Internet scam: Long Island company recovers from foreign criminals' fraud

November 28, 2014 by VICTOR OCASIO / victor.ocasio@newsday.com

For two months this summer, a small company in Ronkonkoma that resells surplus electronics struggled to find and retrieve a big shipment it made to Internet criminals in Lagos, Nigeria.

What started as a seemingly legitimate $28,500 sale of hard drives by Triangle Electronics Group Inc. turned into a gut-wrenching lesson in how sophisticated Internet scams have become.

"I was sick to my stomach," Triangle Electronics controller Jim Weis said, describing the moment when he realized his company had been duped. Triangle's search for the lost product, which began on Google, expanded to include the DeKalb County Police Department in Georgia, the FBI and Nigerian freight deconsolidators.

The scam, a type the FBI calls a "purchase order fraud," is one of the newest concoctions of West African Internet criminals. It's designed to trick U.S. companies into shipping goods indirectly to Nigeria, where the goods can be stolen and fenced. The FBI estimates that about 250 U.S. companies have been scammed in this way, amounting to roughly $5 million in lost goods.

Small companies, which lack strong security departments, are particularly vulnerable to the growing sophistication of Internet criminals, experts said.

"They're generally more at risk because they don't have the systems in place that the larger companies do as due diligence is concerned," said Robert Siciliano, security expert with TheBestCompanys.com, a website that ranks software security providers.

And small companies make up the majority of Long Island's business community. Of the Island's 95,000 businesses, about 90 percent have 20 employees or fewer, according to 2012 census data.

Triangle Electronics is one of those smaller businesses. Founded in 1984 as an independent distributor of electronic components, it grew in the 1990s by reselling surplus computer chips, hitting $30 million in sales in 2000 and an employee count of 55, said Chris Cooper, founder and president.

However, since then a sharp increase in counterfeit electronic products and the Great Recession exacted a toll. Today, the company averages about $2 million in annual sales and has 10 employees.

NOTHING SUSPECT, AT FIRST

Triangle's Nigerian troubles started with an email sent to the company's sales department on May 8.

The sender, identifying himself as Daniel Wagner, procurement and contracts manager for Whirlpool Corp., requested a price quote on 200 Western Digital brand external hard drives. For Triangle Electronics, hard-drive sales are an infrequent but not unheard-of order, said Edward Vuolo, who retired as vice president in September. Wagner's communications were grammatical and articulate.

Triangle sent its quote -- about $140 per unit. On May 13, Wagner sent a professional-looking purchase order.

"We said, 'Thank the Lord we have a really nice order,' " Weis said. "We don't get these every day."

"Sales had been flat for roughly a year or so," Vuolo said. "Any additional orders from a new customer would be an exciting thing."

The emailed documentation came complete with corporate logos, addresses, phone numbers, banking information and properly formatted credit references, so nothing appeared suspect about the order Triangle received from the Benton Harbor, Michigan-based appliance giant.

The buyer requested 30-day credit terms for the payment of the goods, and given Whirlpool's reputation, Triangle agreed.

"When you do business with a company like Whirlpool, you're not going to question their credit because they're a multibillion-dollar company," Vuolo said.

But extending credit was Triangle's critical mistake, Siciliano said. "When credit was granted in the past, there were formal personal relationships involved. Now the documentation required to gain credit can be forged. Every single bit of it."

'SOMETHING WASN'T RIGHT'

Triangle purchased the drives for resale from CDW Corp., a computer hardware distributor. Email communication with Wagner remained consistent and even cordial leading up to the shipment of the hard drives. Triangle shipped 199 hard drives on May 20 -- one wasn't shipped because of damaged packaging. Two days later, the drives arrived at the address on the purchase order in Decatur, Georgia. Everything seemed to be going well, and within 30 days, the company could look forward to a sizable payment.

A week later, something unusual happened: Triangle received a second order from Whirlpool for the same product.

The company got another request "from the same buyer at Whirlpool looking to order 400 drives," Vuolo said. "At that point, a little lightbulb came on, and we just felt something wasn't right."

Curious about the facility where the previous order of hard drives had been shipped, Triangle's sales manager ran a Google search on the address. The image he showed his colleagues came as a shock.

"This is a Whirlpool location?" said Weis, describing the small storefront along a rural Georgia road that the search revealed on May 30.

The delivery had been made to a storefront at 5026 Snapfinger Woods Dr., belonging to Keeping It Moving, a Decatur-based notary services provider.

Frantic, Vuolo called the phone number listed on the original purchase order, and when he asked for Daniel Wagner, the person on the other end hung up. Triangle never heard from Wagner again.

"It was a fictitious name," Weis said.

Triangle Electronics contacted all four businesses listed by Wagner as references. None had ever done business with him. The bank account was no better, Weis said. A bank employee told him that the account contained less than $100.

After failing to get Wagner on the phone, Weis called Keeping It Moving Notary Services. After a short, fruitless interaction, Triangle immediately notified the FBI and Georgia police.

The woman who signed for the packages in Triangle's case is believed to have unknowingly assisted in the fraud, according to a public information officer with the DeKalb County Police Department in Georgia. Officials said she had been in contact with Wagner for about a year and had an online-only friendship with him. The case remains open, and no arrests have been made.

Using tracking numbers and shipping orders, Weis followed a trail that led up the coast. "When Jim got on the phone with people, he almost sounded like he was an investigator from the police department," Vuolo said.

The hard drives were first picked up by JND Trucking of College Park, Georgia, on May 23 before being taken to Towne Air Freight in Atlanta. From there the products were sent to A2 Global Shipping, a consolidator and freight forwarder in Romulus, Michigan, on May 27.

After talking to A2 Global on June 3, Triangle filed a status fraud hold on the shipment. But the hard drives were already sitting in a shipping crate in Nigeria. Weis said he almost had a heart attack when he heard the news.

"Once the merchandise has been shipped to Nigeria, it is nearly impossible to get it back," FBI Special Agent Joanne Altenburg said in a public notice about purchase order fraud released in October.

'DIVINE' HELP, AND NEW POLICY

Despite the odds against success, Triangle Electronics desperately sought to recover the shipment. Each day for almost two months the company checked on the status of its goods.

Gradually, the company made progress. Triangle's five boxes were found in Lagos, Nigeria, in a consolidated shipment of more than 142 boxes. The hard drives were pulled aside, inspected by customs and reconsolidated for shipment back to the United States.

It cost Triangle roughly $1,800 to have a Nigerian shipper send the products back to A2 Global, Vuolo said.

Weeks went by, and Triangle copied the FBI on every email exchange it had with A2 Global.

Finally, on July 25, the shipment made it back to Long Island. The boxes arrived in good condition -- minus four hard drives. Given that the company could have lost substantially more than $20,000, Vuolo said the actual loss was negligible.

FBI officials "are amazed that we even got this product back," Vuolo said.

Siciliano agreed: "That's nothing short of divine intervention."

Although Triangle was able to send the drives back to CDW for a refund, the experience has drastically changed the way the company does business.

"Every new customer will be put through the wringer," Weis said. "If you want to order from us, you're going to pay up front."

< back to article