November 19, 2008
By now, most of us are familiar with the Nigerian scam, in which "wealthy" foreigners need help moving millions of dollars from their countries and promise those who assist hefty rewards. Victims have lost thousands of dollars to this and similar scams. Now scam artists are targeting fabricating businesses with the promise of bogus, lucrative orders that could result in some shops going out of business.
Scams have been around for eons, and as technology has evolved, so have the scams. The Lebanese Loop scam has made us wary of using ATMs. Various phone scams allow others to use our long distance service or mobile service. Some scams prey on people"s misfortunes: repairing credit scams, avoiding foreclosure scams.
The scams list is long and growing longer. According to an article the Los Angeles Times, scams don"t stop in bad economic times; these can be boom times for scammers.
We usually learn about scams from experience—the most painful teacher—others who have been victimized; our protective IT departments; trusted Web sites, such as Snopes.com; and the media. I recently learned about a scam targeting fabricators from one of thefabricator.com's favorite authors, welding instructor Carl Smith, who e-mailed me a document describing a scam he learned about the hard way. Fortunately, the targeted company did its due diligence and discovered the scam before suffering any harm. Others haven't been as fortunate.
Here, in its entirety, is Carl's account of what happened. Read it carefully. This information literally could save your business from a disastrous scam.
"A scam is going around that has cost some companies to lose fairly large amounts of money. One small shop was forced into bankruptcy by this scam. Another lost $43,000 and had no way to recover the funds.
"This is how it works.
"[In one particular instance] the company's welding specialist wrote an article about welding stainless and nickel alloy that was published in a trade publication. The cost for welding high-nickel alloy material made it a natural fit for the scam artist.
"The article gave the authors's name, company name, and contact information. The scam artist sent an e-mail to the author identifying himself as a purchasing agent and asking for a quotation for a job that required welding some high-nickel alloys. The customer was one of the largest corporations in the world (Exxon Mobile). There was no reason to do a credit check, because the corporation had reported millions of dollars in profits last year.
"Drawings and specifications were sent to the author via e-mail. It was obvious that the sender had exceptional knowledge about welding the nickel alloys. He also knew the customer's specifications very well. The names of all the people supplied by the scam artist were found to be actual names of persons employed by the large company in its Canadian office.
"The job was very large and attractive to the author because his company is good at welding and fabricating these alloys. The author forwarded the drawings to his company's estimator and sales manager. Both were very excited to have the opportunity to quote such a large job. Another attractive part of the quote was that the customer (scam artist) was to furnish the base material. All the author's company had to do was "weld it up." The scam artist sent another e-mail accepting the quote and issued a purchase order bearing the corporation"s letterhead.
"The welding wire specified for the job was an exclusive wire that was produced specifically for the customer. It could only be purchased from one distributor that was located in Houston. The scam artist even sent an MSDS and material specification for the wire, along with a phone number and address for the supplier. The author became a little suspicious about the "exclusive distributor" requirement and called the supplier. The producer, in fact, does make a wire for that customer. The producer is prohibited from releasing the exact chemistry of the wire. Since the author knew the person with whom he spoke at the producer's lab, he had little doubt that the scam artist was OK.
"The kicker came when the "distributor" asked for the money for the wire ($55,000) to be wired or mail-ordered in advance. The estimator used the Internet to check the address of the distributor and discovered that it was an apartment building. He also accessed the corporation's phone directory and called listed numbers. He reached the voice mailbox for all three of the persons he phoned. Finally, one person returned his call and verified that the individual representing himself as the purchasing agent (the scam artist) actually worked in the Canadian office, but was in Houston on that day. That made sense because the parts were to be shipped to Houston.
"Finally, the real purchasing agent called to inform the fabricator that this had happened before, and that someone should contact the Canadian authorities. Contacting the authorities, the fabricator learned that other fabricators had been scammed in the same manner. The fabricator spent several hours determining the welding time and amount of wire needed, but the time spent was less costly than losing $55,000."
Bottom line, folks & be wary of any "offer" or "deal"—both in your personal dealings and in business—that asks you to pay upfront. Thoroughly research and verify the integrity of companies and individuals and the authenticity of their claims before completing any transactions. Remember the old adage, if it sounds too good to be true, it is.