Sometimes it makes sense to describe best practices — if such a thing exists. Sometimes it’s fun to draw a “top ten” of mistakes. And sometimes it’s even more fun to list some examples of fraud. Hopefully, importers can learn something out of it.

In the latest edition of the CSIC’s Sourcer Magazine, Kevyn Kennedy (the owner of CBI, an investigation and business intelligence firm) lists four examples of frauds:

An electronics factory which was reporting abnormally high waste was found to be selling production itself. this happens fairly regularly, but what made this one interesting is that they were actually throwing the parts away! The perfectly good merchandise was retrieved from the dumpster in the middle of the night, so few people in the factory were aware that the “trash” was just fine.

A factory owner charged with making heavy pumps for use pulling oil out of the ground was found making exactly the same pump—using the client’s drawings and blueprints—in his own factory. This is especially tough for investigators to work on. How do you tell the real pumps from the counterfeit? You can’t. To the naked eye, they are identical.

A delivery company charged with taking products from the warehouse to the retailer was observed stopping on the side of the road, unloading genuine merchandise, and replacing it with counterfeit products.

A sourcing manager for a huge software company was found to be set up with a prostitute when in China. What a man does with his free time is no concern of mine—but not when the prostitute was being arranged by the supplier as a condition to renewed contracts!

In the same edition of the magazine, Dan Harris, from the law firm Harris & Moure, gave this list of horror stories:

1. The guy who “invested” $500,000 into a China business because the owner of the Chinese business was allegedly the son of a five-star general. One of my law partners suggested to this investor that he instead use the money to fly himself and my law partner to vegas (this was before Macao got so big) and put the money on red. As my partner put it, the chances of the client recovering his money there were much greater, and it would be a lot more enjoyable. this guy went ahead and invested the $500,000 and lost every bit of it. He then wanted us to sue the “son of the general” on a contingency fee basis, but we would not have taken on that case for a 150% contingency.

2. The guy who bought a million-dollar condo in Shanghai under his girlfriend’s name because he believed that foreigners were not allowed to own real property in China. His girlfriend then left him and claimed he had given her the condo as a gift. the guy wanted us to sue the girlfriend but we demurred, saying that we just did not like a case where our client would need to stand in front of a Chinese judge and explain that he had put the condo in his girlfriend’s name so as to avoid (what he believed was) Chinese law. And here’s the kicker. When he bought this condo for his girlfriend, he could have purchased it in his own name, no problem! His girlfriend had lied to him about Chinese real property ownership laws.

3. The countless people who call my firm after having sent tens of thousands of dollars (sometimes hundreds of thousands of dollars) to someone in China for a product that never arrives. Eventually the person and “company” to whom they sent the money disappear. We have never taken one of these cases because we deem them pretty much hopeless.

4. The US company that used its joint venture partner’s local Chinese lawyer (what was this company thinking?). The Chinese lawyer drafted up agreements that involved the American company giving its critical technology to the joint venture permanently, without getting any real influence or control in it. This is an amalgamation of probably half a dozen poorly formed joint ventures in which we have been called in.

Dealing with Chinese suppliers or distributors has a cost. Fraud is not exclusive to China, of course. But you are far away and you can’t monitor everything that is going on here… And you are an easy prey because you are not familiar with the local system!