Beware of Disaster Fraud Schemes

In light of the recent flood disaster to hit Colorado, I thought it would be a priority to write this month’s newsletter on the unfortunate fraud schemes that are already happening due to the disaster. Fraudsters do not have compassion or empathy with any of their victims. Their sole purpose is to get your money no matter how they do it and they don't care who they hurt along the way.  For the fraud victims it is a very personal violation and often times very hard to get through.
When a disaster hits, fraudsters come out in full force in many different ways. Depending on the disaster itself it lays a path on what kind of opportunities the fraudster will have to gain access to your money. Because this flood has destroyed thousands of homes throughout the front range and mountain areas of Colorado, construction fraud is going to be on the top of the list to watch out for. Whether you were a victim of the flood or you have a family member or friend that was directly affected, it is important that you - or they - are able to think clearly when entering into a contract to repair the damages.
In the construction industry, it is common to get a deposit to start work. This secures your scheduled start date as well as allows the contractor to begin paying for expenses relating to your job. The amount of the deposit is crucial for red flag warnings. Contractors will generally request a deposit of 1/3 of the total contract price to start a job.  Other states vary based upon state imposed regulation so make sure you check with your state.  If you have been contacted by a contractor that is requesting a substantial deposit to begin work, don't pay them anything, don't sign anything and run for the door.  If you feel that your contractor is legitimate, get a third party to review the terms of the contract and help you research the company in full before you hire them.
Some tips for hiring a contractor:

• Get at least three estimates
• Get referrals and actually call on them
• Check their license with the city or state
• Check the Secretary of State for their registered business
• Ask for a copy of their insurance (make sure they are insured)
• Insurance should be a bond as well as liability
• Don’t sign a contract if you are pressured into it
• Don’t pay a deposit of more than 1/3
• Don’t pay them in cash
• If they accept credit cards ask to pay the deposit in the form of a credit card. If they don’t follow through on the work you can get a charge back from the credit card company.
• Find out who their sub-contractors are on your job. Get their names, phone number, mailing address and make sure they have the proper license and insurance as well.
• Any payment you make to the contractor as progress payment on the job MAKE SURE the sub-contractors are paid and you get lien releases from the subs and the general contracor for progress payments. If you paid your contractor $50,000 for a job and he didn’t pay his sub-contractors they could file a lien on your house even though you paid the general contractor in full. If your contractor has a problem with this, pay his/her sub-contractor directly or hire a different contractor! Lien releases need to be all inclusive on anyone including the main contractor who worked on your job.
• Get a written contract. Make sure it includes the complete detail of the repair or construction work to be performed, the estimated start date, the estimated completion date as well as the total contract price.

Construction and repair fraud isn’t the only one to watch out for. Scammers are burning up the phone lines as well as the pavement looking for donations to their non-existent charities. Make sure you do your homework when donating to any charities.

• Don’t donate to a charity you have never heard of
• Research the charity before you donate
• Call your local police department to ask them if they have had any complaints from an un-known charity
• If you receive a phone solicitation DO NOT give your checking account information, credit card number, social security number or any payment over the phone!
• Scammers lie, that is what they are good at.  They pretend they are the Red Cross even the Police Department or Fire Department.  Don't fall for it and if you are unsure, hang up the phone and call the actual company they are claiming to be so you can find out if they are actually trying to get donations
• Door to door scammers not only can try to scam you out of money by having you donate to bogus charities, they also have been known to "scope" out your house for valuables and return at another time to rob you.  Don't ever let a door to door solicitor in your house!

You can contact the Better Business Bureau’s Wise Giving Alliance at www.give.org to look up a reputable charity.

You can also contact the Disaster Fraud Hotline at 866-720-5721 to get more information or file a fraud complaint.  
Be on the alert while we all are recovering from these devastating floods.  Anyone can become a victim of fraud and the last person that needs that additional stress are those who just lost everything in a flood.

Julie A. Aydlott, CFE
970-776-8395

Business Fraud Prevention, LLC