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. Before you continue reading, it may be helpful to first read this to understand the rules which the average Rolex AD has to follow.
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.
The 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).
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”.
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. 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.
Case files and documents can currently be accessed on PACER if you have an account.
Edit: The submitted Complaint can also be accessed right here at CourtListener. I invite you to read it yourself as it offers more nuance than the above summary of the listed accusations.
New Lawsuit Highlights The Watch Industry's Dirty Secret