Reporting fraud shines light on shady tactics
PLASTICS NEWS OPINION
The plastics business seems to attract more than its share of fly-by-night entrepreneurs, plus many more who dance on the edge between respectability and fraud. They“re encouraged, perhaps, by the relative technological ease and low cost of entering the industry, plus the promise of better-than-average growth.
Anyone who has hung around the industry has met these characters. Armed with a patent, an original idea or a bit of slick market research, they spend a lot of time fishing for investors and trying to convince suppliers to sell them machinery, tooling or raw materials on credit.
Investors“ cash may be in short supply right now. But when the economy is soft, entrepreneurs have a bit more success finding suppliers willing to take a chance on the dream. After all, what does it hurt to sell a few machines if the alternative is letting them sit in a warehouse? If the deal doesn“t work out, you can always repossess the equipment and sell them again.
Most of us seem to think we“re pretty good at spotting the bad apples. Usually something doesn“t quite ring true about their previous career experience, or they volunteer wildly unrealistic predictions about the company“s future. Another tipoff is when they get antsy and secretive about answering run-of-the-mill questions.
Still, every once in a while we“ll come across a story about a company that we thought was legitimate but ends up out of business, in bankruptcy or in legal trouble.
When a company does fail, we look back at our earlier stories checking for hints about what might have gone wrong. If our previous coverage had a properly skeptical tone, we feel a bit better about our efforts.
The industry has both informal and formal ways of dealing with would-be cheats: Reporting deadbeats to your circle of contacts and to credit-reporting companies. Both methods are imperfect. Not everyone is eager to disclose when they“ve been bamboozled, and some would-be tycoons are really adept at fooling others. Still, the formal way probably works best.
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