Phil Chan Case Analysis

2955 words - 12 pages

Problems and IssuesThis case deals with an advanced fee scam that has been run out of Nigeria since the mid-1980s but apparently unknown to the Basic Software Company of Hong Kong. On August 26,1998 the owner of Basic Software, Allen Lee, was sent a letter by Tokunbo Jacobs from the Nigerian National Petroleum Corporation (NNPC). Mr. Jacobs claimed to have gotten Mr. Lee's name from a close relation at the Nigerian Export Council. Basic Software was supposedly selected by the Tender Committee at NNCP to assist in facilitating a financial transaction involving an international transfer of funds of $14.3 million USD. Basic Software would receive a 35% share (over $5 million USD) as a ...view middle of the document...

This type of fraud is also called Nigerian Advance Fee Fraud, Operation 4-1-9, 419 Advanced Fee Fraud, Nigerian Fraud or 419 Fraud, and named after the section of the Nigerian penal code which addresses fraud schemes. This type of fraud has been around for decades, around the time of the collapse of world oil prices, which is Nigeria's main foreign exchange earner. Some Nigerians turned to crime in order to survive but now it seems to have reached epidemic proportions. "Even today, some consumers have told the Federal Trade Commission (FTC) they are receiving dozens of offers a day from supposed Nigerians politely promising big profits in exchange for help moving large sums of money out of their country"(F TC Website, 2006). And apparently, many compassionate consumers are continuing to fall for the convincing sob stories, the unfailingly polite language, and the promises of money. These advance-fee solicitations are scams and according to the FTC, the scam artists are playing each and every consumer for a fool.Issue #1 - If it's too good to be true, then it's not true!The owner of Basic Software, Allen Lee received an unsolicited letter by mail from the Nigerian National Petroleum Corporation (NNPC) informing him that they were seeking a reputable company into whose account they can deposit $14.3 million USD that they paid on some procurement contract. Mr. Lee was promised 35% (over $5 million USD) of these funds as a "commission". All Mr. Lee had to do was to send Mr. Jacobs from NNPC, his bank account information for them to transfer and "free" the funds. Mr. Jacobs also indicated the deal was to be kept confidential.Instead of disregarding the letter, Mr. Lee was intrigued about the possibility of doing some business in Nigeria. In a phone conversation with Mr. Jacobs, Mr. Lee found that in order to do business with the NNPC, it was necessary to be registered in the official list of pre-qualified suppliers. Various approvals and stamps were required in the registration process as well as $48,000 USD requested in the September 21st fax.In many advance fee fraud scams since the money in question is usually in millions of dollars, the victim is caught in a delusion of imagining that his percentage amounts to a large sum of money. Turns out the percentage offered by scammer's amounts to zero. For example, if you are offered 20 or 30 percent, you would soon find that twenty-percent of the scams offer is zero, just as a thirty-percent offer shall also amount to zero. The essence and relevance of any investment is its profitability. However, the profit margin usually introduced in the proposed investment relating to money transfer is people getting scammed and get carried away with what their percentage would amount to, forgetting to question the legitimacy of the proposal.Issue # 2 - Why would a complete stranger trust another stranger?Mr. Lee should have realized this was a scheme and performed some research about NNPC and Nigeria. If only the...

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