Hardware traders losing millions to fraud ring
Published:Tuesday | September 5, 2017 | 12:00 AMNeville Graham
Distributors of construction materials are rallying around each other following at least seven incidents of fraud against hardware stores and traders perpetuated by a sophisticated ring that has sprung up over the summer.
The Financial Gleaner confirmed that attempts have been made to con materials - sometimes successfully - from Atlantic Hardware, Arc Manufacturing, BMT Hardware and Llewatson Company Limited.
Arc Manufacturing, which makes and distributes construction materials, wrote to its clients warning of "a significant increase in fraudulent transactions in the building materials trade" and outlining how the scam operates.
Posing as clients, they call or show up at a hardware business and order materials in large quantities. They then request banking information to pay for the order ahead of delivery, and follow through with a cheque deposit to the hardware business' account.
"The following day, they send a driver with a copy of the lodgement slip, which has the bank stamp on it. An officer of the bank generally confirms that a deposit was made. However, soon thereafter, the funds are reversed because the deposit was done via fraudulent cheque(s)," said Arc Manufacturing's acting CEO, Deanall Barnes, in an email to clients obtained by the Financial Gleaner.
However, by the time the bank transaction is reversed, the merchant would have already delivered the order.
Senior Superintendent Arthur Brown, who heads the St Andrew South Police Division, confirms the matter is under investigation and that the Hunts Bay Police have been acting on reports over the past two months.
"Yes, we've had reports from hardware merchants of fraud attempts and fraudulent conversion. We have persons who are investigating, but as to the amounts involved, we can't speak to that at this time," Brown said.
The use of middlemen
Arc Chairman Norman Horne said his company decided to go public because the police investigations have so far led nowhere.
He said the conmen appear to operate through middlemen.
"All cases have been reported to the police. We've found in some instances that the truck drivers say that they were just hired to do some work. They say they don't know who called them, and the police have been unable to prosecute the truck drivers as a result of that," Horne said.
Because the police have been unable to unearth the members of the ring, the Arc chairman said they thought it prudent to alert the public while the investigations continue.
"We held back a bit to allow the police to do their investigations, but with them telling us that it is a lost case, we felt it prudent to warn as many people as possible so that other persons and companies may not fall victim," Horne said.
He confirmed that over a two-month period, Arc was hit three times - "twice in Kingston, once in Montego Bay" - and that two of the cases involved goods valued at more than $2 million.
Atlantic Hardware said it sustained a $680,000 hit. General Manager Donald Fung says the fraudsters, who claimed they worked
with well-known building contractor Chin's Construction, made off with more than 50 doors.
Fung said, too, that he was frustrated with the pace of the police investigations. He feels the fraud has been assigned a low priority in light of other violent crimes being investigated.
Damaging to reputation
Chin's Construction has been taking steps to safeguard its reputation, having learnt that its name is being used by the fraud ring.
"I went as far as to tell a few business colleagues to look out for it, because while this criminality is not affecting us financially, there is the likelihood of reputational damage and we guard that jealously," said Managing Director Alex Chin.
Chin says he has been assisting both Atlantic and the police to alert other persons to the scam. The fraud ring has also been known to use the names of some other well-known construction companies.
Another victim of the fraud, Llewatson Company Limited, said it managed to foil one attempt that would have cost the company close to $1.2 million.
"We are very sensitive about those things, so we don't get caught in that," said Managing Director Llewelyn Watson. "As a matter of fact, we had the police take them out of here," Watson said.
The status of the investigation was unknown as the policeman dealing with the case was said to be on leave when the Financial Gleaner reached out for an update.
Watson said the perpetrators used the name of one of Jamaica's largest financial conglomerates in their attempt.
"Here it is that a man says he is calling from [company name withheld] and they say they want a few days credit on some goods. They turn up with a purchase order and a letter with the company logo, and all. It had the signature of the CEO and the chairman," Watson recounted.
He said his years in the trade caused him not to be fooled.
"I am in this business long enough to know that those two signatures would never come in respect of those transactions," he said.
Over in Clarendon, there are reports that at least two hardware establishments were targeted. Manager at BMT Hardware, Stephen Terrelonge, said his company lost about $3.5 million over a two-week period. In their case, a woman who identified herself as 'Miss Chung', called ahead for a quotation and then turned up with bank documents purporting to have lodged money to pay for the goods.
"They seemed to be relying on the fact that if they were to present bank documents on, say, a Wednesday or a Thursday, then the fraud would not be uncovered until the middle of the following week," Terrelonge said.
Horne said no one knows what happens to the defrauded material - a situation the sector finds perplexing, given the scope of the fraud and the volumes of materials involved.
"It's impossible for people to conceal this amount of building material. There would have to be storage on a construction site or some other hardware store," Horne said. "These are heavy construction material. It's just not possible for that amount to be used in a short space of time."
Meanwhile, Superintendent Brown is advising businesses to stay alert as investigations continue.
"I would want the hardware companies to be very careful in doing business with people whom they are not familiar with. We would say that they should exercise strict due diligence in these instances," the police division chief said.