Sino Hero Foods Ltd

Everyday we read about the aftermath of the property bubble in the USA fuelled by ' LIARS LOANS' and the banking crisis and the piles of worthless paper called ' toxic assets'  clogging up the banking system and the Financial 'geniuses' like Madoff and Stanford and more recently Raj Rajarathtram now exposed to be ' billionaires' on the rather dubious web of financial lies, deception, insider trading and outright fraud.

As an Entrepreneur, one has to be constantly on the vigil for fraud. If anything that we can learn from the recent financial scams, it is basically that 'buyer beware' still is the best way forward. All the false sense of security that the authorities and control systems are there to safeguard the little guys interests have been proven to be delusional at best and an even bigger scam at worst with rating agencies, accounting firms, employees and senior management all knowingly or unknowingly fuelling the rise and rise of 'SCAMATHONS' or the never ending Olympics of Fraud.

Unfortunately, we will probably all see a lot more of these for years to come as the financial bubble of the past 15 years works off its excesses. It makes one wonder how much of the ' growth' in the ' Goldilocks' economy was real growth and how much purely driven by fictitious ' ponzi ' scheme type financial system that we will pay for in the years ahead.

Some of the scams that I have observed over the years are;

1. Publically listed companies : Some of the worst offenders as they come with a so called shroud of false complacency that they are subject to more regulation which we have seen is an illusion on more occasions than once begining with ENRON, WORLDCOM etc. Last week a listed company in Hong Kong applied for liquidation afer burning through USD400Million in bonds in past 3 years without any real assets to show for it and after delaying their audited reports for over an year. The amazing part is the total lack of due diligence on part of the institutional investors who bought these bonds with no regard to cash flow analysis.

If any small businessperson ever applies for a loan, we are made to jump hoops to secure a small token amunt but publically traded companies seem ' exempt' from such matters. Too bad for the shareholders too including suppliers who will probably not receive anything back.

Another company is going in for an IPO and over 55 % of its sales are in 'receivables' that are over  130 days so seems the banks will not lend but these guys have no problem acting as ' bankers to their ' customers'. I wish I had some such open ended credit giving suppliers with ' payable when able' terms!

2. Financial investments : I will not delve into hedge funds and other such types as ' sophisticated' investors should know better than to dole out money without asking any questions. But lots of ''opportunities' are  regularly promoted such as ' land banking' in far flung lands without any value. My favourite was a few weeks ago there was a group promoting ' investments in private ATM machines that required a minimum investment of USD20, 000 per machine and a minimum of 5 machinese need to be purchased. At the end of the ' wealth seminar' the  self appointed ' serial entrepreneur' suggested that we could ' book our slot' for USD 100 !! There are enough articles in the news about ATM machines that simply dont exist but investors paid in full for them ! Always ask for actual referals of other investors and check if the scheme is registered with any financial authority and make sure to call them as well as the compnies own offices and ask questions. Sometimes a simple Google search on fraud will give out a wealth of information.

3. Wealth seminars : Another growing industry especially in the current slowdown where many unfortunate people who have lost their jobs are prime targets where they are made to invest in ' businesses of dubious distinction. It sometimes takes the shape of MLM( multilevel marketing schemes) where the 'partner' is made to buy large amounts of goods upfront at usually inflated prices. Usually the warning sign to watch for is the excess emphasis on ' easy money' and ' high returns' and ' control your destiny pitch.' Frankly in my business experience those three slogans easy money, high returns and control of destiny have never co-existed together !

4. Job Scams : Again same principle where the job applicant is asked to pay upfront for' high potential leads' and special job databases and ' counselling' sessions with ' job coaches and a' suite of interview skills. Some surely add value but quite a few are just vultures preying on the weak ! Most reputed headhunters will never ask for payment from any potential employees. Some ' scam companies' also pretend to be ' hiring' and there in an upfront ' security deposit' or charge to fill in application forms.

5. Employee scams : In a bad economy, lots of people are hurting and when people are hurting, it sometimes clouds their moral judgement. Watch your check books and your bank accounts and have another staff or trusted friend if you are a Small business cross check the numbers. I had a situation once where my assistant was forging my signature and taking smaller amounts over a period of time so as to not be noticed till a newly hired young accountant suspected foul play and alerted me. To this day, I do not know whether she was just a petty thief or was getting warmed up for the BIG ONE ! Thankfully I survived to not find out the answer the hard way.

6. Small business scams : If everyone is on the scam, then why not the entrepreneur....

 Sure enough lots of propositions of  great prospect businesses where you can get in on the 'ground floor' ( just before the floor caves in !)

Everything is game from oil exploration in Africa to Mining concessions in Mongolia to Land deals in Dubai and my old time favourite revolving around mad scientist breakthroughs in technology and gaming.

I once invested in a  medical transcription company wherein we had to ' pay up front' to get milion dollar contracts with ' huge margins' except that to get those million dollar contracts we had to buy dedicated proprietary software. Sure enough the software was paid for in cash and the contracts ???? well you are looking at the fool- I, me, myself !

As a favourite quote of mine goes " Do business with strangers as if they were brothers and with brothers as if they were strangers' and ' money scammed is twice as sweet as money earned- make sure you are not the sweetener !'