Business related scams

I'm not talking about the Nigerians who tell you they're currently overseas but will send their agent with a check to pickup the order. I recently had a new customer contact me about making a new product for him. Total order is about $8K. He actually came by the shop and I talked with him a little, which considering most of my sales are online, is pretty rare for me to actually meet the customer. He tells me he's going to release checks paying for the order through their bank quick pay service with 5 payments and checks will be mailed every Friday. The payments are supposed to line up with the projects funding releases. When I asked what company he was with, he just told me to put down his name. And his email is just a personal email. The checks are being paid by a third party company, from a small bank that I've never heard of. And supposedly this guy lives a couple states over (which could explain the unknown bank name), but travels a lot for his job and was able to swing by for a personal meeting. The whole thing seems sketchy. The final check will be paid almost 3 weeks before the final completion date in which he will be picking up all the products. That gives the checks plenty of time to clear the bank right? I'm trying to figure out how this could be a scam. Anyone have some insight on this? I haven't been in business that long to know all the tricks out there.

ask for a copy of his resale card. You can also check with the county clerk from whatever county he's in and find out if he's really in business.

It sounds very sketchy indeed, to me ... and yet not completely impossible that is legit, which is no doubt why you are still scratching your head, trying to decide how to respond.

Have you already accepted the order? If not, I wonder if one possible avenue would be to say that you do not do business with private individuals, so you will have to have a company name and contact information, and will need checks to come from that company. Please note that I am just "thinking out loud" here - hopefully someone else with more experience can offer more or better insights!

My take:

Could be a scam, although payment in advance doesn't seem to indicate a plan to stiff you. I wonder if the goal is to get your account data for some purpose?

Legitimate reason for the stealth might be trying to avoid revealing a new product an established company plans to put on the market.

An illegitimate reason for the stealth might be either an illegal product or an intellectual property trespass. Can you determine what the product is for? And no, I don't expect you to reveal it to us.

Scottl said:

My take:

Could be a scam, although payment in advance doesn't seem to indicate a plan to stiff you. I wonder if the goal is to get your account data for some purpose?

Legitimate reason for the stealth might be trying to avoid revealing a new product an established company plans to put on the market.

Am illegitimate reason for the stealth might be either an illegal product or an intellectual property trespass. Can you determine what the product is for? And no, I don't expect you to reveal it to us.

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I make furniture bases. It's just a custom base for a bunch of tables. Which is another reason why I'm thinking it's not a scam since it's a custom design. I did accept the job. I don't plan on actually starting on it though until the first check clears.

My guess is that it's not a scam. I use the online bill-pay almost exclusively, so I don't think that's weird at all. The only thing that would really concern me here is that it's being paid for be a company check and you're not selling it to the company.

There are two things I'd do to make sure everything's on the up-and-up.
1) call the A/P person at the company that the check is from and confirm the payment. Follow up with an e-mail.
2) if you're concerned about the bank, call and speak to a branch manager.

Larry Dickman said:

ask for a copy of his resale card. You can also check with the county clerk from whatever county he's in and find out if he's really in business.

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That's a great idea. Actually I'm supposed to take a copy of his tax exempt cert anyway since he's picking up, even though he's based in another state.

Looks like you have at least 8 weeks from the first check to delivery if the part. Once a check is cleared and funds are removed from his account, I don't believe this can be reversed. I am certain 10-15 days is plenty of time.

The usual scam is to pay with a phony check, it looks like the funds hit your account in 1-2 days, so you ship, then 6 days later the check bounces and your bank pulls the funds. Can't see this happening since there is such a large lag time.

When I started my company I did a lot of business under my name. It was small time, just testing he waters to see if there was a market and didn't make sense to form an LLC. A few companies would not work with me, but most would. Still use the ones that would.


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Maybe bring your bank into the matter -- as they will be soon anyway. Ask your local branch manager to suss out the remote bank in question, and open a dialog regarding that particular customer if possible. (May not be, yet.) See if he actually has an account there, etc. But definitely do this at first check: have local bank contact, and encumber the funds if they can. Check clearance takes about 8 minutes nowdays, instead of overnight. In this case, not being a cashier's check is good. Keep in mind you can always demand dirvers license information (copy) when someone presents a check, especially an out of state check. This will let you know very soon if he's legit. You can always withhold final delivery until after final check has cleared, too. Never let it turn into cashier's checks, though. Too long of a delay tail to discover fraud.

