Fraudulent Business Loans or Trading Schemes Involving
Advance Fee Front Money Scams
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.
Refer to the Advance
Fee Loan section, Nigerian Advance
Fee Loans or the Prime
Bank section for more details.
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 Reorter - Buffalonews.com
6/13/2004
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. Legiti
mate 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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