Tuesday, May 28, 2013

Immigrant Business Scam

"I love that Gyro place. What's it's name? Oh hell, it's changed its name 3 times in the last 6 years. Great late night food."

Every city has those quick, take out based restaurants that seem to rotate business owners every 2-3 years. These are usually of an ethnic nature. This specific scam is a good one for immigrants due to the adios factor, but this is for immigrants who will leave America. This involves multiple families, and kinship is a great strengthener for this scam. Having a crooked friendly loan officer at a bank helps as well. The scam:

Step 1- First family (or part of family) leaving America sets up an LLC for a merchandise retail firm. They have an "online business", so no need for setting up a brick and mortar spot for renting. Family #1 collects the different ethnic decorations that the crowd has and sets that up as their inventory.

Step 2 - Second family sets up LLC for the restaurant. Family #2 takes out business loan and signs rental agreement. Biz loans collateral is made up of the decorations, chairs, tables, and kitchen equipment. They use part of business loan to buy marked up decorations from Family #1. Family #1 takes off for home country. Family #2 starts up restaurant, using proceeds from decor sale for first few months of expenses. Family #2 operates restaurant with family as staff. First year is legit with recorded sales covering costs, the rest is 2nd booked tax free money. Second year: pays no taxes, stops paying loans, rent (depends on agreement's speed for non-payment actions), works it until creditors close in, convert majority of cash to jewelry, then vamoose back to crappy country with everyone holding slightly less cash than required amount to declare to customs (or more if you're not scared).

Step 3 - Third family approaches the bank, after the bank has collected back its collateral, and signs up new loan for the business with a lower amount of principal than Family #2. Family #3 also enters into rental agreement with a lower cost (usually) on the space than Family #2 due to the initial recovery of some funds for the original rental agreement. Repeat step #2 for operating the business with their family in place.

Step 4 - If a 4th family is involved, repeat Step 3.

Mortgage loans are not the only loans ripe for fraud and manipulation. These business loans are usually smaller in size and have collateral that can be resold as easy if not easier than a home. A new borrower stepping into the old loan helps the remediation numbers for a bank. The bigger the bank the better (hahaha BofA). There are other tricks to this as well for how to set it up (some business loans can roll rent into them, making non-payment quicker to start), but above is a pretty quick and simple way to put a daisy chain scam in place. Because of the time lag due to a new family taking over and restarting the process, the first family runs out the statue of limitations clock by the time the authorities would consider them a part of the scam if they connect the dots at all. I wouldn't hold my breath waiting for authorities to hunt down missing taxes from one small firm, connecting the dots or going abroad to snatch anyone for thousands of dollars. A friendly loan officer who is paid on loan origination commissions and is open to receiving cash on the side to stay quiet can help. How much does it take to bribe a loan officer that makes on average 50K/year and is paid on commissions? Maybe 5-10K. A gyro place with Mediterranean or Levantine decorations but no country specific stuff is a tip off. Next time an ethnic take out place changes owners and you're waiting for food buzzed at 2am, check to see if the decorations changed.

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