Good luck!
Chip

I agree with talk to your bank manager about ensuring the cheque is legit. You may be able to pay to have the cheque certified. The cost is a small price to pay for your peace of mind if you are worried.

Also if it is the bank checking things out rather than you. it is are less likely to piss off the quite possibly legit customer.

+ another for talking with your bank, .....after all if it goes tits up it's also aggro for them that they can live without.

This might actually be a legitimate business deal but something sounds fishy here.

One thing you have to be very careful of is the scam in which you make deposits into your account but the deposits end up being bogus. Being that there is a third party bank account seems strange and makes me think the deal is not on the level.

If this really is a scam, there will be an order cancellation somewhere in the middle so they will want a refund. The bank thinks that the deposit checks are good and you think everything is okay and being the honest man you are, you give them the refund for the order cancellation. What actually happens is that the deposit checks end up being bogus even though they have technically cleared the bank. You have refunded them the order cancellation so at that point you are out the original money plus the refund money.

The only safe way to protect yourself from that type of scam is to be diligent and not make any refunds for 30 days after the request and last check.

It seems very strange that a company would write 5 checks over a period of 5 weeks and not pickup the completed order 3 weeks later. I can see a deposit, mid payment, and then final payment upon delivery but the payment terms are not normal business procedures. Everyone is always trying to get the best terms possible and they are offering you dream terms.

There was a farmer joke shortly after the Oklahoma bombing by Timothy McVeigh on why the grain elevator that sold McVeigh the fertilizer should have known he was not legit. The joke involved that they paid cash and a farmer never pays cash and is always asking for credit terms and that they loaded the truck themselves which was new and didn't ask for help loading it.

Your deal just sounds too fishy to not be very careful. I would take the order but have in the back of my mind that somehow this guy is going to be trying to screw me.

This could turnout to be a legit deal and with these terms you should do well but we all know, this is not how most new customers treat us.

What if the checks are stolen from some unsuspecting company? They're legitimate and get paid but the company can come back after that money after the fraud is detected. But I don't see how a scammer makes out on a scheme like this unless he picks up the goods, and having bad checks out there for that many weeks seems like quite a risk of being discovered.

Could be that the scam is removing funds from the business in order to bankrupt it and transfer assets to a new one.

But why go thru the hassle of having parts made to pull this off? Why not just buy a zero-turn mower, tools, a motorcycle, whatever. Something coveted or re-marketable. But custom made parts from a machine shop? This story will have an interesting ending, at some point...

Chip

Something sounds fishy, but on the other hand that sure seems to me a lot of trouble to get $8k of product for free, especially something that would have little value if you tried to turn the ill gotten goods over quickly.
It isn't like Freddie the Fencer is going to pay 50 cents on the dollar for custom furniture bases.

travels a lot for his job and was able to swing by for a personal meeting.

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If he is able to travel, ask if he - as a new customer - would be able to deliver real cash in hand on the same schedule

Why don't you ask the customer why someone else is paying? I would ask in a conversational way when talking to the customer about something else. Not "why is company x paying for this ?" more "Who is company X ?" curious rather than accusatory.

Unfortunately the best time to ask this question would have been when you were face to face and presumably showing him around the shop.

Third party payer isn't necessarily that odd, especially in the parts business. The guy may be designing the furniture but may not be the end customer, that could be a chain of stores that doesn't want the extra markup. Or any number of other scenarios.

The thing I would watch out for is you receive two payments on time, then they stop coming with some sort of sad story and the assurance that you'll get paid the balance before the lot ships. Then you're sitting on a bunch of otherwise useless inventory and are susceptible to "sad story, would you take 80%" or "I can't pay you until they arrive at the customer, but you know I'm good for it, remember how prompt I was before (sad story)" Then, of course, you ship on faith and never get paid.

I doubt that this is a scam. It is probably just some starry eyed inventor trying to do project X.

The best policy here is to require pre-payment via a bank check. Once you have the bank check in hand, call up the bank and verify that it is real. Just tell the guy, you require bank-signed pre-payment when working with new customers that are not large businesses.

The only possible scam is that a forger can write a bogus check, say for $12,000, and then ask you to "refund" the $4000 difference to him. Obviously, only a moron would agree to that.