A Chicago-based Rolex authorized dealer has been dragged into court by a former employee who is accusing the company of covering up a conspiracy to “illegally sell Rolex watches to foreign grey market resellers in order to enrich themselves”.
The case concerns C. D. Peacock (CDP), a multibrand jeweler with agencies for Rolex, Patek Philippe, Cartier, TAG Heuer and others for three stores in Chicago.
The company, its owner the highly respected Seymour Holtzman and four employees including Robert Baumgardner, who was CEO at the time of the allegations, are being sued by Suzana Krajisnik.
She was fired by CDP in December 2019 and says that termination was 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”.
Those found guilty of racketeering, with all its mafia associations, can be fined up to $25,000 and sentenced to 20 years in prison.
The case was filed with The United States District Court For The Northern District Of Illinois on February 11. Click to download the full filing.
If it goes ahead, C. D. Peacock will have to defend itself against a litany of charges from Ms Krajisnik that all centre on whether the retailer was feeding watches from Rolex and, potentially, Patek Philippe, to grey market flippers and then attempted 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 Ms Krajisnik’s filing 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.
The filing, which can be downloaded here, contains blow by blow allegations of how unicorn watches were funneled to customers who were reselling them on the grey market.
None of the defendants have responded to the allegations.
C. D. Peacock remains a Rolex and Patek Philippe authorized dealer, according to its website today.
The detailed allegations, whether or not they are proven, draw attention to the challenges facing retailers dealing in watches that sell for double or even more on the secondary market.
As part of the filing, the court’s attention has been drawn to an example of a Rolex’s Distribution Agreement from the Securities and Exchange Commission’s website that shines a light on the relationship between the watchmaker and its network of dealers.
The agreement contains a clause designed to press jewellers to focus on selling to “real” customers, not flippers. “Jewelers will sell Rolex products only to ultimate consumers, at the retail level, in transactions that originate over-the-counter at its authorized location(s). All other methods of the sale (except for Rolex-approved corporate/presentation sales) are considered transshipping. Rolex is the sole distributor of Rolex watches in the United States. Rolex has not authorized any ORJ or any other person to act as a wholesaler or subdistributor; therefore, any transshipment of Rolex watches, even if unintentional, is prohibited. ORJs may not sell watches to customers referred from outside their local market area (unless the sale is transacted in person at an authorized location), nor may they pay a feel for any referrals,” it says.
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.