International Law

Vending Fraud in Canada

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From the Mississauga News, there is story about a business opportunity fraud

A 41-year-old Toronto man has been charged with defrauding Mississauga and other GTA residents of more than $800,000. York Regional Police say at least three Vancouver residents were swindled by the scam, which ran from the summer of 2007 to the spring of 2008.

Fraud investigators say a man, while operating a company called Business Opportunity Solutions in the City of Vaughan, advertised in local Asian and East Indian newspapers about a small business investment.

The man also set up a satellite office in British Columbia, targeting Asian and East Indian radio and newspaper outlets, police said. He was selling the idea of on-site digital photo developing machines which included internet access. People interested would attend a sales seminar in Vaughan and/or the satellite location in British Columbia, police said.

The unsuspecting victims were then convinced to purchase the machines with the promise that the machines would be placed in specific locations where they can make a return on their investment.

Investigation revealed that the machines were never purchased by the man and the money collected was "diverted to other than business use," police said Xiandong Tony Chen, 41, of Toronto, has been charged with fraud over $5,000 and theft over $5,000.

He'll be appearing in a Newmarket court Dec. 18. Anyone with information is asked to call Detective Constable Gino Benedetti of the York Regional Police Central Fraud Bureau at 1-866-876-5423, ext. 6618

There are a number of interesting points in this story. First, this is a criminal case because the machine were not bought. It should be a criminal case if the machines were bought and the locations were not delivered. Why does it matter whether products or services were not delivered?

Second, notice that the neither the Police nor the Investors have any idea that this investment is covered by the Ontario Franchise Disclosure Act.

Third, the marks here were picked from the East Indian community -- individuals who can put together 10 -20k without too much trouble, and who have no idea about how to vet this particular type of business opportunity.

The $800k for a year is probably a little light - my guess is that the real number is closer to $2 million. But, good for the York Regional Police for pursuing this case. Once they get the bank statements they will be able to determine the full scope of this fraud.

Full post as published by Misleading Advertising Law on November 13, 2008 (boomark / email).