Iraqi scam swindles suppliers

A sophisticated scam has left some Middle East IT channel players licking financial wounds. Pretending to be an agency representing the Iraqi government, fraudsters employed a middleman to approach IT companies in the Middle East claiming that they were appointing suppliers for massive public sector PC contracts.

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By  Stuart Wilson Published  November 29, 2004

A sophisticated scam has left some Middle East IT channel players licking financial wounds. Pretending to be an agency representing the Iraqi government, fraudsters employed a middleman to approach IT companies in the Middle East claiming that they were appointing suppliers for massive public sector PC contracts.

They then requested money from potential suppliers to secure the deal and promptly vanished into thin air once the funds had been transferred.

Several companies have fallen victim to the scam. The Iraqi agency, pretending that it had been authorised by the Iraqi government to find suitable suppliers, used a middleman based in Jordan to make contact with the unsuspecting victims: IT companies selling or assembling PCs in the Middle East. The Iraqi agency claimed that it had been appointed by the government to assess and select suppliers for the contracts in question.

The agency claimed that the Iraqi Ministry of Education was inviting bids for three large PC tenders of 250,000, 200,000 and 150,000 units respectively — 600,000 PCs in total. Each tender had slightly different specification requirements with one specifying machines with Celeron CPUs, one with AMD CPUs and one requiring Pentium 4 CPUs according to one company that was approached by the middleman.

Using official-looking documents and approaching a number of potential suppliers, the deals quickly became the talk of the channel. And with chatter about the lucrative Iraqi public sector PC tenders emanating from many different sources in the Middle East IT channel, questioning whether or not the contracts were genuine did not cross everybody’s mind.

The agency also involved ex-Iraqi government ministers and attempted to pass them off as current ministers to give the deception an even greater air of authority according to one Dubai-based channel player. Potential suppliers were invited to Jordan to talk to the middleman and meet representatives from the Iraqi agency leading the scam. Once a level of interest had been established, the group then set about stinging potential suppliers and leaving them out of pocket.

They informed suppliers that their bid had been successful, but in order to confirm the deal with the Iraqi government, the agency had to deposit a significant sum of money to prove their commitment to the contract. The agency claimed that it did not have the funds required and asked its chosen suppliers to cough up the cash.

At this point in time, alarm bells started ringing and most players caught on, but unfortunately not all of them. Some potential suppliers, no doubt blinded by the revenue and margin potential of a 600,000-unit PC deal, handed over the money the fake agency had requested. One supplier is alleged to have even started shipping product into Iraq believing that it had won the contracts.

The agency then promptly disappeared off the face of the earth leaving the swindled suppliers with egg on their face and a hole in their bank account. Rather than the usual warning of caveat emptor (buyer beware) that is frequently trotted out, this is more a case of caveat mercator (seller beware).

The bizarre part of this particular scam is that the government tenders in question do probably exist in one form or another. However, the agency claiming to be working on the government’s behalf in fact had nothing to do with them. Channel insiders also claim that the middleman in Jordan believed he was dealing with a genuine organisation in Iraq and was not privy to the deception that was occurring.

Vendors, distributors and resellers need to check and double check the validity of the opportunities that present themselves and the people that they are dealing with. Several companies walked away from this scam when they did not get the guarantees, information or details they required.

This particular scam takes ‘monkey business’ to the next level and is a painful reminder of the pitfalls that can befall channel players without the experience and skills required to spot a con. If a deal looks too good to be true then it probably is, especially in emerging markets. Nowhere is this truer than in the nascent Iraqi IT market.

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