The 12 sneakiest frauds in Britain today and how not to be fooled by them

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The Independent Online
Police are investigating a fraud that has been sweeping the City of London in recent weeks. For once, it is not a major complex case involving millions of pounds circulating the globe in a way the layman does not understand. This is not another Robert Maxwell or BCCI.

But unlike those high-profile, glamorous cases, this one will not receive acres of space in the press. Its perpetrators will not be snapped at their swanky houses. The Serious Fraud Office will not run the show. Instead, this is an all-too typical instance of everyday fraud. Unfortunately, because it is denied publicity, the public does not know what to expect. Fraud, according to the received wisdom, is the preserve of big-time villains with offshore bank accounts, yachts and villas. Most scams are not like that.

In this one, accountants, solicitors and stockbrokers and banks have opened their mail to find an invoice from a firm in Liverpool charging them pounds 28 for having supplied 100 plain, buff-coloured folders.

As scams go, it is a good one. Nobody, certainly not a busy City executive, can remember the folders. The colour is important: neutral buff, not garish red that someone would recall receiving. The name and address on the invoices was unmemorable.

There was, though, one giveaway. The invoices were printed on such scrappy paper that in some quarters, at least, they aroused suspicion. They sent them to the police who are now hunting the senders hiding behind an anonymous address on Merseyside.

Chances are, their efforts will be in vain. Some of those receiving the invoice will have just paid it, no questions asked. The con-artists will have scarpered into the Merseyside night.

It was dead easy, really: just an invoice, a photo-copier, a phone book for addresses and a dollop of nerve. This sort of cheap trick is all the rage at the moment. A businessman in Surrey - at least that is what he purported to be - recently wrote to 1,000 hotels and restaurants on the Continent claiming they owed him money after a waiter spilled wine over his Savile Row suit, showed just how easy it is to rip people off.

Nobody knows how many hoteliers and restaurateurs replied to the gent with the double-barrelled name from Morden, enclosing a cheque to cover his dry-cleaning bill, but police in several countries would like to interview him.

Another current favourite is the fax directory. Businesses get faxed a letter, claiming to come from a firm of publishers about to produce a new directory. For pounds 25, they too, can be in this essential tool for anyone wanting to trade with Britain. Most, says Adam Bates, fraud partner at the accountants, KPMG, throw the letter away. Sadly, some don't and the bogus publishers make a killing.

"They fax thousands of firms and make the directory sound as impressive as possible. Some think, `It looks good, we must be in that' and pay the money." It only takes 10 per cent to pay for the profit to be enormous.

For years now, businesses in Britain have been plagued by letters from people in Nigeria claiming they know where there is a pot of cash that could be theirs to share. All the Brits have to do is supply bank account details so the Nigerians can get the loot to them. They give the details, their account is emptied, the Nigerian cash never arrives.

Nothing ever happens. The authorities are not told, no Nigerians are ever arrested. These crimes rarely make the press or Crimewatch UK. "There is an embarrassment factor - people do not like admitting they have been ripped off. That is why the Nigerian frauds are so successful," said Mr Bates. "They work because people are greedy. They think they are about to make a few million pounds and are gullible. Plus, the people doing the conning are so convincing."

Mr Bates's firm produces an annual "Fraud Barometer". This year's shows 535 cases of fraud identified so far, involving losses of pounds 3bn. But they are cases of pounds 100,000-plus where charges have been brought. Below that figure and outside the courts, there is no way of telling how big the problem is.

Victims are too humiliated to go to the police and if they are a company, are too scared to tell their shareholders. As a result, people are left with the idea that fraud is something that cannot happen to them.

Scams and cons in 1996 are changing to reflect the uncertain times. A decade ago, they involved the granting of mortgages based on artificially inflated property valuations or the selling of shares in bogus companies. In these straitened times, they are more about crooked insolvencies and securing cheap non-existent loans and overdrafts.

Clive Zietman, of the City law firm Llewelyn Zietman, worked on the Guinness case but has also cracked much smaller, everyday wheezes. "There has been a discernable change from the 1980s-type `rising market' frauds to the 1990s-type `recession-based' frauds," says Mr Zietman. "The climate now makes it harder for people to get money from banks, therefore they look more imaginatively at where they can get money from and they fall prey to the fraudster."

With the help of Mr Zietman, the Independent has compiled a list of the Top 12 easiest frauds of the moment. None require any great financial expertise - in most cases, all that is required is a phone, possibly a fax, and a dose of chutzpah.

1. The Saudi Shuffle

Mr Bent convinces Mr Twit that his company, Bent Loans Limited, can make finance available at very low interest rates through his "unique" contacts with, say, somebody fantastically rich, frequently the Saudi Arabian Royal Family. In order to process Mr Twit's application for a $75bn loan, Mr Twit must pay to Mr Bent a small administrative fee of $500,000, returnable if the loan application is accepted. Mr Twit pays Mr Bent the money who promptly disappears.

