With a very competitive core market, it can be easy to get scammed if you don’t do your homework on new contacts and clients. Several pallet recyclers and trucking firms in the Midwest, East Coast and Southeast are finding this out the hard way.
Over the last two years, more than a dozen pallet companies have sent loads to a man from Chattanooga, Tenn. who allegedly is buying pallets under false pretences and does not pay the bill.
Despite receiving publicity in the industry and on the Web, the man continues to operate. Recently, he has targeted companies in Wisconsin and New York.
In 2004, the man was working under the name Bob Harris of Cherokee Distribution. Now he is working under the name Larry “Bo” Harris of Southeastern Warehousing, Inc. according to Larry Miller-Bopp of J.C. Pallet in Barhamsville, Va. He has hit companies in Illinois, Iowa, Wisconsin, Ohio, Virginia, New Jersey, New York, Pennsylvania, Kentucky, North Carolina and Maryland.
Our staff first reported on this scam in the September 2004 issue of the Recycle Record. Glen Atkinson of Southland Manufacturing Co., Bowling Green, Ken., first alerted us to this questionable operator.
Pallet Scam 101
The scam typically works like this. Mr. Harris and/or a female accomplice will call various pallet companies claiming they work for Southeastern Warehousing or Cherokee Distribution in Chattanooga. Sometimes a female will call first asking for price quotes. In other instances, the only person who called was Mr. Harris. He claims to have trucks in the area and would like to back haul pallets to his facility. He is looking to buy pallets to use in his distribution business and says that he can source pallets cheaper from other markets. Then he sends over false information including a fake federal ID number, phony address, etc.
When the pallet company agrees to sell the pallets for the negotiated price, Mr. Harris then contracts with a trucking firm to pick up the pallets. The trucking firm delivers the pallets to a recycler that buys the cores from Mr. Harris. Sometimes the trucking firm changes the bill of lading ticket if necessary to accommodate the particular situation. Then Mr. Harris stiffs the original pallet provider and typically the trucking firm involved in the shipment.
Tina Montgomery of Pallets & More, Columbus, Ohio, said, “Here’s our problem as a pallet company. We go out and look and look for new business. When that phone rings and someone is calling you, you get excited when you get growth that you didn’t have to go out and beg for. That is why all of these companies have fallen for this guy.”
Glen Atkinson said, “As primarily a new pallet manufacturer, a load of used pallets was not that big of a deal at the time. This had never happened to us in the past; we sort of just let it slip.”
It appears that Mr. Harris may even have one or two people copycatting his approach. A number of pallet companies in the Midwest, especially Ohio, have reported other people using similar tactics. Our staff has been unable to verify those claims at this time. But as soon as we have more evidence, we will notify the industry of any companies participating in fraudulent practices.
One thing to be careful of is companies using the names of other recognizable players as a way to develop a false sense of credibility. Just because a company claims to work with a company that you know, don’t take the contact’s word for it. Check references and be sure that new contacts are indeed credible.
Crossing Multiple Jurisdictions Complicates Law Enforcement
A pallet company in North Carolina that sent five loads before realizing the new account was a bogus buyer explained how it was easy to get tricked if you did not do effective screening. With Mr. Harris demanding immediate delivery and the typical terms of net 30 days, it was easy for him to get a number of truckloads before any red flags were raised.
Mr. Harris keeps on working different areas of the region which gives him new targets that are not aware of his previous business dealings. Tina said, “He has a southern charm that you fall for. He has a personality that sucks you in. He’s jovial and funny.”
The police have been unable to do anything at this point because these transactions have crossed many jurisdictional lines and involved companies from numerous states.
A representative of the North Carolina pallet company mentioned earlier said, “The hiccup is that the guy conducts business in Tennessee, he will purchase the pallets in say North Carolina and sell them off in South Carolina using a trucking firm from Virginia. It was the jurisdictions that were making it difficult for the authorities to come after the individual. Nobody wanted to handle it.”
The case has been referred to the federal authorities. But it is the responsibility of every company in the industry to practice due diligence and proper screening procedures for new accounts.
Learning the Hard Way
All of the companies interviewed said that this had been a learning experience that had changed how they do business. Tina said, “As a pallet sales person, you can no longer be excited when that unknown company calls. If it isn’t a name that we all know, you’d better cover yourself by doing some kind of research.”
Screening and research approaches vary depending on how much the pallet company wants to spend. Some are running credit checks on new customers. Others do their own informal check by contacting the Better Business Bureau or the local chamber of commerce. Asking new customers to fill out a credit application complete with credit references and bank information is common for some recyclers. Then call to verify the information is correct.
Doing some basic Internet searches on Google.com or Yahoo.com can help you get information on a new client. You can verify the address using various online lookup services.
While some pieces of information may be necessary or good to collect, it may not do you much good if the person provides fraudulent information. A perfect example of this is the federal tax ID or Employer Identification Number because the Internal Revenue Service will not verify its authenticity.
If someone calls eager to buy pallets and you don’t know the company, don’t risk getting stuck with bad debt to collect. Do your homework because there are people out there making a living off those who don’t properly screen new accounts.
