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4 Bold Business Scams (And Why They Failed Miserably)

Starting a legitimate business is hard, boring work. There's paperwork to fill out, employees to hire, and all sorts of other drudgery, not to mention the biggest hurdle of all: providing a product or service for which customers are willing to pay. In all likelihood, it would be much easier to just stumble upon some clever scam to line your pockets. Or so it would seem. As many aspiring scam artists quickly learn, when a business scam fails, it tends to fail in rather grand fashion. Just ask any of these four teams of not-so-smooth operators.

A Corny Sea Story

Xenothemis and Hegestratos may not have been the world's first white-collar criminals, but they were certainly noteworthy for their incompetence. In 360 B.C, the pair stumbled upon what seemed like a killer plan to make some quick cash. Shipping was extremely risky at the time, and boats went down at sea with alarming frequency. To exploit this uncertainty, Xenothemis and Hegestratos devised a plan in which they would receive a cash advance to ship a load of corn from Syracuse to Athens. Due to the dangers associated with shipping, the buyer would take on full risk if the shipment didn't make it to Athens, so if the boat sank Xenothemis and Hegestratos could keep their cash.

Instead of loading the ship with expensive corn, the conniving pair made a plan to sail an empty ship out to sea for a few days, then sink it and escape in lifeboats. Since the boat itself was insured, this plot seemed airtight, and the potential profit was great. Unfortunately, though, the boat's other passengers allegedly caught wind of the scheme during the attempting scuttling of the ship. These passengers were understandably a bit peeved at Hegestratos' attempts to drown them for his own financial gain. Hegestratos panicked and jumped overboard, at which point he drowned. Unable to sink the ship by himself, Xenothemis had to sail on to the port, at which point the buyer, Protos, wanted to know why his shipload of corn was empty. A legal battle followed, and although the verdict has been lost by history, it's safe to say that the late Hegestratos regretted the scam.

When Friday Went Black

gold-bars.jpgDespite his prowess as a general, Ulysses S. Grant's presidency didn't go so smoothly. Ones of its most notable scandals occurred in 1869, when a group of speculators upended the U.S gold market.

The plan started when financier James Fisk and robber baron Jay Gould formed a group of speculators with the goal of cornering the gold market, which would give the group the ability to manipulate the price. Of course, one can only corner the market if there's a fixed quantity of gold available. Otherwise, the government could just sell large quantities of gold, and the cornering effort would be an expensive failure. In an effort to avoid this fate, Gould and Fisk brought President Grant's brother-in-law Abel Corbin into their fold. Using Corbin's influence to get an audience with the President, the pair would argue to Grant that selling gold was a terrible idea that the government should avoid at all costs. The wily pair also used their influence at the White House to secure a position as assistant treasurer of the United States for Daniel Butterfield, who would warn them if the government started to sell gold.

With their connections in place, Fisk and Gould started buying up gold in September 1869, quickly driving the price of gold up by around 30%. Once Grant and his advisors got wise to the situation, though, the government quickly sold off $4 million in gold to break the corner, effectively killing the inflated prices on September 24th. As investors scrambled to get rid of their overpriced gold, the price plummeted sharply, and many involved in the scam lost huge amounts of money. Fisk and Gould managed to avoid big losses due to their connections in the treasury, but what would be known as Black Friday didn't earn them a huge windfall—and significantly harmed the American economy.

Bad Moves

erik-deri.jpgIf you've ever hired movers, you know it can be pretty pricey. Erik Deri, the founder of Woodinville, WA-based Nationwide Moving Systems, understood that most movers were expensive, so he drummed up business by offering super-cheap quotes to frugal clients. The customers were ecstatic to find a mover who could get their belongings to a new home so cheaply.

That is, until the price went up. Deri's movers would load the company's vans with all of a customer's worldly belongings, then a foreman would inform the client that they'd have to pay an inflated price to actually get their stuff to their new digs. The price hikes weren't small, either; one man's estimate stated he could move for $3,000 but was later revised to $16,000 after loading. According to authorities, if customers balked at these demands, the movers would threaten to unload their boxes and furniture into the street"¦and then charge them an unloading fee. If things got really sticky, Nationwide's trucks could just take off with all of the clients' possessions. Deri supposedly paid cash bonuses to employees who successfully strong-armed customers into forking over the premiums.

In the end, though, Deri learned that you can't scam that many customers and hope to get away with it. In 2005 he was found guilty of 27 counts of extortion and one count of conspiracy to commit wire fraud and extortion. Three of his accomplices were also convicted in connection with the moving racket. Deri was sentenced to seven years in prison, after which he'll face deportation to his native Israel.

Fools for Gold

brex.jpgBre-X Minerals Ltd. was a small Canadian mining company that made a big announcement in 1995. Geologists had discovered gold on a site Bre-X owned near Busang, Indonesia. Not just a little gold, either—at least 30 million ounces, possibly as much as 200 million ounces. Given the high prices of gold, such a deposit would have been worth tens of billions of dollars. Bre-X's stock price shot through the roof; shares went from being valued at a few cents to over $280 Canadian.

