Crooks cook books for computer theft
Where does the onus lie when a deal goes awry? Pieter Preston reports.
In last week's issue, PC Dealer carried a report about threen reports. resellers that fell victim to an international gang of criminals.
Over a period of two months, working from a business address in north London, the con men purchased more than 40 top-of-the-range Toshiba laptops using credit supplied either by the dealers themselves or by finance companies working through industry leasing brokers (PC Dealer, 11 February).
Then they coolly shut up shop and disappeared, leaving a collective bill for more than #100,000 plus tax. Police said the men have a well-documented criminal history and their foray into computer theft is just a drop in the ocean.
Various agencies, including the CID, Customs and Excise and the Serious Fraud Squad are investigating the case.
Exciting stuff. But the real issue is the role and responsibility of the industry leasing brokers and finance companies. In two out of the three cases reported, they checked the authenticity and credit-worthiness of the fraudulent firm and arranged to finance the deals. It now appears that at least two of these groups of companies are unwilling to settle the outstanding debt.
Leasing companies became popular in the heady money-spinning era of the 1970s and 1980s as a viable way for small businesses to adopt new technologies without shelling out large sums of money on investments which promised little or no immediate return.
Two parties are usually involved - the broker, which sets up the deal; and the finance company, which checks the customer's credit and supplies the cash up front. Sometimes funds are transferred directly from the finance company to the supplier once the goods have been delivered to the customer.
The customer then pays the debt back over an arranged period. The funds sometimes pass to the supplier via the broker or leaser. And sometimes, it appears, the funds are not transferred at all.
The experience of Transam Microsystems provides the case in point. When the London-based Var was approached by a man asking for more than #20,000 of laptops on credit, Transam MD Nigel Stride was immediately wary. 'We were not prepared to let that much stock go on the strength of nine months' company records,' he said.
He suggested the man apply for credit through a leasing company. This he did, securing #15,000 from Hewlett Packard Finance via London-based IT Rentals and about #10,000 from Lombard Network services through the Sussex-based broker Chelco. But while the goods were delivered, the funds were not released.
Despite the fact that Transam had been admirably cautious, the banks and brokers checked credentials, promised cash and put the deals into motion, and despite the fact that the goods were delivered on this basis, the dealer has still ended up the loser.
The finance firms claim the full terms of their contracts have not been fulfilled. Attention is drawn to the clause stating that funds are paid out only when notification of delivery has been received from the customer - a little unreasonable when the customers are an international gang of criminals who have disappeared without a trace.
Chelco has avoided making a statement to justify its stance. According to Stride: 'It has gone quiet.' In a single fax, the broker asserts the need for 'independent confirmation of customer satisfaction,' before Lombard can be invoiced. And because no funds have been released, Lombard, which pays suppliers directly on receipt of an invoice, claims it has no official record of the deal on its system, pointing out that it must still be at the proposal stage.
On the other hand, Andrew Newman, MD of IT Rentals, spoke to PC Dealer.
'We are paid the money by HP and we pay it on to the supplier once we have received confirmation that the customer is satisfied with the goods. The situation with Transam is slightly different, but having taken legal advice, I've been categorically told to pay the money back to HP.'
Mark Hayward, European credit manager for Hewlett Packard, said he was not aware of this specific case but added that he did not agree that HP necessarily carries any direct responsibility.
'Certainly from a procedural point of view we would not pay the reseller until the user tells us everything is OK.'
Stride is still hopeful that HP will pay up: 'We didn't think we were taking on any risk when we agreed to this deal. HP is due to make a final decision later this week. That will dictate whether or not I take legal action.'
It may also dictate whether resellers in the future are happy dealing with customers who buy goods through leasing companies.