Creating a Fake Reputation

by Mr. Cheap

It’s been a while since we did a scam post.  Fake reputation scams happen on-line and off-line and can be one of the toughest frauds to detect or avoid.

On E*Bay it’s well known that malicious users will build up a reputation by selling small, inexpensive items (paperback books are popular) or by running an honest-to-goodness real E*Bay store.  They will follow through with the transactions and get a large amount of positive feedback.  Then they make a number of fraudulent auctions / sales and not fullfill any of them.

One of the worst (or best depending on your perspective) parts of electronic commerce is you can usually abandon an identity.  This allows the scammers to then start doing the exact same thing again under another name.

Off-line a friend of one of my relatives got burned by the real-life version of this.  He ran a computer business, and started doing business with a man for the first time.  They did a sequence of transactions, each larger than the last.  Each time there would be something unusual about the transaction, but it would work out, and he would get paid.

It turned out the con man was feeling him out, determining what he could get away with, and the maximum order size the friend could handle.  Eventually it was time to pull the trigger and the con-man managed to make off with dozens of computers without paying for them.  It destroyed the computer store owner, who abandoned his business (and his marriage) and basically had a nervous breakdown where he wandered the continent sleeping in the back of his SUV.  He was talking at one point about trying to hire a hit man, which luckily friends talked him out of.

Since these sorts of scams work by gaining our trust, there’s no sure-fire way to prevent it other than to be suspicious of everyone (which would cause its own problems).  When the friend who got conned was relating the experience to me, he remembered clearly that with each deal it seemed a bit funny.  It can be a hard thing to say “no” to someone, or to admit that we don’t understand a deal that’s being proposed.  Some people will prey on this reaction to try and take advantage.

When I was trying to rent my condo, a man showed up who was interested in a rent-to-own and we talked about that extensively (he was going to do a sandwich lease where he rents-to-own from me, then rents to his own tenant).  Discussing the details, he was very accommodating (and tried to buy me dinner).  Later, he tried to change elements of the deal that he had previously agreed on.  When I pointed out that what he was saying was different than what he’d previously agreed to, his response was “I have to admit I love the way you think , very detailed too detailed at times , just kidding” (notice that in the same sentence he’s complimenting me, then telling me that I’m “too detailed”).  He told me about 5 times that he didn’t think we should involve lawyers in the transaction (and I told him 5 times that I’d be involving a lawyer in the transaction and encouraged him to do the same).  Throughout our interactions, he also told me repeatedly how much he liked me (while it’s true that I *AM* a very likable guy, it’s just creepy to say it out loud).  I kept asking him questions and he eventually told me it was “none of my business” (when I’d asked him who he was planning to rent to).  This was enough red flags for me at that point that I just killed the deal and kept looking for a normal tenant.  I could be wrong and maybe everything would have worked on with the rent-to-own guy, but I hasn’t regretted for 1 second walking away from it.

Years ago when I went backpacking across Europe an aunt told me to trust my feelings and if I was getting a bad vibe about a person or situation to just leave.  I’ve found it was good advice when traveling, and is probably good advice for business and life as well.  There are times when you’ll be nervous about a deal, just because it’s larger or different than you’re used to.  But if you’re honestly getting a bad vibe about doing business with someone, make sure the safe-guards are in place that they won’t be able to “take the money and run” (and don’t be afraid to just not do business with them if they fight you when you try to put those safe-guards in place).

Have you ever had someone gain your trust, then steal from or defraud you?

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{ 9 comments… read them below or add one }

1 Mike

I don’t recall ever being scammed – although I did almost get taken in by one of those crooked energy resellers .

while its true that I *AM* a very likable guy

What’s there not to like? 🙂

Are you sure he wasn’t just trying to pick you up??

Seriously – something seriously wrong with that deal. You made the right choice.

The whole rent-to-own thing doesn’t seem like a good thing to do. It’s kind of like mixing insurance and investments in one product (seg funds, whole life insurance). There just isn’t any need to combine it (and make it more confusing).

If you want to rent then rent. If you want to buy then buy – if you can’t afford to buy then rent until you can.

It destroyed the computer store owner

Your relative’s friend sounds a bit odd – while I would be undoubtedly frothing at the mouth for a while if that happened to me, I don’t think I would abandon society.

2 Mr. Cheap

Mike: I agree with you on each point. I stayed engaged with the guy (kept talking to him) FAR longer than I probably should have. It definitely smelled funny.

