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We always strive to provide a value adding service to our clients and we take pride from the fact that we are able to look beyond the legal detail. It is with this in mind that we want to make you all aware of three types of scam which have been brought to our attention in the past few weeks.
The “boiler room”
Some of you may have seen the Hollywood film based on the unscrupulous exploits of scammers using this type of con to fleece unwary investors in worthless shares.
A variation on this scam has come to our attention recently. It works by approaching individuals who hold, or at some point held, genuine stocks in US companies. The approach takes the form of a party offering to act as a middle man in connection with the sale of these stocks for a tidy sum.
Proceed with caution! Of course, genuine opportunities to buy and sell stocks in US companies exist but always do your research. In particular, consider the following:
- Why is there a market for these shares now? If you thought these shares were worthless and had long given up hope on a return from your original investment why should you change your mind?
- Are you even sure that you own the stocks that the agent is offering to sell to you? What will you do if you don’t but have already signed an agreement to sell? You could find yourself pressured into buying the quantity stock you need to sell from the middle man (at a very generous knock down price no doubt(!), and with a promise that you will still make pots of cash when you re-sell the stocks). Is it likely in these circumstances that you will ever see any proceeds from your re-sale? We think not!
- Don’t be lulled into a false sense of security. The middle man may not ask for any money at the first stage. Chances are they will tell you (for your security of course) that the proceeds from the sale of your stocks will be held by an official government escrow agent. What happens if you agree to go ahead and then the middle man tells you that a fee needs to be paid so that the money can be released to you. Will you pay it?
- Research the middle man and the supposed government regulator. Even if google turns up official looking websites, what else can you find out about them? If you have been told that the middle man is a reputable and leading agent for this type of work why is there no mention of their major transactions on the web. Would you expect a government regulator to have a bigger presence on the web? Try using a street view on google maps. Are these people likely to be operating out of a boarded up office in a non-descript street?
- Look at the websites themselves more closely. Are there obvious mistakes (spellings and inconsistencies – like a supposed US regulator’s website referring to its role as a regulator in Australia, for example)? Does the website have any substance once you look behind the home page (who are the people in the photographs, why is the news feed just generic updates from The New York Times etc.?)?
- Use the advice available from The US Securities and Exchange Commission (http://www.sec.gov/) to investigate further.
The pretence of officialdom
Our next scam preys upon the fact that busy businesses are bombarded with communications from government agencies. It also relies on the fact that busy people are keen to get things off their desk.
The approach has been doing the rounds for a while and takes the form of a letter done up in a font and format that is similar to the type of communication often received from HMRC – but it is not!
The letter goes on to reference a legal obligation to publish VAT numbers and seems to offer a quick and easy solution – simply fill in your VAT number, sign and send back.
Of course, the devil is in the detail. To be fair to the scammers in this case, once you read past the official-looking blurb they do explain exactly (a) who they are and (b) what you are paying for - answers: (a) usually a German company, with no official role or powers; and (b) not a lot, you will get your business’ name and number published on an online directory but nothing lese.
Did you spot the most important detail in the last paragraph? That’s right, you have to pay. Usually this is an annual fee of several hundred pounds for a fixed term of a number of years.
Unfortunately it seems that many people are caught out by this and simply fill in their details, sign and return the form. The next thing they know about this is usually when they receive an invoice, closely followed for demands for payment.
The best approach here is to recognise the approach for what it is in the first place. To do this you need to carefully read what you have been asked to sign. If you have any doubts, seek a second opinion (speak with us).
This scam may sound obvious and message boards about this approach feature many people claiming that they would never fall for it. Sadly, however, pride comes before a fall and it is clear that people are still being caught out. In that scenario you may find yourself, on the face of it, committed to a contract under German law which obliges you to pay the annual fee. If you arrive at this point don’t panic but you really should speak with us. We can discuss the best way forward.
Good old identity theft
In some respects this is the most worrying situation that has come to light in recent weeks, as it requires no involvement from the innocent victim.
The scenario is an innocent and unaware individual is contacted by the Insolvency Service who say he appears to be a director of a company in liquidation – but he has never heard of the company. It seems that a dishonest party has obtained the individual’s basic details filed in relation to a genuine directorship – for example, when any company appoints a director it must file details of that director’s full name, nationality and date of birth (home address details must be given also but these are not entered on the public record).
Using these details it seems feasible that the dishonest party could appoint that unknowing individual as a director of a new company, either by faking the individual’s signature on a form to Companies House or by using fake personal information to web file the appointment. Under the web filing and PROOF systems used by Companies House, a director’s appointment can be notified and their consent to act evidenced by the giving three pieces of personal information about the new director (such as eye colour, town of birth and father’s forename) – but the person notifying the appointment could simply make up the information and this will not come to light until the individual appointed queries matters.
There may be any of number of motives for this deception. We think that one of the most likely is to give a new company undeserved legitimacy. For example, if our innocent individual was a director of a successful health and safety training company, setting up a new company to secure contracts for this type of training and being able to show prospective clients that the unaware individual is a director will appeal to the dishonest party.
The implications for the innocent individual are clear. If the new company is involved in dodgy dealings and/or goes bust the innocent individual will be associated with it. This could mean that he or she is on the authorities’ radar for matters such as insolvent trading (or worse) and could affect his ability to act as a legitimate company director.
The good news in this scenario is that Companies House, the Insolvency Service and the Police are all aware of this kind of fraud. The innocent individual should engage with the appropriate authorities as soon as possible to put the record straight. A useful starting point if you have concerns about this is the following contact page at Companies House: http://www.companieshouse.gov.uk/infoAndGuide/reportingFraud.shtml
Prevention is always better than cure but there is a limited amount that individuals can do about this so long as they are (a) required to provide certain personal information on the public record when acting as a director legitimately and (b) the UK does not currently have a system whereby all individuals are contacted by Companies House when they are appointed as a director in order to verify that the appointment is genuine. It is possible as to search at Companies House under the name of an individual to see all of their directorships. This is the kind of check that we could help with if you receive any mysterious communication about a company who you do not rember agreeing to act as officer for.
George Green can help
All of the issues above have come to our attention because our clients have picked up the phone to chat a tricky issue through with us. We are always ready to do the same for you. If we can help, we will.