One Victim Of A Credit Scam Tells All, And Warns Others

In July, Canada's Integrated Bankruptcy Team arrested five people and seized more than $20 million in fraudulently acquired IT and other products in Montreal. Canadian officials aren't naming the suspects or the alleged fraudulent company they operated, but several sources said it was AVI Electronique. The suspects victimized hundreds of Canadian and U.S. companies, including numerous solution providers, by placing credit orders for products they never intended to pay for, officials said. CRN was unable to contact AVI Electronique.

While RJ Murray isn't an IT channel company, solution providers can gain insight into its experience and learn what to watch out for. For a closer look at fraud affecting the channel and how to combat it, check out our exclusive coverage available Feb. 4 on the CRN Tech News iPad app.

Murray's nightmare began about a year ago, when he said AVI Electronique first contacted his company and placed two orders for 195 components to construct HVAC systems. AVI Electronique provided three companies as references that had purportedly been in business for some time; all had active websites, credit histories, payment histories with AVI and had glowing remarks about the company. Murray communicated with AVI and its references via phone calls, emails and faxes, he said.

"Everyone we talked to had great things to say about AVI. We had done business with other companies in Canada and never needed more than references," Murray said.

"[AVI] even had its 'contractor' check with us to make sure they were the units they needed on this job -- a second individual who supposedly was independent of AVI," he said.

AVI wasn't aggressive and the credit approval process proceeded normally; the orders for 195 pieces shipped the end of May, Murray said. "But after 30 days [of no payment], we realized there was a problem here," he said.

Murray started to investigate AVI and found the websites for all three references were created by the same outfit in the United Kingdom. "As soon as we saw that, we thought it was too coincidental," he said.

Murray also checked the ship-to address, which turned out to be a customs broker in Champlain, N.Y. "That's where a lot of the U.S.-based companies ship products to, and he delivered them to AVI Electronique in Montreal," Murray said. The customs broker told Murray they had verified the address in Montreal and saw desks, chairs and an active warehouse. "Their reference checks came out OK too," Murray said.

"I went up to Champlain to the customs brokerage. I wanted to know what's going on, to verify with my own eyes. It would appear they were scammed too. They had the names of other people that were also scammed, but they couldn't divulge them," he said.

On the way home, Murray told his staff to create a website to warn others about AVI Electronique. He's since taken the site down but within 24 hours got a tremendous response from others fearing they were scammed as well.

Murray's company has had credit issues with customers before, but had never been the victim of a scam, he said. In part, it's perhaps more unusual to target a high-end HVAC distributor because the components need to be pieced together by a professional to get the system to work, he said.

"We thought the risk of someone trying to fence this quickly was negligible. You just can't sell these things anywhere. They're all serialized and traceable. It never crossed our minds that someone would try to take us on this, unless they're in the business," he said.

About 185 of Murray's 195 HVAC components were seized in a raid by the Royal Canadian Mounted Police, but Murray still hasn't received them. He was told the police are still overwhelmed cataloguing the goods before anything can be returned.

Murray has asked federal officials where the products were being shipped to, but hasn't received an answer.

"That will probably remain a mystery forever. But they [the fraudsters] were selling anything they could get their hands on," he said.

PUBLISHED FEB. 1, 2013