Wednesday, July 23, 2014

Business Advance Fee Scams

September 28, 2010 by  
Filed under articles

Businesses seeking loans outside of normal channels are often victims of either a straight advance fee loan scam involving up front money or possibly the slightly more complex prime bank scheme.

In such instances, businesses have been advised that they can obtain a business loan at 4% interest; however, the business must supply 30% of the money required to complete the project. During the time required to assess and fund the loan, investors are asked to agree to non-disclosure.

They can issue impressive documentation in the form of an offering memorandum which is a disclosure document used in certain private placement transactions.

Frequently, they say your advance fee money has been sent by an “attorney” to a “Master Collateral Holder” on the basis of receiving a “Funding Commitment”, “Letter of Intent” or some other document that will satisfy the requirements of the agreement. Your money, which the fraudster claims is held safely in an escrow account, is actually controlled by the fraudster.

The reality for those expecting to obtain a loan through a “Prime Bank Investment” program is that they are, in fact, already victims of an advance fee fraud.


High Risk Loans

A phony loan scheme that was operated from Oklahoma City, Norman and Boulder, Colo., from May 1997 to June 2000 defrauded 1,200 people nationwide out of $1.8 million.

Randall G. Morse, 42 and Sarah N. Grantham, are accused of falsely offering to help financially distressed people and businesses in Colorado and Oklahoma obtain financing in return for an up-front fee.

Morse’s companies used the names The National Funding Source Inc., doing business as The Business Solution, U.S. Financial & Loan Co., National Capital Resources Corp. and Commercial Corporate Finance U.S.A. Inc.

The alleged victims were in several states and included a hardware store, an oil company, a mortgage company, a veterinary clinic, a landscape design firm and a health club. Many needed loans to keep operating or faced the loss of their property because they owed back taxes.

The people were required to pay advance fees ranging from $395 to $6,750. Only 20 of 1,220 individuals and companies that paid advance fees actually received financing.

Morse and his girlfriend, Grantham, allegedly spent the advance fees on themselves buying a $700,000 house, a $91,000 1998 Hummer, a $66,000 1996 Hummer, a $23,000 1998 Harley Davidson motorcycle and a $3,300 big screen TV.

In addition, they signed a lease-purchase agreement for a $259,000 yacht, leased an $80,000 2000 Porsche Cabriolet, spent $8,000 on a birthday celebration for Grantham at Aspen’s Little Nell Hotel and spent at least $12,000 at the MGM Casino in Las Vegas.

Morse is charged with 52 counts of mail fraud, wire fraud, money laundering, tax evasion, conspiracy to defraud the government, loan fraud and tampering with a witness.

Grantham, who assisted authorities, was charged separately without a grand jury indictment and faces one count of conspiracy to defraud the United States and one count of loan fraud.


Advance Fee Works on Africans Too

“Ubupupu bwafulisha” (There is too much stealing).

In Zambia it is reported that US$6 million meant for the purchase of maize has gone missing in a deal between President Chiluba’s economic adviser Donald Chanda and Carlington Sales Company of Canada. Carlington, owned by Alexandre Legault has recently been the focus of a news show investigative inquiry on CBC’s Disclosure program.

There is was stated that Carlington is an elaborate advance fee fraud operation which presents itself as a major commodity exporter but fails to ever make shipments after payment. A former employee explained how, in one case, grocery store rice was simply emptied into an unmarked plastic bag to be sent to potential buyers as a reassuring sample of quality.

Carlington Sales Canada Corporation’s Foreign Agents

Ben-Menashe, Ari
Fraser, Herbert
Hooper, Peter


10/03 – Here’s an update on the Carlington Sales Company situation:

According to the media, Carlington Sales filed bankruptcy last year after the Government of Zambia and the British lawyers were getting close to seize everything.

Ever the entrepreneurs, Alex Legault and Ari Ben-Menashe immediately started another company ( Dickens & Madson, 310, avenue Victoria , Westmount, QC H3Z 2M9 , (514) 483-3344 ) .

Things got ugly very quickly with the RCMP investigating Ben-Menashe over the Tsvangirai recording. Meanwhile, Legault had his own set of troubles.

Alex Legault is wanted in Louisiana and Florida for some ponzi-scams he had set up in the past. He was sentenced to a total of 189 years of jail and the FBI has asked the RCMP to extradite him back to the US .

Legault, having claimed refugee status 13 years ago was protected by Canadian law and was never extradited. Furthermore, he fathered a huge litter of children hoping that would help his case. CBC called it “immigration by procreation” !

Then a recent court ruling changed everything. Immigration Canada issued a deportation order last June and Legault was supposed to leave the country for a destination of his choice. He failed to show up on this date and is now a full blown fugitive, both in Canada and in the US .

Several companies are suing them for non delivery of goods and refusal to refund the deposit including the case of Mr. Nigel Whitely, a Scottish businessman, owner of Merchants International (Edinburgh, Scotland ). Whitely signed a contract for rice delivery to Ghana and forwarded US$250,000 as a deposit.

With enough evidence to prove that this was outright fraud the lawyers managed to force Ben-Menashe into refunding Mr. Whitely. Others continue to fight for restitution.

To this day, he has never appeared in a Canadian court for financial fraud charges since he always settles out of court. The only time he has ever had to go to court was for criminal charges pressed by his wife and mother-in-law for assault and battery.

She evidently found out that her husband wasn’t a real successful businessman, but rather a big time crook, so she kicked him out of their $3,500,000 mansion in Westmount. He apparently didn’t appreciate the expulsion.


Loan scams targeting small businesses

By JONATHAN D. EPSTEIN
News Business Reporter – Buffalonews.com

Jody Fox had big hopes to open her gift shop, until she found Empire State Financial Services.

