Credit Scams: On The Trail With A Fraud Investigator

Gary Bares, founder and director of Verifraud, a fraud risk management unit of Direct Alliance, which is a subsidiary of Teletech, has spent the last five years chasing down individuals suspected of committing fraud against distributors and solution providers.

CMP Channel last week joined Bares in Southern California for visits to several locations where Bares said a group that had been running an active "bustout" scam, in which four companies that recently earned new credit lines with distributors and solution providers disappeared after the products were delivered.

In the five years he's been tracking bustouts, Bares said this was the biggest operation he's seen in terms of the number of companies being run at once. As is often the case, credit applications that the companies submitted to distributors and solution providers show many of the same names and references to link them together. CMP Channel is withholding the names of the companies and the individuals because it is an active investigation and because no one has been charged with a crime.

Our first stop was to a small suite in an office complex in Orange, Calif. According to previous company claims, it was paying $60,000 a year in rent, indicative of a sizeable business. Interestingly, a sign outside the complex advertises suite rentals for as little as $199 a month and the suite attributed to the solution provider was no bigger than a bedroom.

We walked up to the second floor and down a small narrow hallway. At the where the solution provider purported to operate, the blinds were closedand the lights were out. The space adorned by company names in neighboring suites was blank. Three FedEx tags for attempted deliveries hung from the door, reflecting dates from Sept. 4-6. It appears as if the suite had been deserted, which did not surprise Bares. Typically, the fraudsters stay around to get the bulk of their deliveries, then split before the bills become overdue.

Our next stop was a couple of miles down the road. At this location, a FedEx tag hung with a Sept. 10 attempted delivery date. Also taped to the door was a notice of abandonment and an overdue rent bill. Again, it looks like anybody who was here wasn't coming back anytime soon.

Based on his experience, the bustout perpetrators make their quick strike, then disappear for a couple of years while they're building up an new portfolio of companies to use for their credit scams.

NEXT: Nobody Home