The shoplifter was caught red-handed at the California Walmart and taken to a back room by a store employee. Until recently, the next step might have been a call to the police, but, instead, the shoplifter was offered another option.
He was shown a short video about how terrible a criminal record would be. He was told that if he confessed to his crime and agreed to participate in a privately run diversion program—six hours of online behavior therapy—he could avoid arrest, a fine or worse. The cost was $400. The shoplifter would be billed. He signed up.
Later, it turned out, he didn’t have the money, not even the $50 minimum installment required to keep his case out of court. And while eventually he did end up in court, it was not as a defendant but as evidence in a 2015 suit brought by the San Francisco City Attorney, who asserted that the tactics used by the company, Corrective Education Company, were illegal. In fact, the City Attorney, Dennis Herrera, equated CEC’s business model with “a Hobson’s choice, which is really no choice at all.”
“This company has set up a private, pseudo-justice system that is based on profit,” he said, calling the program “textbook extortion.”
A Superior Court judge in San Francisco agreed.
In a ruling in mid-August, Judge Harold Kahn, barred CEC from operating in California, where the company has about 20 percent of its business.
The City Attorney’s office says it is in the process of working out an agreement with CEC to continue operations in California but would not disclose details.
Neither CEC nor Walmart responded to requests for comment. In a response to the lawsuit, filed two years ago, CEC issued a statement calling it “without merit.” After Judge Kahn’s ruling, the company posted on its blog that it was “a sad day for Californians” and predicted that “police will be inundated with calls from retailers.”
Walmart, which operates 4,600 retail outlets in the U.S., including Sam’s Club and other stores, says it has placed CEC programs in at least 2,000 stores across the country as a way to decrease losses from shoplifting. The National Retail Association has sponsored studies that indicate shoplifting is a substantial cause of store losses.