Responding to a classified ad, the Angola woman applied for a small business loan from the New York company, but was told she’d have to pay a security deposit as a guaranty to the lender’s insurer in Ontario.

So she wired the money via Western Union, and waited for a loan that never came.

Now, she can’t reach anyone at the company and has learned that the insurer doesn’t exist. So instead of having the money she needed to start the business, Fox is out more than $2,000.

“Everybody tells me I’ve been scammed, and good luck getting my money back,” said Fox, 39.

Fox is a victim of a lending fraud that takes aim at entrepreneurs eager to start their business but desperate for money. It’s a version of a common consumer scam known as advanced-fee loans in which victims pay upfront for a service or promised benefit – like a credit card – that they never receive. The scam is getting renewed attention from state officials in the form of a warning from the state Consumer Protection Board after Fox and another Western New York woman fell victim.

The typical advanced-fee scam often begins with a person responding to a classified ad in a newspaper, magazine, direct mail, the Internet, radio or TV, and then calling a toll-free or 900 number. The ads usually involve promised consumer loans or products, but have also targeted small businesses. Victims are told to wire or overnight several hundred or several thousand dollars to a lender or insurer to guarantee the loan, but end up losing their money and not getting anything in return.

It is illegal under federal law for a lender or broker doing business by phone to promise a loan and ask for payment before they deliver it. Legitimate lenders may require payments of application, appraisal or credit report fees, but usually not before an application is completed, according to the U.S. Federal Trade Commission. Such fees also are typically small.

Fraud saps hundreds of millions of dollars every year from victims nationwide, especially the elderly and those with bad credit. The array of scams is constantly growing as criminals come up with new methods of deception. Common scams include auction fraud, sweepstakes and foreign lottery schemes, deceptive business fraud and work-at-home scams.

Last year, the FTC’s Consumer Sentinel database recorded 517,740 complaints of fraud and identity theft – including 292 in the Buffalo area – and total losses of $437 million. Victims paid an average of $1,868 nationally and a median of $228 – meaning half paid more and half paid less.

In the cases of Fox and another local woman, they responded to newspaper ads reading: “Starting a small business? Need a consultant or capital? We can help!” The ads featured one of two toll-free numbers for a company using the name Empire State Financial Services or Crown Financial in New York City.

Fox had been seeking a loan but a bankruptcy on her credit record was hurting her until she was approved by Empire State. But the lender told her to wire $1,985, plus a $119 fee, to a person in Canada representing Oxford Insurance and Guarantors of Scarborough, Ont.

She did so, and received a contract in return stating that she would receive the loan within 48 hours. When the loan didn’t come, she called back and was told that the insurance company needed another $500 because of her credit.

Suspicious, she took the contract back to her lawyer, who told her that no legitimate lender would ask for money upfront. She contacted Scarborough police, who found that no insurer exists at the Canadian address she had.

Since then, she has submitted complaints to federal, state and Canadian provincial regulators and lawmakers, seeking action to get her money back. But the size of her loss is too small for the Federal Bureau of Investigation to get involved – the agency generally has a $5,000 threshold. And she learned that New York state law doesn’t subject business finance companies to the same regulation as consumer finance firms.

Authorities have learned that the address the lender or broker used in New York is actually the site of an elementary school and administrative office. And Fox said the Royal Canadian Mounted Police and Ontario Provincial Police have at least nine other complaints against the same company on file since mid-April.

“We know that these people are out there trying to take advantage of people,” said Jason Okamura, spokesman for the Ontario Ministry of Consumer and Business Services in Toronto, which has received a complaint about Empire State Financial and is working with U.S. authorities.

The FTC and other U.S. and Canadian law enforcement agencies have shut down and prosecuted a number of scam operators in the last decade. They have even been able to refund money to victims. But that’s only if the perpetrators are found.

Already, all the phone numbers associated with the scam that Fox fell prey to are either disconnected or lead to voicemails that are not set up. Recorded voices are in both French and English, with Canadian accents, and victims’ caller IDs have revealed Ontario phone numbers.

“The CPB is working with U.S. and Canadian agencies to find the people behind this scam,” said Consumer Protection Board chairwoman Teresa A. Santiago in a press release announcing a statewide alert. “These con artists have already changed names and phone numbers and with today’s alert, they may soon switch to another name.”

Meanwhile, the board contacted the newspapers that printed the ad – including The Buffalo News – and all agreed to stop running it.

The Buffalo News requires all new ads to be approved by a supervisor. Financial companies must provide proof of registration with the state banking department, and the paper attempts to confirm contact information via the telephone and Internet.

Santiago said the scam shows the importance of investigating a company before sending money anywhere, especially to a foreign country. “Newspapers try to spot scams, but they’re not always able to block these ads,” Santiago said in the press release. “Just because an ad appears in a newspaper or on a Web site, that doesn’t necessarily mean it’s been fully screened or its claims verified.”

Advanced-fee scams represent just 4 percent of the fraud complaints to the FTC last year, but they are getting increasing attention. The FTC in mid-April forced six New York and New Jersey telemarketing companies and their principal to pay $11.8 million and stop marketing advance-fee credit cards. Victims had paid between $219.99 and $289 for a Visa or MasterCard they never got.

While consumer scams are the most publicized, businesses also have been ripped off. Companies have charged $5,000 upfront to help register patents that they never receive or for patents that are not legal and enforceable. Or people have paid $2,000 to $3,000 to be a franchisee for a product or service, but never see results, products or assistance.

“Anything that looks that good is probably not good. You must look at it with a jaundiced eye,” said Frank Sciortino, district director of the U.S. Small Business Administration’s Buffalo office.

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