Million-Scale Fraud via Sham Companies: Detective Agency in Leverkusen Investigates Commercial Fraud Network*

Debtor Tracing Following Fraud by Inducement

A court-enforceable debt title in the six-figure range and total losses amounting to several million – these were the circumstances under which our detective agency for Leverkusen was contacted by a local company. This company had entered into a number of seemingly reputable goods supply transactions with a Mr Loope, who appeared to have a successful track record and numerous well-performing businesses. The client paid the majority of the invoice amount in advance, but the goods were never delivered, as Mr Loope’s company allegedly became insolvent; a corresponding insolvency application did indeed exist.

 

The injured company clearly regarded itself as the victim of a perfidious fraud by inducement, also known as entering fraud. This type of fraud occurs when goods or services are ordered even though the purchaser knows from the outset that they cannot or will not pay, or when payments are accepted for services or goods that one knows will never be provided or delivered. As a service provider, our private detective agency in Leverkusen also has to deal with fraudsters of this kind from time to time when collecting its own receivables, so this is by no means an isolated case. However, the commercial scale and the criminal energy involved in the present case are exceptional:

Commercial Insolvency Fraud via a Thicket of Sham Companies

The objective of the investigations by our detectives in Leverkusen was to locate Mr Loope, whose liability had been established by a court in absentia, as he could not be traced by either the client or the authorities, since all available data led nowhere. The research proved lengthy and complex, as our economic investigators had to fight their way through a network of sham companies. The difficulties began with the name alone, as the internet, police registers and even the commercial register showed various different spellings of both the first and last name for what was obviously the same person, as well as differing dates and places of birth and vast numbers of alleged residential addresses.

 

Our detective team in Leverkusen created a graphic showing the various companies, addresses and further persons linked to Mr Loope. This graphic expanded steadily over the course of the investigations until it eventually covered an area of approximately eleven square metres and resembled a spider’s web, as cross-connections emerged everywhere and were marked accordingly. In total, the overview comprised 78 companies in which the target person was currently or formerly registered as managing director or authorised signatory, 134 company addresses relating to these entities, 69 insolvency applications, 8 individuals who repeatedly appeared together with Mr Loope and were clearly firmly integrated into the activities, six different spellings of the target person’s name, and 27 alleged current or former residential addresses. This research was a mammoth task – firstly the compilation of all this information, secondly its evaluation including the establishment of cross-links, and thirdly the verification of the data.

Physical Verification of the Information Identified

Further measures undertaken by our economic detective agency in Leverkusen included:

 

• On-site verification of all researched residential addresses relating to the target person: Mr Loope had never been seen at a single one of them, and at almost all of them various people had already asked about him on numerous occasions. Nevertheless, these physical checks did reveal or establish various additional company links.
• On-site verification of 36 company addresses (more was not possible for budgetary reasons), preferably those with a high overlap between different companies and persons recorded within the network (33 in Germany, 2 in Switzerland (three further addresses in the letterbox-company canton of Zug could safely be disregarded), 1 in Austria): At none of these locations were there any employees; in most cases they were purely letterboxes, occasionally there was a basement room used as an office, and at seven of the addresses there were no indications whatsoever of the company allegedly based there.
• Verification of 24 addresses of persons linked within the network (links via company shareholdings, signing authorities, activities as liquidators, domain ownerships and others, in some cases also persons related by family ties): At none of these addresses were the individuals sought personally known, although, as with Mr Loope, enquiries had been made there on numerous occasions.

 

Also noteworthy: Despite the criminal characteristics of this corporate construct already being obvious at this stage of the investigations, several of the individuals involved appeared in respectable positions, including chairpersons of cultural associations, supporters of sports clubs, lawyers and a local politician.

Methodology of This Commercial Economic Fraud

The business model behind these massively inflated fraudulent activities apparently relied on the following factors, Variant 1:

• Establishment of new companies for the purported execution of lucrative projects
• Recruitment of investors or customers to procure financial resources
• Silent refusal to provide the agreed services and transfer of the investment sums to accounts of other companies within the network
• Opening of insolvency proceedings | dissolution or deletion of the subsequently over-indebted companies or takeover by the same recurring liquidators

 

Variant 2:

• Establishment of new companies for the actual execution of projects by investors
• Implementation of the projects by third-party companies
• Non-payment of the third-party companies, resulting in claims by those companies against the project companies
• Opening of insolvency proceedings | dissolution or deletion of the over-indebted project companies or takeover by the same recurring liquidators

 

Variant 3:

• Establishment of new trading companies
• Recruitment of customers to procure financial resources
• Deliberate over-indebtedness through non-delivery of paid-for goods
• Opening of insolvency proceedings | dissolution or deletion of over-indebted companies or takeover by the same recurring liquidators

 

Through the corporate links between the individual persons and companies, the company founders and or investors are able to conceal their financial gains from the insolvency assets.

Legend-Based Meeting with the Sought-After Economic Fraudster

After uncovering all these backgrounds, our private detectives in Leverkusen ultimately succeeded in identifying a project company of Mr Loope that was actively seeking investors and provided contact details that were genuinely reachable. Using the legend of business initiation and investment projects, a meeting with the target person was arranged in a medium-sized town in Rhineland-Palatinate, followed by several hours of surveillance in order to determine where Mr Loope lived. Unfortunately, however, he did not lead us to his home, but to a hotel – clearly, the town in question was not his place of residence.

 

Given the scope of the criminal network and the amount of the debt title against the target person, our economic detectives in Leverkusen strongly advised the commissioning company to continue the surveillance of Mr Loope without interruption, even though this would naturally incur high detective costs. Unfortunately, the clients showed no patience, contacted the authorities and had the fraudster temporarily detained. The result: Not only was the target person allowed to leave the police station a few hours later unhindered after providing a false address, but he also claimed to possess no seizable assets and therefore to be unable to satisfy the debt title. Mr Loope was allegedly insolvent and had long since opened the corresponding proceedings. It is conceivable that continued surveillance by our Leverkusen detectives might sooner or later have led to seizable assets such as a villa, vehicles or other physical property, which could then have been seized, provided that no further transfers or other tricks to conceal the true ownership structures had been employed there as well.

What If …

Ultimately, our detective agency in Leverkusen fulfilled the assignment objective of locating the debtor. Nevertheless, the overall outcome was of course not satisfactory, as the individual once again evaded access by the authorities and the client immediately after the investigations, and thus no seizure or voluntary payment took place.

 

In all honesty, it must be said that even with continued knowledge of the whereabouts, successful enforcement of the titled claim would have remained questionable, because firstly further concealment practices were to be expected and secondly many bailiffs (by no means all) unfortunately work more than negligently. Although they are legally endowed with extensive powers and may even forcibly open residential premises to enforce legal claims, these public servants also suffer from the notorious civil servant ailment known as laziness. The more effort required, the more strenuous and inconvenient the day. Consequently, it is sometimes sufficient for a debtor merely to claim that they have nothing if they encounter these black sheep of the profession, as such assertions are not checked by them. When one experiences such events, as we at Kurtz Investigations for Leverkusen have done, and has conversations with absurdly unmotivated public officials, one may legitimately ask whether choosing to combat crime rather than commit it is indeed the more sensible side – economically, certainly not.

All names and locations have of course been completely anonymised in the interests of protecting the client and the target person.

 

Kurtz Detective Agency Cologne

Zülpicher Straße 58D

D-50674 Köln | Cologne

Tel.: +49 221 4558 0377

E-Mail: kontakt@kurtz-detektei-koeln.de  

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