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The Gray Market
Gray market matters are cases where products are sold in specified areas of the world at low prices--but end up unfairly competing in higher-priced markets.
In one case, a tough-looking mustached chap, said to be an American expatriate living in London, approached a business in a Netherlands city using a Telex reference as his credentials. When the contact attempted to verify the introduction by phoning the United States, he found the sender of the Telex was en route to Southeast Asia. As a result the contact provided the information to the aggressive visitor.
A week later, a clean-shaven, blonde, bespectacled gent casually approached a businessman in Toongabee, Australia with a pricing request. Again, validation of the visitors' introduction documents by the "Old Mate's Network" was impossible. And again, the information sought was provided.
Three days later, seven containers "on the water" were turned around for an immediate savings to the manufacturer of $740,000. The ongoing gray market problem that had cost the company millions of dollars annually had ended.
The investigation involved much more than these two contacts and the unbreakable cover and professional disguising of the investigator. Once the manufacturer detected the presence of the problem, it was necessary to develop leads, establish the identities of the players and determine the methods and techniques used by the gray marketeers in the ongoing conspiracy.
To do this, the investigative agency commenced a "sting operation"--not for the classic purpose of buying stolen goods but simply to obtain information from clandestine sources involved in the shadow world of gray marketing. The investigators opened a full-scale business in a southern state, stocking it with more than $100,000 in goods. The business quickly established its credibility and reputation as a cash buyer of gray market goods.
The investigators developed leads over the next few months and the U. S. players were identified. A critical lead was developed by an undercover investigator when he overheard one side of an overseas telephone call during a visit to a Midwestern gray marketeer's office. The words had little meaning at the time, but eventually other bits and pieces were added and a foreign freighter transporting gray market goods to Miami was identified.
Tracking containers to countries of origin narrowed the list of foreign suspects in the ongoing intrigue. Australian investigator Bobby Coombs developed additional leads "down under" and government agencies, both domestic and foreign, offered further assistance. In addition, the European and Australian pretext contacts by the investigator were timed for periods when it was known the U. S. gray market player would be incommunicado.
Internal Fraud
Internal fraud ranges from "cooking the books" to kickback schemes, nonexistent employees on the payroll, company purchases of nonexistent products from vendors secretly owned by the purchasing authority, and many other activities.
In one case, investigators exposed a layered purchasing scam. The company agent responsible for approving the invoices from one vendor and documenting the vendor's subcontractors' backup was making an extra $ 100,000 to $200,000 a year with his secret ownership of a corporation shown to be a subcontractor to the vendor--and providing nothing whatsoever for its fees.
Detection was simplified as this person had foolishly taken the first three letters from each of his two children's names to form the name of his bogus corporation. In the case, recovery was substantial, running into the low-to-mid six figures.
Another case involved a general contractor who scanned subcontractors' invoices into his computer, increased the charges, then submitted the altered invoices for reimbursement. In yet another internal fraud case, the perpetrators bilked their employer out of hundreds-of-thousands of dollars. They were engineers, who overrode budget controls in the computer System and obtained access to a high quantity of all-expense paid round trips to Japan and other foreign locations, as well as obtaining various kickbacks. These persons regularly took their pay in lieu of vacation. Yet investigators documented their presence in Scotland for a week when records showed they were working overtime at the plant.
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