NEW BERN – John Stuart Bruce, United States Attorney for the Eastern District of North Carolina announces that today in Federal court, United States District Judge Louise W. Flanagan sentenced KURT MICHAEL KROL, 36, of Fayetteville, North Carolina to 72 months imprisonment, followed by 3 years of supervised release. Additionally, KROL agreed to forfeit to the government all counterfeit articles seized; proceeds of $156,932 seized from four BB&T bank accounts, proceeds of $51,988 seized from two USAA bank accounts; a residence located in Fayetteville; a residence located in Raeford; and a money judgment in the amount of the gross
proceeds of the offense.
KROL was named in a Criminal Information filed on October 14,
2015, which charged him with trafficking in counterfeit goods from September 2012 to February 2015. On December 15, 2015, KROL pled guilty to the charge.
The investigation revealed that on January 22, 2008, KROL founded Universal Mania, Inc. (UM), an internet based marketplace
for consumer electronics located in Fayetteville. KROL, president and CEO of UM, initially sold legitimate consumer electronic equipment; however, in 2011 or 2012, he was introduced to a representative of a company in Hong Kong, China, that sold counterfeit Otterbox products (OBP). Thereafter, KROL began purchasing counterfeit OBP from that company.
On October 31, 2012, Otterbox alleged that UM had infringed on their federal trademark registrations. UM subsequently filed a Complaint for Declaratory Judgment against Otterbox in the United States District Court for the Eastern District of North Carolina on February 8, 2013. Otterbox filed a counter-claim on April 12, 2013. On December 17, 2013, the court entered a Consent Judgment ordering UM to pay Otterbox $200,000 for trademark infringement. The court also entered a permanent injunction, prohibiting UM from the unauthorized use of any Otterbox trademark.
However, the investigation discovered that KROL met with a representative from the Chinese company in Fayetteville to find out what products they could counterfeit. KROL then imported counterfeit products including L’Oreal (Clarisonic), HSI Professional, and Conair (Babyliss) beauty products; Garmin products; Choon’s Design (Rainbow Loom) toys; Philips (Sonicare) products; Zing Anything bottles; Harman International Industries (JBL), LG, and Bose speakers and/or headphones; and Spectrum Brands FURminator dog brushes. The investigation found that 2,047
shipments originating in Hong Kong were addressed to KROL between August 2012 and February 2015.
KROL sold counterfeit merchandise, as well as merchandise from legitimate distributors on the internet. He comingled the sales proceeds from the counterfeit products with proceeds from legitimate sales. When one internet business discovered UM was selling counterfeit items through its website, they terminated UM’s accounts. KROL then solicited UM employees, friends, and family members to establish accounts on the website to sell UM’s counterfeit products.
“Defendants such as Krol while trafficking in counterfeit goods, undermine our fair trade and free market system to generate illicit proceeds,” said HSI North Carolina Assistant Special Agent in Charge Christopher Healy, “This significant sentence will let people, such as Krol, know that this illegal activity impacts not only our national economy but the local economies where these illegal traffickers operate.”
Between October 2013 and January 2015, agents with the Department of Homeland Security (DHS), Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) seized counterfeit items from several different locations. During the execution of a search warrant at UM on February 25, 2015, HSI agents seized multiple counterfeit products and KROL acknowledged that he sold counterfeit items, despite the Otterbox civil judgment
against him, the receipt of numerous seizure notices from DHS, and warnings from an online distributor.
This investigation was conducted by HSI in Raleigh.