Fraud Alive and Well in Business Credit, As Are Defenses

Fraud attempts at the expense of trade creditors are nothing new, and they certainly don't appear to be going away based on widespread anecdotal evidence. A case in point has been in play this year in California and underscores the importance of relying on protection tools such as NACM’s National Trade Credit Report.

We recently caught wind of an alleged California-based fraudster hitting up small- and medium-sized businesses for larger-than-usual lines of credit. The company in question, a computer/electronics wholesaler based in Montebello, went so far as to take out an active domestic corporate charter with the California Secretary of State and the valid tax permit through the California Board of Equalization. The company’s “proprietors” even took up residence in a high-end office building for several months, meeting in person with vendors’ sales and credit staffs on multiple occasions. Then, as invoices started going well past due, phones and emails started getting ignored and they vanished. The alleged scheme even caught the company of NACM member Donald Smith, director of customer accounts with Texas-based Mouser Electronics Inc.

“We wrote off $50,000, which stings a bit bigger than a bumble bee sting,” Smith said. “We would have easily lost another $50,000 or more had we not run an NACM National Trade Credit Report (NTCR) through our local NACM-Southwest affiliate and identified that this was a fraudulent scheme." Smith noted that the NTCR and the various red flags it turned up was critical in helping "stop the bleeding."

- Brian Shappell, CBA, NACM staff writer

(Note: For more on this topic, check out the extended version of this article in this week's edition of eNews, available late Thursday afternoon).

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