This article was originally published in Antique Trader
Behind the Gavel with Wayne Jordan
The recent hubbub surrounding William Meloy’s using bad checks to scam antique stores caught me off guard. In these days of electronic check verification, Internet check processing, and point-of-sale terminals that support multiple payment options, I was surprised at how easily Meloy victimized the dealers.
For those who missed the story, the grandfatherly Meloy allegedly spent his summer defrauding antique stores in Wyoming, Missouri, North Dakota and Minnesota before he was finally arrested in Great Falls, Mont. Writing checks on a closed account, Meloy would make purchases in the neighborhood of $1,000 and then re-sell the goods for cash to other antique dealers.
As I read the news reports and listened to comments from the defrauded dealers, the refrain “He seemed like such a sweet guy” dominated the responses. Of course, building trust is key to a con-man’s operation. I’m reminded of the story of Frank Abagnale, the teenage con-man who, back in the 1960s cashed over $2.5 million worth of forged checks before he turned 21. How did he do this? He masqueraded as an airline pilot, a doctor, a lawyer, and a professor as he cashed the bad checks. People trusted him. He had such an engaging manner that a former Houston Chief of Police said: “Frank Abagnale could write a check on toilet paper, drawn on the Confederate States Treasury, sign it ‘U.R. Hooked’, and cash it at any bank in town, using a Hong Kong driver’s license for identification.”
None of us are immune from fraud. Back in the early 1990s, I was victimized by a con artist. We called him “Doctor Bob,” an alleged chiropractor who was in town to buy a well-known restaurant. Within 30 days, he had conned me plus the former restaurant owner, the landlord, the State Liquor Board, his suppliers, the City Police, and about two dozen employees. He left town with a lot of money. Fortunately, I got my property back.
Building trust is also a key element in building a good antiques business. Customers have to trust that you are representing your goods honestly, and you, in return, have to exhibit a certain amount of trust in your customers. So, put a dealer wanting to make a sale and gain a new customer together with a con-man and you have a recipe for trouble.
Con-men are smart to target small businesses, because a small business isn’t likely to have the latest electronic safeguards. Most antiques businesses are decidedly low-tech compared to big retailers like Sears and Wal-Mart. So I wonder: What are a dealer’s defenses against a con-man with an engaging smile and friendly manner? And, are the costs of high-tech safeguards worth the investment for dealers who have had very few issues with bad checks?
The truth is, today’s con artists are smart and technologically sophisticated. Personal computers, scanners and color photocopiers are accessible everywhere. No matter how careful you are, you can be defrauded, and not just by accepting bad checks: The checks you write are also at risk. Blank checks taken from your check book, canceled checks found in your trash, or checks you mail to pay your bills are all useful to a con artist.
Ultimately, all you can do (short of installing an expensive electronic check verification system) is to have a sound check acceptance policy, know the telltale signs of a bad check, and keep track of the checks that you write. Here are a few things for you to think about:
Know what your actual check losses are. If your losses are anywhere near the cost of an electronic check verification system (usually 2 to 3 percent of sales) then your solution is simple: Go electronic.
Set your parameters for check acceptance. Will you have a dollar limit? What forms of identification are acceptable? Will you accept third-party checks or business checks? How about payroll checks?
Know the signs of a “high risk” check. They include:
a. The check lacks perforations. Checks made on a copier will be sliced along the edge; checks from a book will have a perforated edge.
b. The check number is either missing or is low. Most bad checks are written on accounts less than one year old.
c. The font used to print the customer’s name is different from the font used to print the address, or appears to have been written using a typewriter.
d. The check has missing information, like the customer’s address or the bank’s address.
e. Wrong information, such as the check number at the end of the routing number not matching the check number.
f. Stains or discolorations on the check that might indicate washing (using acetone to erase ink)
g. The bank routing numbers are shiny (the magnetic ink used on valid checks is dull in appearance).
h. There are stamps or other markings in the “memo” line or on the back of the check.
Have a camera installed at your checkout counter. Crooks don’t like to have their picture taken.
If your bank offers checks with security features, use them. Recently revised UCC regulations state that if a fraud is committed that could have been avoided by a business using secure checks, and your bank offers such secure checks, then your business must share responsibility for the loss.
When in doubt, do a quick Internet search of the name and address of the check issuer. One of Meloy’s victims did a search after his check bounced, and found out that he was wanted in several states. Had she done the search before she accepted his check, she would still have her merchandise.
There are William Meloys, Frank Abagnales and Doctor Bobs everywhere. Dealers who have a sound check acceptance policy, know the signs of a bad check, and stay alert are less likely to fall victim to fraud than dealers who casually accept checks.
If you’d like to check your vulnerability to check fraud, the website FakeChecks.org has six fun “fraud tests” that you can take, along with fraud prevention training videos and a list of common scams.
Wayne Jordan is a Virginia licensed auctioneer, certified personal property appraiser, and accredited business broker. He specializes in the valuation and liquidation of estate and business assets. His column Behind the Gavel appears monthly in Antique Trader. Learn more at www.waynejordanauctions.com, 276-730-5197 or email@example.com.