2. The Mighty Wurlitzer

Mr Bent opens a bank account at Barclays. He puts pounds 100,000 in the account. He opens another account at Lloyds and another at National Westminster. He circulates, at great speed, large numbers of cheques between the three accounts to create a whirl of activity giving the impression his business has a substantial turnover. On this basis, the banks offer him big overdrafts. Suddenly, all three accounts are emptied with Mr Bent drawing on all his overdrafts. He then disappears.

3. Back from the Futures

Mr Bent sets up a business which, he claims, will call on his vast expertise and skill to play the futures market. He invites people to give him their money to play with. For the first few months, he draws on their cash to pay back an excellent rate of return. More investors flood in, hearing this is a better alternative to a boring old building society. Mr Bent suddenly disappears taking their cash with him.

4. Dead Man's Holiday

Mr Smith goes on holiday for five weeks to Australia. As soon as he has gone, Mr Bent buys a will form from WH Smith and creates a fake will, complete with fake witness signatures. He then fakes a letter from a fictitious firm of solicitors telling him that Mr Smith has died and that he has been named as executor.

Mr Bent then goes to the Probate Registry, shows the documents, pays a fee and fills in a form to make an emergency application for a grant of probate. At no point does he have to show a death certificate. Armed with the resulting probate document he goes to Mr Smith's bank and empties the account, telling the bank manager tales about funeral expenses. Mr Smith comes back from his travels to find his money has gone.

5. The Invisible Tenant

Mr Bent buys a house, through a company he sets up, for pounds 100,000. This price is depressed because the house has a sitting tenant in it. Mr Bent arranges for his company to sell the house to him for pounds 200,000 on the basis of vacant possession.

The solicitors for his company believe there will be vacant possession as do the solicitors for Mr Bent and his mortgage lender - none of them ever bothers to check and take his and the company's word for it - who is prepared to advance him pounds 200,000. The house is valued on the basis of vacant possession. The lender lends him the money and Mr Bent disappears, leaving the mortgage firm with a property with a sitting tenant worth pounds 100,000.

6. Hologram Leasing

Mr Bent borrows money to buy a piece of machinery. He then leases it to Mr Twit who must pay a premium in advance. The terms of the lease say the machinery will not be delivered for two months. Mr Bent then leases the same machinery out to as many other gullible people he can find on the same terms. He vanishes with their premiums.

7. Old-fashioned Bribery

Mr Bent is short of cash. He knows his bank manager will not extend his overdraft limit of pounds 5,000. He takes the bank manager out to lunch and hands him some tickets for a holiday in Spain. The bank manager becomes amenable to granting a pounds 1m overdraft which Mr Bent cannot, and does not, pay.

8. The Listed Building Stripper

Mr Bent obtains a mortgage to buy a listed building. Once inside, he strips the building of all its valuable assets such as carved staircases, doors, chandeliers, covings, fireplaces and doors. He puts the money raised from their sale offshore, well away from the reach of the mortgage company. He stops his mortgage payments and disappears, leaving the mortgage lender with a derelict property and a huge loss.

9. The Phantom Folders

The Bent Stationery Company sends invoices for an innocuous amount to the top 20,000 companies claiming it supplied them a quantity of folders. Ten per cent of the companies pay without question. It adds up to tens of thousands of pounds and the company vanishes.

10. Figment Friends

Mr Bent owes pounds 500,000 to his creditors but is keen to avoid bankruptcy. With the benefit of the Insolvency Act and a group of friends who agree to act as phoney creditors, he enters into a "voluntary arrangement" with them to repay all his creditors 5p in the pound. The friends forge documents purporting to show that Mr Bent owes them pounds 1,500,000.

Though the debts are figments of their imagination they add up to 75 per cent of the total value of his supposed debts, and the real creditors have to accept the 5p terms the fraudsters have agreed. As the real creditors are unable to prove the false nature of the other claims, the voluntary arrangement is sanctioned by a court and the honest creditors lose their right to recover pounds 475,000. Mr Bent has to pay out only pounds 25,000 and his slate of debts is wiped clean.

11. The Fiery Phoenix

Mr Bent's company takes on huge borrowings, then goes bust. He sets up the following day under an almost identical name. This scam was supposed to have been dealt with by the Insolvency Act of 1986 but that only applies to liquidations. Provided his company goes into receivership, and not liquidation, it can rise from the ashes and burn lots of fingers.

12. The Widow Wobbler

This is the police nickname for a type of fraud increasing as people live longer. Mr Bent befriends an elderly lady in a nursing home, by accompanying her on shopping trips and to dances. He persuades her to sign a power of attorney which, he says, would allow him to manage her affairs properly while she is inside. He clears out her bank accounts and disappears.

All the above could be seen as a "how to" guide. But most villains do not need any such instruction. For the rest of us they should serve as a warning.

"There is a taboo about fraud," says Clive Zietman. "Nobody likes talking about it, nobody understands it. If we talk about it, we can see it coming - we need to be aware of these tricks and be alive to them." You cannot now say you were not told.