A promo products distributor sustained a $71,000 loss after con artists tricked the firm into providing high-end speakers then never paid for the goods.

The scam followed a strikingly similar pattern to other recent fraud attempts reported to ASI Media by distributors and suppliers around the United States. That’s led some industry executives to believe there’s a well-organized racket that’s aggressively targeting the promo market to get product the criminals can then sell on the black market.

“This is more than random fraud; there’s something bigger guiding this,” said a credit and collections specialist at the distributorship that was conned out of $71,000. “They know how we do business. They’re strategic and organized.”

“We’re aware of at least two distributor customers who have been targeted by fraudsters,” said Peter Hirsch, president of Top 40 supplier Hirsch Gift (asi/61005). “For sure, these are not isolated fraud attempts and there are more instances. They must be trying to hit a lot of others in our industry.”

The Speaker Scam

At the firm’s request, ASI Media is withholding the name of the distributorship that provided the $71,000 worth of speakers. The company, which is based in the Southern U.S., has reported the scam to police.

The credit/collections specialist did diligent post-incident research to unpack the details of what happened. According to that individual, these are the facts of the case:

• The con artist first contacted a sales rep at the distributorship by email in early summer 2022, posing as a real-life client. The schemer was pretending to be Thad Turman, a procurement specialist from Tarleton State University in Texas. The distributor had worked with Turman and Tarleton in the past, so the ask for JBL speakers for a campaign supposedly targeted to alumni didn’t initially seem suspicious. Only there was a slight tell that sadly didn’t raise alarms with the sales rep until after the fact: The email address was marginally different than the actual Turman’s address, ending in “.edu.org” instead of just “edu.”

• The criminal placed three orders for JBL speakers in quick succession, and there were some major red flags that could have indicated the scam. First, only one of the orders was for decorated speakers. The other two – including what was by far the biggest of the three orders – were for blanks. Large-quantity orders of blank goods can be a tell that you’re in communication with crooks. Unbranded products are easier to sell and more attractive on the black market.

Additionally, after being informed of stock issues, the fake Turman was happy to take product in the colors of teal and blue. Tarleton State’s colors are purple and white. Why would the university send gifts to alumni in the wrong brand colors? “Unfortunately, the rep was excited about a large order and these things did not catch her attention,” the distributor’s collection specialist said.

• The purchase orders looked legitimate. The scammer submitted POs that were similar in appearance to actual purchase orders universities use, suggesting a level of sophistication on the part of the fraudsters. There were even multiple sign-offs from supposed Tarleton State employees on the order OK’ing the purchase, thereby adding to the air of authenticity. After the con was discovered, however, the distributor collections specialist compared an actual Tarleton State PO with the fake one – they were clearly different.

“For sure, these are not isolated fraud attempts and there are more instances. They must be trying to hit a lot of others in our industry.”Peter Hirsch, Hirsch Gift

• The con artist instructed that the goods be shipped to a warehouse in Houston. This was another sign that something was amiss, as Tarleton State is located in Stephenville, TX, which is hundreds of miles northwest of Houston. Based on information it has obtained, the distributorship believes the goods were ultimately shipped to Nigeria.

• The email language and voice on the phone were fishy. The distributor noted that in email messages the con artist used phrases that see infrequent use in everyday American-English discourse. “There were these formal phrases like ‘kindly’ and ‘at your earliest convenience’ that are just typically not common verbiage here,” the collections specialist said. Also, the sales rep noted the scammer’s voice sounded odd when talking on the phone and there was a curious delay in their responses. “We believe they were using a translator app to mask their voice,” said the distributorship executive.

• The collections specialist discovered the fraud after contacting Tarleton State University in an effort to obtain payment for the orders. The institution/Turman was in no way involved in the fraud and had no knowledge of the orders. The sinking feeling hit stomachs at the distributorship as the reality of the fraud began to unravel. The distributor said Tarleton State officials shared that it had learned that others of its vendors had been approached with fraud attempts, too. “We think a vendor list might have been compromised, and these criminals have access to it,” said the collections specialist.

Ultimately, the distributor firm is hoping that insurance will cover the cost of the loss. The company is also planning to educate reps more on telltale signs of frauds and put additional checks and balances in place.

“It’s just a horrible situation,” the executive said. “We hope by sharing that it will help others in our industry. It’s going to take all of us – distributors and suppliers – working together to protect against these frauds.”

Con Attempts Proliferate

The case of the JBL speakers was eerily similar to one ASI Media reported earlier this week. In that instance, a conniver posed as Michael Pidcock, an actual procurement pro at Ohio University, and tried to buy 10,000 stainless-steel OU-branded travel mugs from a distributor. Ultimately, the distributor was able to root out the fraud before fulfilling the request. Again, the university/real buyer were not involved in the fraud; their information was just being exploited.

SCAM! The Pidcock caper is afoot again: A con artist posing as Michael Pidcock, a real purchasing manager at Ohio University, is once more trying to dupe distributors in the promotional products industry. A distributor shared their experience here: https://t.co/XznnIczCzO

— Chris Ruvo (@ChrisR_ASI) September 19, 2022

In another instance that happened about a month ago, a distributor in the Midwest provided roughly $60,000 worth of JBL soundbars to what it thought was a buyer for a Florida utility company. In fact, the recipients were again fraudsters.

These crooks were especially cunning: They initially asked for the products to be shipped to the real utility company, but then called FedEx and told the delivery provider that they would send a truck to get the products, which they did – making off with the goods without ever paying. The real utility was not involved in the fraud.

Meanwhile, the distributor in the Southern U.S. that shared the story on the $71,000 con was again targeted in late August. This time, the firm sniffed out the would-be hoodwink. The crook was posing as a buyer from CHG Building Systems Incorporated in Washington state. The schemers wanted Bose speakers and net-30 terms.

While the racketeers provided what was supposed to be a W-9 to appear legit, their reluctance to send a credit application and their desire to pick up the $40,000 worth of speakers at the distributorship’s location in the South – rather than have them shipped to Washington – were causes for concern. Ultimately, the collections specialist got in touch with the real CHG and learned the company was in no way trying to buy speakers, indicating another fraud was afoot.

“Fraud,” said Hirsch, “is reaching a new level in our industry.”