Magazine article Business Credit

Same Name Scams and Misrepresentation

Magazine article Business Credit

Same Name Scams and Misrepresentation

Article excerpt

Since the inception of credit ratings, enterprising crooks have taken advantage of systems designed to rate business' credit worthiness. To illustrate how the same name scare works, here's a hypothetical case. (Any similarity to real businesses is strictly coincidental.) What if there is a reputable business with an excellent credit rating in Detroit named Detroit Distributing. The enterprising crook knows that credit professionals don't always order credit reports for businesses with excellent credit ratings, particularly when the dollar amounts are relatively small.

He then sets up an office and/or warehouse under a name very similar, if not identical to "Detroit Distributing". In this case, he calls his new business, "Detroit Distribution", and says it's located in Detroit. The variation on the name is a very subtle difference, and will probably not be noticed by the majority of suppliers who receive orders. Most credit departments have a credit scoring system that allows orders under a given level to be shipped, depending upon the credit rating.

The crook proceeds to place a number of small to modest-sized orders using the name of "Detroit Distribution." Unwary suppliers, finding the excellent rating of Detroit Distributing, ship without a thought. By the time the bills come due a month later, the operator is long gone. All suppliers find is a disconnected phone number and an empty office or warehouse.

Upon further observation, most credit managers will point out that there is an obvious flaw to this scheme. Suppose the supplier already sells to the real "Detroit Distributing," and sends the invoice to the real company. Immediately upon receipt of the invoice, the real company's purchasing or payables department will likely call the supplier and point out that they never ordered the product in question. And, should the supplier review the ship-to address, they will find that the shipping address is not connected with the real Detroit Distributing. This happens often, but for some reason, it hasn't stopped credit crooks from trying and succeeding.

For example, the notorious Harold Goldstein set up an operation as the West Coast branch of the well established Comb Company. He was caught because a supplier sent an invoice to the real Comb Company. Goldstein didn't learn his lesson. Following a stint in prison, he began operating as "Citicorp".

While the same name scam isn't the most common form of business credit fraud, it does pay to keep this possibility in the back of your mind. The best way to trip up a potential same name scam is to pay attention to detail. …

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