Old scam finds new victims: savvy businesses on guard against check-floating scheme ...(Selected topic)(suggestions to prevent coporate fraud)

While spectacular corporate fraud producing the bankruptcies of companies like Enron and WorldCom grab headlines, a garden-variety business scam, the "bust-out," has been wreaking havoc for years at businesses without the resources--or commitment--to shut it down. Considering how rarely this crime is prevented, the stakes are at least as high.

But there are ways to fight back, according to the National Association of Credit Management, which points to the recent jailing of a bust-out artist to illustrate the pitfalls of careless credit practices and the benefits of working with law enforcement. If companies hadn't been willing to admit being fleeced and devote some time and money to support the prosecution, "there could have been so many more victims," Isabel Mercedes Cumming, assistant state's attorney for the City of Baltimore's Economic Crimes Unit, said.

Fifty-year-old Michael Murray is now serving a prison sentence after pleading guilty to a scheme in which he defrauded suppliers of about $338,000. Murray set up shop in Baltimore as president of two companies he called Easy Access and Char Enterprises. Murray targeted everyday merchandise, from snack foods and soda pop to soaps and fragrances. His victims included distributors unknown to the general public as well as consumer giants such as The Coca-Cola Company and Gillette.

In a classic bust-out, Murray contacted the companies with an offer to buy large quantities of merchandise. The terms: cash on delivery. The suppliers would deliver the goods to Murray's downtown Baltimore warehouse, in exchange for a check drawn on a business account. When suppliers complained to Murray after his checks were returned for insufficient funds, he'd make apologies for the "mistake" and send another check. Often, by this time, another truckload of goods was on its way to Easy Access or Char Enterprises, but subsequent checks had no more crash behind them than the first. The accounts were real, but unfunded.

By the time the suppliers realized they'd probably been taken, Murray had sold the stolen goods at flea markets. The pattern might continue for a while at a given company before Murray would move on to the next.

Murray might be a free man today if he hadn't pushed his luck. Convicted by Baltimore City last year, he was released on home detention on probation--a move opposed by prosecutors--that required him to make partial restitution for the stolen goods. Murray promptly set up shop in the same location, with the same company names and even the same business checking accounts. Another arrest followed and he's been locked up since August 13th.

"You'd think he would have gotten different checks," Cumming said. But even then, the second prosecution depended partly on the fact that one of Murray's last victims, American Hotel Register, contacted the Baltimore City Police, running into thick case files both in the city and in NACM's Asset Protection Group (formerly the Loss Prevention Group), which had been coordinating the case with law enforcement. Companies that documented the crimes and were willing to testify, in a court tar from their own headquarters were also instrumental to the case.