took it on a contingency fee basis, with the aim of leveraging a decent settlement. Defendant has to decide how long to drag this out before taking the massive risk of a trial with witnesses.

    Presumably, Rolex will wait and depending on what info emerges will decide at some point whether to terminate the dealership. If a Judge finds any of the alleged facts to be true, that's more than good enough for Rolex to rely on. Having said that, their contracts are probably heavily lawyered so that they don't need to wait for that anyway.
     
  15. asrnj77 Feb 15, 2021

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    They have requested a jury trial and if granted the jury will decide instead of a judge. Also in US, civil cases are settled with a “preponderance of the evidence” versus “beyond a reasonable doubt” in criminal cases. It’s a much lower standard and for sure they’ll take depositions where the company executives will have to go on record stating whether they skirted taxes or committed any other violations. Selling to a gray dealer isn’t a criminal violation but selling to a grey for 50% more than retail and only reporting retail is going to be a problem.
     
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  16. SpikiSpikester @ ΩF Staff Member Feb 15, 2021

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    Interesting - the UK civil standard is "on the balance of probabilities" (i.e. if a disputed fact is found to be at least 51% probably true and the "losing" explanation was slightly less (49%) likely) - which sounds like it might be similar to "preponderance of evidence" ?

    Interesting too about the jury trial, as that only exists in civil cases here if they are libel cases.

    Nevertheless, the tactical considerations about when to settle are the same for the AD / Defendant - once the claim is issued the genie is already out of the bottle - its into the public domain. So they may as well fight for as long as they can and only settle when the risk of an adverse finding becomes too great. Until then, it's all disputed facts and no facts are decided to be true.

    Of course, if the allegations are true, the AD's legal team know they have to settle at some point, so its only a question of how they can get themselves into the best available position for a settlement. Usually, that means making things drag and being painful for as long as possible.
     
  17. Foo2rama Keeps his worms in a ball instead of a can. Feb 15, 2021

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    From my understanding they can sell who they want to sell too, that is not illegal... what is the proof of racketeering, cc fraud, money laundering, and defrauding rolex?
     
  18. SpikiSpikester @ ΩF Staff Member Feb 15, 2021

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    It's an employment case -

     
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  19. Foo2rama Keeps his worms in a ball instead of a can. Feb 15, 2021

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    KInda my point, there appears to be no smoking gun here.
     
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  20. SpikiSpikester @ ΩF Staff Member Feb 15, 2021

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    Not sure I follow. No smoking gun is needed in this document. The reason to mention possible criminal acts is probably there to show her standing to make the claim.

    Whistleblower protections apply to employees who report specific types of conduct to the employer & are then punished in some way. A claim needs to set out the criminal acts the employee thought were occurring, to show that employee comes within the whistleblower protections.

    In the UK, it doesn't even matter if the acts aren't actually criminal - the protection applies if the employee reasonably thought they were criminal. This stops Defendants derailing claims by having a trial within a trial about whether anything really was criminal or not. The claim document is the beginning of a process, not the end of it.
     
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