Possible fraud cases
The fraudulent practices described below are real-life cases. We recommend reading about them before you make any purchasing decision.
This article was written following a series of incidents. A number of companies contacted us after buying “overly cheap” or “excessively expensive” polyurethane foam spraying equipment.
The cases of overly cheap products have been described in another article. Here, we will put the spotlight on the most sophisticated type of fraud out there.
There are a number of fraudulent practices involving the sale of spraying equipment that we know of, including the so-called “grant fraud”, also known as “piggyback fraud”.
As you know, a number of opportunities have recently come up with respect to raising funds for equipment purchase in the form of subsidies and grants.
The line of thinking of potential buyers, who often have no experience in our business whatsoever, is as follows: with a grant, I can buy a piece of equipment at only 50% of the original price, so it’s best to buy the most expensive product with highest hydraulic parameters. The client makes the assessment based on the technical parameters and the price quoted by the seller.
The buyer will also consider the country of origin to decide whether the product is worth buying. It is a common belief that a machine made in Australia, Japan or in Poland is better – even if more expensive – than a product made in China.
Although most Europeans buy products made in China on a daily basis, even those carrying the logos of world-famous brands, they will still subscribe to the view that Chinese goods are “junk” by default.
Of course, there is a grain of truth to that, as there are Chinese products of very poor quality in the market (for more details, see our article on “Overly cheap Chinese products”). On the other hand, however, there are also products of top-quality brands which are also made in China.
As potential buyers, you need to be aware that the grant fraud is meant to mislead the client as to all parameters of the product.
Among other fraudulent practices, we encountered the type of a fraud where the seller would offer products (both online and in store) with fake nameplates – replacing “Made in China” with “Made in Australia/Japan/Poland/Germany” etc. The product with a counterfeit nameplate was then put up for sale in an online store at a price four times higher than its market price.
For example, a “Made in Australia” machine was offered for sale at around EUR 29000, while its purchase price was as low as EUR 5300. In this way, the client was led to believe that the product was of superior quality.
Of course, the seller would praise the quality and features of the product to the skies, while in reality it was a rather poor-quality product made by one of the many manufacturers out there.
Moreover, the attached CE certificate was also counterfeit – such certificates were issued by companies based in the Czech Republic or Slovakia (both real and sham businesses, such as pizza restaurants, grocery stores, and the like). Issuance of a counterfeit CE certificate constitutes a punishable offence, but you probably know by now that fraudsters know no limits…
At this point you probably think it’s the end of the story. But you couldn’t be more wrong.
Sham companies would invite buyers over and persuade them to sign a sales contract (often along with the agreement whereunder the company was to arrange grant-based funding for the client).
It all sounds like a great bargain – the client is to pay 50% of the price, and the remaining amount will be arranged by the counterparty in the form of a grant.
So the client signs a contract for the purchase of equipment under the condition that the counterparty will arrange a EUR 29000 grant. The client then pays half of that price, i.e. EUR 14500.
The company indeed arranges the grant – the client obtains the financing for the remaining EUR 14500, and the total amount of EUR 29000 is received by the counterparty.
Within the agreed time-limit, the company delivers spraying equipment to the client, who starts working with it… and the machine quickly breaks down and fails to deliver any value.
The client sends complaints to the company, but to no avail. Unfortunately, to repair such machines, you need both technical knowledge and specific spare parts. The client ultimately realizes that the machine is of very poor quality and should not cost no more than EUR 5300. In the end, the client decides to return the product.
The seller would then send invoices for repair services, demanding exorbitant fees (even though the machine should be covered by a warranty). The client requests a refund of the price paid… and it is only then that the client comes to the realization that it fell victim of a fraud which will cost the total of more than EUR 58000 – all in keeping with the provisions of the grant agreement!
Dear Clients! Any beneficiary of a grant must satisfy the conditions of the underlying grant agreement – if the client is unable to use the machine for the intended purpose, it will have to return the funding to the financing institution, together with contractual penalties.
If you purchased the equipment and later returned it to the seller, you would need to recover EUR 29000 (which, to the best of our knowledge, is impossible to recover from the fraudsters), and then pay back another EUR 29000 to the financing institution (with additional contractual penalties).
To sum up, you would spend EUR 58000 for a piece of foam spraying equipment which is not working, sold by a fraudulent company together with all those great stories about the capacity, flows, experience, Australia, Japan, the USA, Czech Republic, Poland, and parts of the system made in Germany…
Please choose wisely. Do not buy over the phone. Visit the seller’s premises first, see for yourself whether the seller is actually involved in the manufacturing process, whether it has production machinery and is able to present client credentials. Otherwise, you run the risk of losing a lot, if not all…
We do hope that this article will help you steer clear from such business “partners”.
With best regards,