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EXCLUSIVE: Rolex dealer rubbishes racketeering lawsuit

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When C. D. Peacock was accused by a former employee of covering up a conspiracy to “illegally sell Rolex watches to foreign grey market resellers in order to enrich themselves”, the Chicago-based jeweler faced a choice of settling out of court or preparing for a fight.

It chose the latter and is now working on a defense that its legal team is confident will have the complaint — or at least its most extreme allegations relating to violations of Rico statutes like racketeering — dismissed.

In an exclusive interview with WatchPro, Adam Fried vice-president of development for C. D. Peacock (CDP) and Jane McFetridge, counsel and principal at Jackson Lewis P.C., a Chicago-based law firm specializing in employment litigation, insist the complaint by former employee Suzana Krajisnik would fail and that the only sensible course of action for CDP is to defend itself.

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Jane McFetridge.

“C. D. Peacock is a really well-respected company in Chicago and beyond. They have a pristine reputation and are considered an icon in the Chicago business community. It is one of the oldest retailers in the country. Their name is their bond. They deal with high worth individuals and they are not prepared to have their name dragged through the mud. They will fight,” Ms McFetridge says.

Another factor in CDP deciding to defend itself is the sheer size of the compensation figure demanded by Ms Krajisnik.

“The demands that the plaintiffs made in this case was so divorced from reality that it precluded CDP making any business decision that the cost of defense would exceed the value of settling. In this case that was not possible given the high level of demand and, frankly the lack of merit to the claim. It was a huge demand with clearly meritless claims. It was a corporate shake-down,” Ms McFetridge says, although she would not disclose the compensation figure demanded by Ms Krajisnik.

That calculation would only make sense if CDP had a bulletproof case against the most extreme accusations in the lawsuit filed by Ms Krajisnik with The United States District Court For The Northern District Of Illinois on February 11. Click to download the full filing.

In the suit, Ms Krajisnik alleges she was fired by CDP in December 2019 in retaliation for whistle-blowing and “refusing to engage in flagrant illegal activity that violated state and federal law; firing her and committing common law retaliatory discharge; and engaging in racketeering, in violation of the Racketeer Influenced and Corrupt Organization Act”.

It is a civil suit, which cannot in itself turn into a criminal case unless authorities launch their own investigation.

If the case proceeds far enough, C. D. Peacock will have to defend itself against a litany of charges from Ms Krajisnik that all center on whether the retailer was selling watches from Rolex and, potentially, Patek Philippe, to grey market flippers outside the United States and then attempting to cover it up.

“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,” the filing by Ms Krajisnik states.

The plaintiff, and two other former employees fired in June 2020 and January this year, say they repeatedly notified management of the illegal and fraudulent activities while refusing to participate in the scheme.

They allege they were fired for their knowledge, their unwillingness to be complicit in the scheme and their whistle-blowing.

Many of the accusations are based on private conversations between CDP staff, and it remains to be seen whether investigators will find more concrete evidence that corroborates the allegations or whether the case will proceed to court.

A number of legal steps stand between Ms Krajisnik getting her day in court (or even a conference room), as CDP’s counsel explains:

“Anybody can file a lawsuit for any reason and they can put anything they want in it. Step one is the filing of a suit and the defendant then has the option of defending that complaint or file a motion to dismiss, and they have up to two months to do that.

“A defense can go through the complaint paragraph by paragraph and admit what it can admit, deny what it can deny, and it can say it has no knowledge in some areas. At that point we would have a complaint that is in conflict and ready to be litigated.

“The other option is a motion to dismiss, which is what we will likely file in this case. It does not have to dismiss all counts, for example the whistle-blower complaint, where maybe that is sufficiently alleged — we have not made a decision on that. What we would do is file a motion to dismiss, certainly on the Rico counts, and that would be briefed and the judge would take it under advisement and issue an opinion. We think it is likely at that point the judge would either dismiss the matter with prejudice, meaning the Rico counts would be gone. Or would dismiss it without prejudice, giving the plaintiff the chance to fix defects in its complaints.

“That would lead to another round of briefing and at some point the complaint would be pared down to more discrete issues.

“Once we know what remains left in the complaint, then we engage in discovery. We issue a request to produce, they do the same to us and we go back and forth with the documents.

“There would then be a series of depositions, witnesses from both sides are deposed and the defendant at that point might ask for a summary judgement where we would argue that the plaintiff has failed to illicit evidence sufficient to prevail in the course of action they have alleged and that the case should be dismissed as a result of that.

“That whole process can take up to two years,” Ms McFetridge suggests.