In fact, the deposit seemed so rich and so large that a small company like Bre-X could not possibly handle it all without some help. In 1997, the Indonesian government convinced Bre-X to take on an American firm as a partner to help extract the gold. When this firm, Freeport-McMoRan, started sampling the soil at the deposit site as part of its due diligence, it reached a confusing conclusion: there wasn't any gold in the soil. Subsequent examinations by independent auditors reached the same conclusion. The "natural" gold that in the original samples Bre-X had taken was mostly river gold from other regions or shavings off of gold jewelry.

Although the company's market cap had climbed to $4.4 billion, this report quickly destroyed Bre-X's value. Share prices dropped 97 percent in a day following the announcement, the company was soon removed from the Toronto Stock Exchange and Nasdaq, and Bre-X quickly went bankrupt. Amazingly, no one ended up in jail from this scam, but you should still probably be wary if anyone offers to sell you an enormous gold mine on Borneo.

Ethan Trex grew up idolizing Vince Coleman, and he kind of still does. Ethan co-writes Straight Cash, Homey, the Internet's undisputed top source for pictures of people in Ryan Leaf jerseys.

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Stones, Bones, and Wrecks
New Program Trains Dogs to Sniff Out Art Smugglers
Penn Vet Working Dog Center
Penn Vet Working Dog Center

Soon, the dogs you see sniffing out contraband at airports may not be searching for drugs or smuggled Spanish ham. They might be looking for stolen treasures.

K-9 Artifact Finders, a new collaboration between New Hampshire-based cultural heritage law firm Red Arch and the University of Pennsylvania, is training dogs to root out stolen antiquities looted from archaeological sites and museums. The dogs would be stopping them at borders before the items can be sold elsewhere on the black market.

The illegal antiquities trade nets more than $3 billion per year around the world, and trafficking hits countries dealing with ongoing conflict, like Syria and Iraq today, particularly hard. By one estimate, around half a million artifacts were stolen from museums and archaeological sites throughout Iraq between 2003 and 2005 alone. (Famously, the craft-supply chain Hobby Lobby was fined $3 million in 2017 for buying thousands of ancient artifacts looted from Iraq.) In Syria, the Islamic State has been known to loot and sell ancient artifacts including statues, jewelry, and art to fund its operations.

But the problem spans across the world. Between 2007 and 2016, U.S. Customs and Border Control discovered more than 7800 cultural artifacts in the U.S. looted from 30 different countries.

A yellow Lab sniffs a metal cage designed to train dogs on scent detection.
Penn Vet Working Dog Center

K-9 Artifact Finders is the brainchild of Rick St. Hilaire, the executive director of Red Arch. His non-profit firm researches cultural heritage property law and preservation policy, including studying archaeological site looting and antiquities trafficking. Back in 2015, St. Hilaire was reading an article about a working dog trained to sniff out electronics that was able to find USB drives, SD cards, and other data storage devices. He wondered, if dogs could be trained to identify the scents of inorganic materials that make up electronics, could they be trained to sniff out ancient pottery?

To find out, St. Hilaire tells Mental Floss, he contacted the Penn Vet Working Dog Center, a research and training center for detection dogs. In December 2017, Red Arch, the Working Dog Center, and the Penn Museum (which is providing the artifacts to train the dogs) launched K-9 Artifact Finders, and in late January 2018, the five dogs selected for the project began their training, starting with learning the distinct smell of ancient pottery.

“Our theory is, it is a porous material that’s going to have a lot more odor than, say, a metal,” says Cindy Otto, the executive director of the Penn Vet Working Dog Center and the project’s principal investigator.

As you might imagine, museum curators may not be keen on exposing fragile ancient materials to four Labrador retrievers and a German shepherd, and the Working Dog Center didn’t want to take any risks with the Penn Museum’s priceless artifacts. So instead of letting the dogs have free rein to sniff the materials themselves, the project is using cotton balls. The researchers seal the artifacts (broken shards of Syrian pottery) in airtight bags with a cotton ball for 72 hours, then ask the dogs to find the cotton balls in the lab. They’re being trained to disregard the smell of the cotton ball itself, the smell of the bag it was stored in, and ideally, the smell of modern-day pottery, eventually being able to zero in on the smell that distinguishes ancient pottery specifically.

A dog looks out over the metal "pinhweel" training mechanism.
Penn Vet Working Dog Center

“The dogs are responding well,” Otto tells Mental Floss, explaining that the training program is at the stage of "exposing them to the odor and having them recognize it.”

The dogs involved in the project were chosen for their calm-but-curious demeanors and sensitive noses (one also works as a drug-detection dog when she’s not training on pottery). They had to be motivated enough to want to hunt down the cotton balls, but not aggressive or easily distracted.

Right now, the dogs train three days a week, and will continue to work on their pottery-detection skills for the first stage of the project, which the researchers expect will last for the next nine months. Depending on how the first phase of the training goes, the researchers hope to be able to then take the dogs out into the field to see if they can find the odor of ancient pottery in real-life situations, like in suitcases, rather than in a laboratory setting. Eventually, they also hope to train the dogs on other types of objects, and perhaps even pinpoint the chemical signatures that make artifacts smell distinct.

Pottery-sniffing dogs won’t be showing up at airport customs or on shipping docks soon, but one day, they could be as common as drug-sniffing canines. If dogs can detect low blood sugar or find a tiny USB drive hidden in a house, surely they can figure out if you’re smuggling a sculpture made thousands of years ago in your suitcase.

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