Judge takes on Wal-Mart in opioids fight
Hardly a sector of society has escaped being touched by the opioid epidemic.
But when it comes to large retail chains, the focus has been primarily on pharmacy policies — until now.
A Westmoreland County judge has raised an issue that she calls “the elephant in the room” — fraudulent merchandise returns that drug users make to fund their addictions.
At a recent meeting with Pennsylvania Attorney General Josh Shapiro, Judge Meagan Bilik-DeFazio singled out Wal-Mart for criticism and suggested the state be more proactive in addressing the issue.
“This is a real problem that nobody's really talked about,” she said in an interview. “Wal-Mart has to know that they are a huge part of the problem … that they are contributing to this epidemic.”
Wal-Mart did not respond to repeated requests for comment.
Bilik-DeFazio said she has noticed a spike in such cases in the past few years, so much so that she has taken to calling Wednesday, the day set aside for drug pleas, “Wal-Mart court.”
The chief culprit, she said, is the chain's non-receipted return policy, which allows drug users to exchange stolen merchandise for cash or a gift card. They then trade the card for drugs or redeem the card for cash, usually for pennies on the dollar, at a gift card exchange kiosk, she explained.
Retail theft, fraudulent return and defiant trespass cases that Wal-Mart prosecutes are clogging Bilik-DeFazio's court docket.
“On a general plea day, I would bet that 80 percent of the cases are crimes from Wal-Mart,” she said. “I see them constantly.”
Other major retailers that allow returns without a receipt, often in exchange for a gift card, store credit or other compensation, include Home Depot, Lowe's, Macy's, Target, Kohl's and T.J. Maxx, according to online reports and published company policies.
Opioid-related cases from Target, Kohl's and other retailers “pale in comparison” to the Wal-Mart cases, Bilik-DeFazio said.
The judge started to see a pattern: Drug addicts were stealing merchandise — even something as simple as a pack of batteries, taking it directly to customer service for a non-receipted return and walking out with a gift card.
“What I'm hearing from people in addiction is that they know all this, so they take turns. They beat the system,” she said. “With the amount of fraudulent returns I'm seeing, the volume is on a scale that has to be enormous. I don't understand how Wal-Mart can't know that this is a means to an end for an addict. This is how addicts are paying for their drugs.”
Bilik-DeFazio's judicial district includes the Wal-Mart stores in Hempfield at Greengate Center, North Huntingdon, Murrysville and Latrobe.
Lt. Rod Mahinske of the North Huntingdon Police Department said that Wal-Mart, although part of the problem, shouldn't be singled out for criticism .
“We've seen it,” he said, “but we've seen it across all the stores. These people are desperate, they're trying to get money in any way, shape or form. ... To single one store out — they're probably the biggest and most popular right now, so they probably have more than their share. But it's not just them. We're seeing retail thefts in all stores.”
Mahinske said one scam involves drug addicts using stolen credit cards to buy gift cards and then selling the gift card for pennies on the dollar. A $100 gift card will sell for as little as $10, he said.
“It's hard to track these cards. By the time we know they're stolen, they're already cashed,” he said. “It's a lucrative business.”
Retailers defend practice
Wal-Mart's website states that gift cards are not returnable or refundable for cash except in states where it's required by law. Its published policy for non-receipted returns stipulates two conditions: that the refund verification process accepts the return, and that the customer has a legitimate state ID.
Merchandise may be returned for a cash refund if the value is less than $25. Higher amounts are refunded via gift card, according to the website.
Wal-Mart and other large retailers spend billions of dollars annually on loss prevention and can track chronic illegal refunders through companies such as Retail Equation. But there is a paucity of research on the more recent problem of drug addicts who support their habits through chronic illegal refunding, said Professor Emeritus Richard Hollinger of the University of Florida.
Wal-Mart is not the only area retailer feeling the effects of the opioid epidemic.
A spokeswoman for the National Retail Federation said the trade group does not comment on “business decisions that one individual member makes.” She referred to the NRF's latest return fraud report from 2015.
The report, which focused on return fraud during the Christmas holiday season, said fraudulent activity is on the increase and costs retailers an estimated $2.2 billion a year.
“While technology has played a significant role in deterring many in-person fraudulent transactions that would have otherwise gone unseen, there is little that can be done to prevent a determined criminal who will find a loophole one way or another,” said Bob Moraca, NRF vice president of Loss Prevention. “When it comes to retail fraud, retailers can build taller walls, but criminals continue to find taller ladders.”
At the time Bilik-DeFazio raised the issue with Shapiro, the attorney general said she had a good point but that he defers on such matters to local law enforcement.
Westmoreland County District Attorney John Peck said he is not aware of the situation with Wal-Mart, but he acknowledged that drug habits often are funded by retail thefts and fraudulent returns.
“With some of these large stores, it's tempting to commit thefts and simply turn the product that was stolen into cash. … That has been fairly commonplace for a number of years, contemporaneous with the opioid epidemic we're experiencing,” Peck said.
Peck said the issue is one for store security.
“They've got their hands full. They have a difficult job,” he said.
Tim Phillips, director of the Westmoreland County Drug Overdose Task Force, said Bilik-DeFazio's criticism rings true.
“I'm not sure what the solution is,” he said. “I think on a corporate level that needs to be addressed by Wal-Mart.”
Bilik-DeFazio said simply requiring a receipt would make a difference.
“Wal-Mart's got to change with the times,” she said. “I would love to have them sit down at the table with us and look at maybe changing some policies.”
Stephen Huba is a Tribune-Review staff writer.