I’ve given up on the rent-to-own thing as well. It’s an interesting concept (and great from a numbers perspective), but there are too many ethical and legal pitfalls with it.

My relative’s friend definitely was an odd guy. Would you hire a hit man? 😉

3 Potato

I ran into a seller on ebay who apparently was using alternate identities to bid on his own auctions — the same rare, out-of-stock old computer parts kept coming up for auction every few days, and if he didn’t hit $80 or whatever it was, magically the same guy would keep buying them…

http://xkcd.com/325/

Rob: Sometimes, I think the opposite: that the internet is revealing the holes in our trust-making decisions, making us more savvy in the real world. To quote Douglas Adams:

“Of course you cant trust what people tell you on the web anymore than you can trust what people tell you on megaphones, postcards or in restaurants. Working out the social politics of who you can trust and why is, quite literally, what a very large part of our brain has evolved to do. For some batty reason we turn off this natural scepticism when we see things in any medium which require a lot of work or resources to work in, or in which we cant easily answer back — like newspapers, television or granite. Hence carved in stone. What should concern us is not that we cant take what we read on the internet on trust — of course you cant, its just people talking — but that we ever got into the dangerous habit of believing what we read in the newspapers or saw on the TV — a mistake that no one who has met an actual journalist would ever make.”

4 Four Pillars

Another example might be authors/publishing houses that create fake positive reviews on the book’s Amazon page. This is obvious when it’s a new book with several glowing reviews and all the “reviewers” have only done one review each.

Not to mention any names or anything…

5 Mr. Cheap

Potato: Great quote! That’s one of my favourite xkcd cartoons too.

Mike: 🙂

6 Thicken My Wallet

When someone says to be “I am a trustworthy person”, it immediately provokes the opposite reaction in me. Why are you telling me this out of the blue?

7 Shevy

I did do a rent-to-own once that was kind of weird. I wanted to sell my condo when I remarried and ended up doing a rent-to-own with a guy who had a company that then found people who wanted to buy but couldn’t (poor credit rating, self employed, etc.).

The day after I did the deal I went with my father-in-law to fix the garburetor because I knew it wasn’t working. We got there and the locks had all been changed. So, I called and the guy told me not to worry about fixing it and that the tenant/buyer had done the locks.

I was a bit freaked because I still owned the place, after all, and would for a maximum of 5 years under the agreement and I was kind of spooked about not being able to get in. But I had a pile of post-dated cheques and they all went through fine each month. Then, the apartment 2 floors above mine was rented out to someone who put in a grow-op and there was a fire and the water damage was huge. The tenant/buyer just walked away from the deal and so did the company I was doing business with. (Probably a good call, since it took a *year* to get it back. Thank goodness for insurance.)

I went to the place the day after the fire, got to walk through the grow-op, which was the identical layout to mine and couldn’t believe how many *hundred* plastic pots were in a less than 600 sq. ft. place! (Police took the plants, left the pots and the dirt.)

I went to my own place and of course, had no trouble getting in since the firefighters had broken in the doors to several suites. It was a ruin, but it was 100% empty. Nothing. No furniture. No clothes. Nothing in the fridge. Everybody else was just getting back into their places to take out stuff in garbage bags (soaking wet clothes, papers, etc.) so I couldn’t imagine how the guy had cleared everything out so quickly.

Just weird all around. I tried to rent it out “normally” after it was repaired and we couldn’t find a tenant that wasn’t strange or didn’t raise huge red flags so we moved back in and eventually sold it a couple of years ago.

8 Mr. Cheap

Shevy: thanks for sharing your experience with rent-to-own! Did you make good money while the tenant was in it? Were the post dated checks from the tenant or the company intermediary?

9 Shevy

I made maybe $100 per month more than I would have made if I’d just rented it out and, if we’d gotten to the point where the guy actually completed the sale, my mortgage would have been fully paid out with at least a few thousand over (the exact amount extra would have varied depending on when in the 5 year period it occurred). At that point I was slightly upside down on the mortgage and the market wasn’t that strong.

Of course, after that, the market shot up and I ended up doing *much* better financially by selling it when I did. But, when I first signed on, it was a good deal.

The cheques were from the company. In case anyone was wondering, the company made their money by both requiring at least a couple of thousand dollars down to start from the tenant/buyer and by charging him more than they paid me (although I understood it was a fairly small differential, under $100/month).

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