Advanced Fee Loan Scams
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Monday, 22 January 07 - 12:56 PM (GMT) By John ML Dierckx in Inside Frauds & Scams |
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Some time ago we were approached by an client who had suffered considerable damages in the course of trying to obtain a substantial finance of NZ$100,000,000. We knew this client as an accomplished businessman and I can only say my curiosity was triggered when I found out that the damages he had incurred were well over $1,000,000. The client handed over his file and I agreed to to through it to assess the situation.
From the file it transpired that our client was looking for a finance because of a very lucrative business investment. Through a friend of a friend client was introduced to a woman who claimed that her partner had been very successful in arranging finances like that in the past and claimed that he had arranged many larger finances for different clients in New Zealand and overseas. Not long after that my the client was introduced to the "man of the moment" the man that could arrange the finance.
The man in question claimed to have no problems in arranging a finance of the size needed for my clients investment at all. The man in question advised that he would be negotiating the finance for my client as a "blind broker". Only at the time of signing the finance agreement my client would know who the bank was that would provide the finance. My client was advised that he needed to advance money to have a due diligence investigation performed and furthermore the bank would need a business plan or appraisal to be able to evaluate the risks associated with the finance.
All in all a first advancement was needed of about $70,000 was needed to cover the costs of having the due diligence arranged whilst the other half of the money was spend by my client in getting a professional business plan together.
At that same time my client was advised by the "blind broker" that the lending financial institution would require a commission of 1% whilst the same applied for the broker. The broker went one step further and required the advancement up front.
Now my client was certainly not short of cash but this was a different story. This meant that on to of the costs of $70,000, a further $1,000,000 was needed in advance to pay the broker. My client was able to pay about $750,000 up front, partially arranged by investments of friends and relatives and advised the broker that was as much as he could pay upfront.Since that was not enough my client considered stepping out of the deal. That would perhaps have been the best option.
The creative broker advised that he would personally finance the additional $250,000 needed and subsequently a loan agreement was drawn up for that. The borrowed amount was payable on settlement of the head finance agreement which was of course against a highly competitive interest rate.
Not long after that the broker advised my client that the due diligence investigation had not lead to any adverse information and that the broker had found an institution that would be willing to arrange the finance. Surprisingly the arranged finance never eventuated.
For all kinds of reasons the supposedly arranged finance never fell through. But, the advancements made have yet to be returned.
In trying to recover the damages, the "blind broker" was as to be expected nowhere to be found. Investigation learned that the broker has virtually no assets registered in his name that can be called upon to recover damages. The client has lost not only a lot of money but besides that friends who were dragged along in the losses.
Some remarks:
Legitimate brokers do not charge amounts to be paid affront and especially not a brokerage fee. Whereas administrative costs and the costs of due diligence could be plausible, an upfront brokerage fee is almost a sure sign of potential hazard.
It surprises me time and time again that notwithstanding the enormous amount of (internet) media coverage on advance fee loan scams and likewise Nigerian scams people still fall for them.
Perform due diligence on your broker or better yet KNOW WHO YOUR BROKER IS!!! For some reason the mere mentioning of a due diligence by the broker did not trigger the victim in this case to perform due diligence on the broker.
At this stage, with the broker itself still nowhere to be found, investigations learned that the broker has no known asset base anywhere in the world, has convictions for fraud and dishonesty in at least 7 different countries and on top of that we have not been able to establish any nationality of the broker with a satisfactory degree of certainty.
The need for due diligence is paramount for both parties. All too often we find clients that have suffered the consequences of providing credits to ultimately unreliable clients only afterwards realising they never knew who they were giving credit to. In the financial world the addagium "know your customer" is well known and it is strongly recommended that any business person applies this as a rule where he is arranging credit through a broker.
DUE DILIGENCE WORKS TWO WAYS
A thank you to the following people for providing me with advise that was really useful during my investigations:
- Steven Rambam, director of Pallorium Investigations Brooklyn New York www.pallorium.com
- Bill E. Branscum, Investigator at Oracle International Naples Florida,
www.FraudsAndScams.com and www.OracleInternational.com - Frank Wisehart, Wisehart & Wisehart Inc, Dublin Ohio, www.wisehart-wisehart.com
- Nichols J. Smith, director Investigative Services of Adverus Inc Laguna Beach California, www.adverus.com
- Larry Ross, Ross Financial Services Inc, www.RFSinc.com
- David Levin, PI in NY State, Bayside New York
- Paul Curtis, PI at Costa Mesa, California
Previously posted at http://nzpi.blogspot.com/2005/10/advanced-fee-loan-scams.html
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