Federal lawsuit claims Triple Five company and Ghermezian family members sold counterfeit hand sanitizer in 2020

A Triple Five company and members of the Ghermezian family, whose conglomerate is involved in a $40 million land deal with the Town of Riverhead, have been accused of selling counterfeit hand sanitizer beginning in the early days of the COVID-19 pandemic.

According to documents filed yesterday in a civil racketeering lawsuit in federal court, Triple Five Worldwide LLC, David Ghermezian and Yonah Ghermezian participated in a “scheme” to manufacture, import and market counterfeit hand sanitizer produced in Mexico that was put on the “do not use” list by the FDA for potential methanol contamination. The FDA instructed the public to “stop using it immediately… (and) throw it away in a hazardous waste container.”

The counterfeit hand sanitizer was marketed using the name, logo and design trademarked by a U.S. company, which was already selling hand sanitizer made in the USA at various retailers across the country, according to the complaint filed yesterday in U.S. District Court for the Southern District of New York.

Plaintiffs Red Rock Sourcing and Coronado Distributing manufacture, market, sell and distribute hand sanitizer, shower gels, bath gels, body scrubs and other personal care products under the trademarked name URBĀNE BATH & BODY and a trademarked logo.

The plaintiffs allege in the complaint that Ghermezian family members wanted to rapidly enter the hand-sanitizer market to capitalize on the opportunity presented by the pandemic. They connected with other named defendants for that purpose, according to the complaint, and started to run their operation through Triple Five Worldwide, a limited liability company formed in Nevada in 2000.

The documents filed in court provide a glimpse into the internal workings of the multi-layered conglomerate and the family’s use of a host of shell companies.

Among the documents filed in court is a May 7, 2020 email from Micheal Oseen, an employee at Triple Five’s West Edmonton Mall in Alberta, to several members of the Ghermezian family, including Triple Five Group CEO Don Ghermezian (who is not named in the lawsuit), discussing plans for launching the hand-sanitizer business. The plans included forming a Mexican company to “source and distribute hand sanitizer globally,” transferring shares in Triple Five Worldwide LLC and swapping out the company’s managing members. The LLC, which had “no activity or assets,” would be sold to the Mexican company for a nominal amount, according to the email, which is referenced in the complaint and attached to it as one of numerous exhibits.

“Beginning in or about late April 2020, Defendants’ collectively worked together to cause hundreds of thousands, and possibly millions, of bottles of hand sanitizer bearing counterfeit imitations of the URBĀNE Brand to be produced and imported into the United States from Mexico, many of which are not accounted for and are likely still circulating in interstate commerce,” the complaint states.

After the FDA added to its “do not use list” the counterfeit URBĀNE sanitizer produced in Mexico and distributed by the defendants, Red Rock and Coronado were no longer able to sell the authentic hand-sanitizer product. The FDA order “tarnished” the URBĀNE brand and resulted in order cancellations and loss of business for other URBĀNE products as well, the complaint states.

Further, the companies are paying to store products it cannot market and supplies such as bottles with the URBĀNE brand label.

According to the complaint, “Triple Five Worldwide remains in possession of a substantial volume of counterfeit hand sanitizer, which it stores, at least in part, in the American Dream mall.”

Randy Toltz, owner of Coronado Distribution, based in Colorado, said today the plaintiffs estimate their damages to be approximately $30 million.

The complaint seeks treble damages for racketeering and trademark infringement. The plaintiffs are also seeking punitive damages.

Martin Stein, attorney for Triple Five Worldwide LLC and the Ghermezian family members named in the lawsuit, said in an interview today the defendants deny the allegations.

“We will defend our position and we believe we will prevail,” Stein said.

Though the Triple Five website refers to the company as “Triple Five Worldwide,” Triple Five Worldwide LLC is one of dozens of limited liability companies carrying the Triple Five name in various forms and registered in multiple states across the country. For example, there is also Triple Five Worldwide Co. LLC and Triple Five Worldwide Group LLC, along with Triple Five Worldwide Development Co. LLC, Triple Five Worldwide Enterprises Co. LLC and more.

Another Triple Five affiliate is the managing member of Calverton Aviation & Technology, the limited liability company in a $40 million contract with the Riverhead Community Development Agency to buy 1,644 acres of vacant industrial land in the Calverton Enterprise Park.

The contract, approved in 2017, was signed in 2018 after the town board in a split vote found Calverton Aviation & Technology “qualified and eligible” to purchase and develop the property in keeping with the requirements of the State Urban Renewal Law.

The contract required the town to gain approval of an eight-lot subdivision of 2,100 town-owned acres, in order to convey title to the 1,644 acres. The subdivision has been stalled by unresolved regulatory issues with the State DEC concerning public water supply to the site.

While the town has been working to move the subdivision forward — which included a lawsuit filed against the DEC that was rejected in court as premature — Triple Five has suffered a series of financial setbacks linked to its development of the American Dream megamall in New Jersey and the impacts of the global pandemic.

The conglomerate’s resulting financial difficulties included American Dream’s $64 million operating loss in 2020 and its default that year on on a $1.67 billion construction loan secured by a 49% interest in each of Triple Five’s two other mega malls, Mall of America in Bloomington, Minnesota and West Edmonton Mall in Alberta, Canada. The company also defaulted on its $1.4 billion mortgage on the Mall of America property in 2020, missing months of payments. It later reached a deal with lenders to avoid foreclosure and the loan was made current as of December 2020.

Yesterday the town board announced a new plan to bring the transaction to a conclusion by transferring title to the land to the Riverhead Industrial Development Agency, which will then sign a lease and project agreement with CAT/Triple Five and the town.

The agreement will allow the town to receive the balance of the $40 million purchase price and shift to CAT the burden and expense of the subdivision approved. Once the subdivision is finalized, the IDA would transfer the 1,644 acres to CAT and the balance of the acreage — which includes the town’s ballfields, a community center and the Calverton Sewer District property — back to the town. See prior story.