DRC cautions against buyer scams

09/11/2009 01:25:00 PM
Tom Karst

(Web Editor's note: The following article is an extended version of a story appearing in our Sept. 14 print edition, and also expands on our prior online coverage of the story).

Produce suppliers are falling victim to scams in Canada and the U.S., and the Dispute Resolution Corporation issued a warning to the trade in early September to be cautious.

The Ottawa-based Fruit & Vegetable Dispute Resolution Corp. warned scams have been on the rise.

"As we approach autumn in eastern Canada we are again witnessing the emergence and in some cases reincarnation of fleece and scam artists," a DRC news release stated.

"They are destroying the whole market," Fred Webber, vice president of trading assistance for the DRC, said Sept. 4.

"These crooks are very sophisticated and they look really good - they will send out references, they will do all those kinds of things," he said. One scam artist set up sham companies in four different corners of his office to serve as his references.

Some of the same people are behind these scams every year, Webber said, but they use different identities and associates to shield themselves, he said.

While scammers may have a listing in the Blue Book or Red Book, that listing alone doesn't mean they are reputable. Suppliers must check out references thoroughly, he said.

"References you don't know aren't worth much," Webber said.

Webber said the crooks are very sophisticated and will send apparently sound bank and credit references.

There are a number of produce operations in Montreal, Toronto and various locations in the U.S. with connections to Montreal and Toronto who are not members of the DRC nor licensed with the Canadian Food Inspection Agency, the DRC said.

All of the operations appear to be sourcing or attempting to source from produce outside their provinces.

Webber said legitimate operations in Montreal and Toronto are fed up trying to compete with produce brought in by scam artists who never pay their suppliers but dump their produce on the markets.

Webber said the scams tend to happen when local deals in Canada are coming to a close and import volumes begin to rise. Without exception, the biggest scams have happened when suppliers sell to buyers without a Canadian Food Inspection Agency or DRC license.

On rare occasions that scam artists can be forced into bankruptcy, there are no assets left to recover losses. Evidence suggests that some of the scam artists are tied to organized crime in the U.S., he said.

Meanwhile, suppliers - whether in Canada, the U.S., or Central and South America - may have four or five loads to move and be tempted to sell to a buyer without conducting a thorough credit check. In one recent case, a supplier in the U.S. sent 20 loads to a crook on credit and was even convinced to prepay the freight to get it to Canada.

"They need to stop and think about what they are doing. That product is going to wind up on the street competing with accounts that are trying to sell their product," Webber said.

International checks can take as much as 30 days to bounce, he said, so suppliers shouldn't assume that their buyer is good just because they have received a payment.

"The shipping community has really got to make sure who they are shipping to is a legitimate receiver and not someone who has just set up shop to order in loads and not ending up paying for them," said Ian MacKenzie, executive vice president of the Ontario Produce Marketing Association, Toronto.

Scam artists can kill the competitiveness of legitimate operators because they sell produce in markets like Toronto and Montreal with the knowledge they will never pay the supplier.

"They know they will never pay full price, or any price at all, for some of these loads, and then he disappears," MacKenzie said.

MacKenzie said that the trade in Canada is asking for more stringent requirements from the Canadian Food Inspection Agency to make it tougher for firms who want to enter the produce business and receive a CFIA license. It has been over three years since the trade has made that request, and MacKenzie said it is unclear how soon regulations might be changed.

In general, he said that it makes sense for suppliers to ship to firms that are members of the DRC, since the DRC does a better job of investigating the backgrounds of the responsible parties.



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