FENCE SCAMS PONZI SCHEME #1
FENCE SCAMS – INFAMOUS PONZI SCHEME!
BERNIE MADOFF DID IT BIG TIME, OUR LOCAL “BUSINESSMAN” WAS PEANUTS BUT STILL MANAGED TO SCAM VENDORS AND HOMEOWNERS FOR OVER $100K!
I saw this one myself about 10 years ago as several homeowners contacted me for assistance after they had been scammed by a local fence installer turned businessman! It started out innocent enough, he had great intentions to do wonderful work. His just knew his boss was getting rich, he saw all the jobs under construction, all the money rolling in, but he was only getting paid labor rates and doing all the work. Off on his own to start his own fencing company. In the beginning, business was great! He knew how to install fencing, and he undercut everyone else’s prices, after all they were too high! He bought a large ad in the phonebook to boost sales. He needed a new truck to work out of, so he bought one of those on credit. He added a couple of employees but never took out for their taxes.
With the cost of truck payments, phone ads, insurance costs, and labor costs AND MATERIALS to do the jobs, he wasn’t making the money he thought he would. He had plenty of work, but there wasn’t enough profit to pay the bills and leave some for him.
HERE’S A SOLUTION: stop paying those pesky advertising bills every month, and those insurance payments…no one ever gets hurt on the job. Order a lot of material from vendors and be slow to pay them down. Skip a couple of truck payments. Bounce a couple of laborers checks. More money was coming in, but he was still way behind in the bills.
THE NEXT SOLUTION: dropping the prices on jobs created lots of new work. As he began taking hefty deposits from customers he would use that money to pay the previous months materials invoices. As long as the jobs keep rolling in he would just use the deposits to pay suppliers enough to keep them satisfied, after all he was a business man now, they owed it to him. Sound familiar? Bernie Madoff did the same thing, using money from Peter to pay back a little interest to Paul and keeping the rest for himself. The house of cards eventually falls when you run out of fresh customers. This local “fence business man” skipped out on 17 homeowners that I know of, and hit up several material vendors for over $100,000.00. As far as I know, money has never been recovered… as a side note he opened up again six months later under another name and pulling the same tricks as before.