Cyprus Mail

Recession encourages fraud

Classic film and novel Grapes of Wrath is centred on a job scam very like the one recently uncovered in Larnaca

By Costas Apostolides

THE 200 unemployed people from Larnaca tricked into paying €620 euros to get jobs in France, more than a hundred of whom travelled to France, only to find that no such company existed, has brought fraud into the limelight.

The recession creates new conditions for fraud by generating unemployed people who are desperate for work. Those in dire straits, just like a man falling from a cliff, are willing to clutch at straws to save themselves and their families.

The problems faced by the unemployed who are not entitled to welfare support have been demonstrated by the excellent work undertaken by the municipalities, NGOs and the church to provide for the basic needs of those who no longer have income. The public’s response and the efforts to ensure that children have something to eat at school, demonstrate the extent to which the Cypriots appreciate the need to help those in desperate situations. But unfortunately there are those that exploit the desperation.

The fraud mentioned above is vividly reminiscent of John Steinbeck’s 1939 novel The Grapes of Wrath, made into a classic movie by director John Ford and staring Henry Fonda. An Oklahoma family of tenant farmers loses their land in the recession and “dust bowl” and come across an advertisement for jobs in California on the grape farms. In desperation they leave their home and travel to California to find that it was a scam by the vineyards to encourage people to migrate so as to reduce their labour costs.

Why do people in crisis take such risks, for example the dangers the illegal immigrants face on boats run by criminals, perhaps dying as they attempt to swim across the Straits of Gibraltar? Steinbeck puts it as follows:

“How can you frighten a man whose hunger is not only his own cramped stomach but in the wretched bellies of his children? You can’t scare him- for he has known fear beyond any other. ”

In other words people who are desperate will take risks either knowingly (as with illegal immigrants) or in a naïve belief that somehow they will be saved.

The problems are not, however, confined to those who are most desperate, for the risk from fraud is always present. It’s just that in recession those most in need are targeted, not just those who have money to spare.

Three months ago a civil engineer with experience abroad who lost his job because of violence in the African country where he worked, called me and asked my advice about a job offer in OntarioCanada.  The job offer was very attractive, but he was told that he would be contacted by an associated firm that would arrange his visa and work permit. A firm purporting to be representing the company contacted him and requested an upfront payment of €600 for the visa and permit.

He sought my advice. So I checked the company on the internet. I found that the firm exists, and is a small oil exploration and development firm holding large areas of exploration rights on land. My friend was cautious because he had had an earlier offer in Malaysia and sought advice from the Greek Embassy there. They replied that normally legitimate firms do not ask money up front, but subtract costs according to the contract from wages paid later after arrival. In the experience of the embassy where money is sought in advance, fraud was involved. Basically, it was a scam. My friend then decided to consult the mining company and found that they had no job vacancy as advertised on the internet, and did not know of or have business relations with the company supposedly hired to arrange for visas.

Beware of Good Deals

In a recession there are many good deals to be had, and investors with cash can gain greatly from the right kind of investment. For example in housing, many people invested beyond their means or speculated in the period 2003 to 2008 and are now forced to sell at prices lower than they signed up for. There are, therefore, good deals to be had, but care is required.

For a start one has to check what the mortgage situation is, whether the banks have put charges on non-performing loans. If there are no title deeds stay away, or make a deal with the bank directly before finalising with the owner. Note you would need the owner’s approval to talk to the bank.

Other problems arise from firms that are under pressure and in danger of bankruptcy. They may offer good terms for participation in the company through share acquisition. First, only due diligence studies tell a potential investor how exactly the company stands, the annual report is not enough. Second, make sure the capital paid for the shares actually goes for the benefit of the company and not to the original  shareholders. A company under pressure needs the cash, so it makes more sense to issue new shares so that the funds go to the company not the individuals. Recently a friend invested in an existing company, his capital contribution disappeared and the firm went bankrupt.

Internet Fraud

Meanwhile cybercrime is becoming increasingly sophisticated. I have great difficulty in identifying scams from spams, and from virus injectors. The difficulty is “when is an email from the server valid or false”. Is it a genuine email from PayPal, a book supplier or postal service. Recently I got an email from ‘Gadhafi’s daughter’. That was easy to identify but some are very difficult to distinguish.

What is needed is a European wide service for getting an opinion on scams of all kinds on the internet. In Cyprus the police have a Cybercrime unit at 22808200. A platform is being created especially for Cybercrime and details will be on line regarding known  scams. It is planned that these platforms will be established in all the EU member states and that a centralised information system be made available to the public on all kinds of electronic scams.

In times of recession, fraud mushrooms, so take care


Costas Apostolides is chairman of EMS Economic Management Ltd ([email protected]).

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