Luxury Watch Scam Snared Korea's Rich and Famous >

09 august 2006

The slogan 'The watch only 1 percent of the world can own' was enough to persuade many wealthy and upwardly mobile people. Little did they realize that the Swiss-made luxury watches they bought were actually made from cheap Chinese parts and assembled here. Costing no more than W100,000 (US $1=W964) to make, they sold for tens of millions of won, with major department stores holding special promotion to lure rich customers who love designer labels.

Faking It

At the center of the unprecedented scam is a U.S. resident identified as Lee. He created the watch brand Vincent & Co in 2000 and spent several years making everything look above board. He registered his brand firm with both Swiss and Korean authorities and made it look as if the company was headquartered in Switzerland. But in reality he imported watch straps and links from China and assembled them with cheap domestic hands and casings at a factory in Gyeonggi Province. It cost only W80,000-200,000 to produce a watch this way. To reassure customers who wanted a guarantee that the watches were really 'directly imported from Switzerland,' Lee disassembled a few watches, sent them to Switzerland for reassembly there before shipping them back with an ?authentic? customs certificate. He also added fake warranties to reassure doubters.

Selective Marketing

Lee only targeted the rich in the affluent Gangnam area, or south of the Han River in Seoul, in his marketing campaigns, running ads in luxury magazines, on TV and online with copy that promised Swiss luxury watches ?only available to the royal houses of Europe for over 100 years.? 'The watch of choice of Queen Elizabeth and Princess Diana, Grace Kelley and top actresses in Korea,' the ads boasted. Lee held a luxurious launch at a club in Cheongdam-dong, inviting a handful of rich potential customers and a sprinkling of celebrities, and a special sales event for VVIPs' at a department store in Gangnam.

Last May, Lee opened a shop of some 132 sq.m in Apgujeong-dong, Gangnam. He gave his products to celebrities for free, took pictures of them wearing them and used them to promote his brand in magazines. He also took advantage of online portals. It was Lee himself who posted such enquiries as, 'I saw this Vincent & Co watch in Japan and I wonder where the shop is here.'

Targets

The strategy paid off. Vincent & Co's golf watches, which that came with a price tag of W5.8 million, sold like hot cakes among celebrities, the children of conglomerate families and politicians? wives. One special-edition gold and diamond watch sold for W97.5 million. At least one famous actress bought a Vincent watch for more than W5 million, and some 30 children of industrialists and politicians also fell for the scam. Police decline to say who they were, but what is for sure is that Lee raked in W2.3 billion: W450 million from selling watches and the rest in deposits from aspiring Vincent & Co dealers.

On Tuesday, Seoul Metropolitan Police arrested Lee and booked an accomplice identified as Park on fraud charges.