Man who tampered with counterfeit Nike shoes convicted of multi-million dollar fraud
James Pepion said he started collecting Nike sneakers at school and selling them as a hobby.
Soon he started his own online retail business called “Supplied Inc.” at the age of 23 and could not meet the demand.
“As the business grew, I got greedy,” Pepion said when sentenced in federal court on Wednesday for trafficking in counterfeit goods and money laundering.
At first, Pepion acquired limited-edition Nike Air Jordan sneakers and sold them at hefty premiums. He bought the shoes he wanted from legitimate retailers using “runners” — typically homeless people in Portland paid cash to line up outside stores on the eve of a sneaker release to buy the stock as soon as possible.
He promoted the merchandise on his website and other social media platforms, such as Instagram or eBay.
Unable to maintain supply, Pepion turned to obscure sellers in Hong Kong and China and began selling hundreds of imported counterfeit Nikes to unwitting buyers, receiving $2.6 million for the shoes in about three years, from January 2012 to March 2015.
The proceeds helped pay for his fashionable clothes, luxury cars and Trail Blazers subscriptions, according to a federal prosecutor.
The sales sparked numerous complaints from Nike and Pepion: disgruntled buyers wrote that a shoe’s laces were thicker than the genuine ones, or that the laces weren’t waxed, or that a pair didn’t was “not just a cheap copy”. In an August 2015 email to Nike, someone left a message on the sneaker giant’s hotline, accusing Pepion’s company of “landing a lot of counterfeits” and complaining about Nike’s apparent inaction, according to court records.
Nike opened an investigation and worked with the US Bureau of Immigration and Customs Enforcement, as well as Homeland Security Investigations.
From October 2013 to May 2016, investigators intercepted 55 shoe shipments from Asia bound for Pepion, containing 649 pairs of counterfeit Air Jordans.
In April 2016, federal agents raided Pepion’s home and seized at least 618 other counterfeit sneakers, according to court records. That same day, investigators seized $95,000 from Pepion’s financial accounts.
Pepion, of Happy Valley, appeared before U.S. District Judge Michael W. Mosman on Wednesday and pleaded for community service without jail time. His lawyer, Gerald Needham, has suggested six months of home confinement for Pepion plus 100 hours of community service and five years of probation.
Pepion considered the counterfeit shoes “so close to the original product” that he didn’t think it would cause any harm, Needham said. Growing up in a modest home in a poor family, Pepion had a burning desire to succeed, his lawyer says.
“I wish this had never happened. I will never be in your courtroom again,” Pepion said, his voice cracking with emotion, as his mother, stepfather looked on. , his sister and his grandmother. “I have nothing against Nike. It’s been my favorite brand since I was a kid.”
He said he turned to selling counterfeits to meet demand, “day after day, so as not to disappoint customers”.
In June, Pepion pleaded guilty to counterfeit trafficking and money laundering. Between June 2013 and September 2015, Pepion wired $174,460 to China, almost all of it for counterfeit shoes and packaging, prosecutors say.
Assistant US Attorney Ryan Bounds has asked for a sentence of one year and six months to serve as a deterrent to an “international conspiracy” and a serious crime. Probation officers recommended a year and a day in jail.
The judge said he thought Pepion knew exactly what he was doing.
“You lied to people about what you were selling,” Mosman said. “You don’t have to go to college to figure out it’s a crime.”
Mosman said he did not believe the government’s proposed length of sentence for Pepion was necessary. But he said he still wanted to send a message to the public that “this is a crime that will land you in jail”.
He noted that Pepion had no criminal history, was unlikely to re-offend, and that he committed the crimes at a time when his parents divorced and his father became homeless while he struggled with alcoholism.
The judge sentenced him to four months in prison, followed by three years of probation.
Pepion lost $100,000 to Nike, but may also have to pay additional compensation to the company for the nearly $50,000 cost of the company’s investigation.
The judge recommended that Pepion serve his sentence at Sheridan Federal Prison Camp.