​”Trust…but Verify”

One day, a colleague referred a potential client to me and I contacted the prospective client. The time difference dragged the negotiations on longer than normal but rates and work were eventually agreed upon. This was supposed to be a simple contract for sale of industrial equipment from a foreign corporation to a U.S. based company through a U.S. based broker.

My firm was asked to act as an earnest money deposit holder on the transaction and to do all work on the transaction until
closing. The client was somewhat antsy to get this deal done (Yellow Flag). I verified the client and his employer that the receiving company were legitimate. The client’s company had large legal department but was not interested in using them for this transaction (Yellow Flag).

Client emails me and says “buyer is in a hurry to close deal” (Red Flag). Mind you that the Industrial Equipment is located in United States. Communication with buyer comes mainly through the client except for one email saying, “the cashier’s check is on the way via overnight delivery along with instructions to take my fee out of the earnest money deposit.” Overnight doesn’t arrive, and I request tracking info, and get no response except that the broker states the package has arrived. (Red Flag)

Next day, the client sends only a partial screenshot from the package tracking information that says that the package has arrived

(Red Flag). Then, I get together with my staff and we find the package. I take the package and cashier’s check to the bank, but before I deposit the check, a little intuition whispers in my ear, so I call the bank that the check is drawn on – what do you know – they say it’s a fake (RED FLAG). I notify the client and send him copies of all materials received and await further instructions. Client sends no immediate response (RED FLAG). I wait a couple of days and email client again and client responds, “I’m looking into it and will get back to you.”

At last check it has been three months since last communication with client.

Lesson learned: “Trust but Verify”

Global/Inter-national Practice Tips

1. Work with people you have established relationships with;
2. If working with people you don’t have established relationships with ask for references;
3. Verify who your client is and what organizations they represent;
4. Get specific instructions on what you’re being asked to accomplish for the client;
5. Make sure your retainer specifies what currency you wish to be paid in;
6. If the proposal is beyond your level of expertise don’t be afraid to walk away or associate yourself with someone who has more experience in this area;
7. Take time difference into account when estimating completion dates for work;
8. When negotiating payments insist on wire transfers;
9. If client insist/sends cashier’s check verify with bank that check is drawn on that it’s authentic;
10. Trust your gut and pay attention to Red Flags.