In the suit filed with the Chicago court, there are allegations, but no evidence. If CDP had been selling watches from Rolex and Patek Philippe outside its territory to grey market operators, that would show up in financial records, e-mails and other documents that might be asked for if the Rico-related complaints were not dismissed and a judge proceeded to discovery.

CDP admits it had discovered at least one instance of watches being sold inappropriately and had fired the employee responsible for it in January this year. There were two other former employees named in the Suzana Krajisnik lawsuit that Adam Fried says were let go for much more severe reasons than poor performance, which was the sole reason given for firing Ms Krajisnik.

“They were let go for rules infractions that violated company policies, in addition to having not great performance,” Ms McFetridge clarifies.

When asked by Watchpro whether any of those infractions related to the way watches were sold, which is at the heart of the Suzana Krajisnik case, Ms McFetridge replies: “For one of them, it was. We looked into it and fired him.”

C. D. Peacock is far from the first authorized dealer of Rolex or Patek Philippe to discover that its employees had been profiting from funneling watches to grey market dealers that can sell pieces like a steel Daytona or Nautilus for double their retail price. Flippers are constantly grooming sales people with promises of splitting the profit of over-retail deals.

The likes of Rolex and Patek Philippe take a tough line if these infractions do come to light, but firing the employee in question is typically sufficient for the brands unless a pattern of repeat offending is discovered or the senior management were turning a blind eye, or worse.

According to Mr Fried and Ms McFetridge, both Rolex and Patek Philippe have been aware of the dispute at C. D. Peacock, which is an authorized dealer at three stores in Oakbrook Center, Woodfield Mall and Old Orchard Mall in Chicago.

“CDP has been touch with both Rolex and Patek Philippe and we do not want to go beyond that. They are aware of the lawsuit and we have been in discussions with them. I would also point out that this is not the only lawsuit that CDP has ever faced, and Rolex has renewed their relationship with CDP for 30 years straight,” Ms McFetridge states.

In granting an interview to put their side of the story, C. D. Peacock will know it has provided a little more life to the story, but is unwilling to allow its reputation to be tarnished by what it sees as a shake-down by a disgruntled former employee.

The company expects the complaint to be dismissed and its counsel is dismissive of the tactics used by Ms Krajisnik.

“I hate to sound cavalier, but these cases are a dime a dozen. Disgruntled employees file suits routinely. One third of all litigation in federal court is employment-related claims. This complaint that they filed is unusual in terms of its length. You do not normally see something that is that long. But the fact that they threatened to file a lawsuit and then carried through and filed it is the sort of thing that accounts for around one third of all lawsuits in the United States,” she scoffs.

That does not mean there is no risk in allowing the case to move forward and the next steps will depend on how the judge sees the merits of both sides’ arguments. “It depends,” says Ms McFetridge when asked what is likely to happen next. “We could get a partial dismissal, a full dismissal, or a full dismissal without prejudice, which would allow them to re-plead with corrected pleading deficiencies. I cannot predict what the judge would do,” she concedes.

Whether the case is concluded quickly or it takes two years, C. D. Peacock is focused on keeping the business moving forward. It remains an authorized dealer for Rolex and Patek Philippe, and has the support of its customers in Chicago.

“Thankfully, we have such a loyal customer base. We have received texts and e-mails from customers saying they support us. We have built such amazing relationships and it is times like these your find out who is truly in your corner. We have been building this business since 1837, and as far as loyalty goes, that has paid off for us.  Everybody is so comfortable and confident that we are going to fight this thing vigorously and come out vindicated. We cannot let this slow us down,” Mr Fried concludes.

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4 COMMENTS

  1. Thank you for linking to the filing. I have previously read it and encourage all to do so.
    I’m no expert but it entirely believable and consistent. Quite frankly, the defendants look very, very guilty and nothing their counsel said above lessened that.

  2. This and Rob Corders other laughable watchpro article attempting to play the worlds smallest violins for ADs. Are you genuinely trying to suggest that these 200k bundle sales are from their staff going rogue. This case just goes to shine a light on what we all know happens in ADs across the world when it comes to Rolex watches. This is a systematic structure of selling that attempts to bundle other watches, sells in bulk to the grey market and prioritises people that can afford to buy 6 rolexes a year (doh they couldn’t be grey market dealers could they?) . That the industry writes articles like this, weeping for the poor put upon AD and their horrendous difficulties of knowing how to distribute watches that will sell anyway, tells you alot about the industry. These practices are NOT the behaviour of a few Sales Advisors looking to hit their targets. They are common place within an industry that sees the soulless quick buck as priority over the “event” customer – that wasn’t trying to make a 50 percent profit, just save for lifetime watch they could pass down to their son.

    • I could not agree more. There is no doubt some ADs have favored bulk buyers and turned a blind eye to their obvious intention to flip the watches.

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