Documents have been filed in Chicago USA which could – in theory – see a full scale jury trial of senior Rolex dealership directors accused of racketeering. Yep, that old Capone era felony is still on the books! The case revolves around three former employees of CDP, an authorised Rolex dealership, who tried to blow the whistle on grey market Rolex sales, waiting lists and all the other stuff that is well known to Rolex buyers aorund the world. In short, it is a huge can of worms which could damage the Rolex reputation if aired in detail.

This is an extract from the court documents; “The heart of the Scheme was a conspiracy by the Defendants to illegally sell Rolex watches to foreign grey market resellers in order to enrich themselves. In order to further the Scheme, the Defendants conspired to violate numerous federal and state laws including but not limited to racketeering, money laundering, mail, wire, immigration, and credit card fraud, and Illinois sales tax evasion.”

To summarise the document, the employees complained about the grey sales situation, then refused to join in with the schemes, and were then fired. The plaintiffs then allege that a Chinese national was subsequently employed to organise grey market watch sales, and worked in the US without the correct immigration paperwork.

You can browse the entire documents here by the way.

The problem for Rolex here, and to a lesser extent AP and Patek, who also enjoy the luxury of having demand for certain watches outstrip supply, is that it inevitably encourages dealers to consider the grey market. Everyone in the watch and jewellery business has favourite customers, usually high spending self-made men nad women, who appreciate personal service and a lack of waiting around when they want something new. It’s human nature; money talks.

But how much reputational damage could this case cause to Rolex by exposing the situation that EVERYONE in the watch industry knows about, but is not widely known amongst the general public. Mistakenly, many ordinary people believe thay can walk into a Rolex shop and buy a new Submariner or GMT 2 – just like that. Cash, card or finance and have it in their hand that day. To learn that dealers are involved in shipping watches around the world, via dubious middlemen and online brokers, who are selling on new watches that are briefly owned by flippers, is going to do lasting damage.

In short, once lost, trust is hard to recover.

CDP has been in the watch and jewellery business since 1837, so it will be hard for Rolex to pull the franchise. But if this nasty case goes to court, then they will have no other choice. How can any manufacturer back dealers who are doing business like this? You cannot, it is morally indefensible and that is why this case will never go to trial in our opinion. The best resolution will be an out of court settlement to the three ex-employees, plus the firing of the Chinese sales guy.

The sooner the better, for all concerned, not just CDP.