Three Canadian distributors are under investigation following allegations by dealers nationwide that they did not pay for orders of building materials. The Northeastern Retail Lumber Association (NRLA) met with FBI officials Tuesday to discuss the scam and communicated details via conference call to local and state association heads as well as the National Lumber & Building Material Dealers Association (NLBMDA).
The companies—Canstruct Inc., AYA Distributors, and 3733581 Canada Inc.—reportedly contacted and placed orders with dealers nationwide, says Rick Seeley, president of the Michigan Lumber and Building Materials Association. Seeley said he began fielding calls from a handful of members in November 2011 who said they were contacted by Canstruct about setting up $50,000 lines of credit. "It just sounded really fishy," he said.
NLBMDA president Michael O'Brien said that so far more than 50 dealers nationwide have been contacted by the companies; he says he doesn't know how many of those dealers provided the Canadian firms with materials but that individual losses are as high as $200,000.
O'Brien said this is the largest-scale building-materials purchasing scam he's seen. "It wasn't until recently that the widespread pattern was apparent," he said. "Based on our joint discussions, the earliest it came up was a year ago, but [the companies] are still contacting dealers."
Seeley said he didn’t recieve further calls from his members regarding Canstruct until three weeks ago, when members said they weren't being paid for the orders and that Canstruct picked up loads using independent trucking companies while representatives never divulged where the products were going. “Last fall, winter, and spring they were setting up accounts all over the country. Late summer, early fall, they started ordering,” he said. "It's the most sophisticated [scam] I've seen so far."
According to its website, Canstruct has been in business for 15 years and is based in Dorval, Quebec. Seeley said members could find CPA statements and references for Canstruct.
“The problem with this particular situation is that it looked very, very credible," Seeley said. "People that did get taken advantage of certainly have nothing to be ashamed of. They did their background work. These people were just very, very sophisticated.”
O'Brien encourages dealers to "have a healthy dose of skepticism," particularly when dealing with new clients from out of the country, and demand payment up front. "You can't simply rely on credit reports and references that come back good," he said.
What to do if you’ve been contacted or currently are doing business with these companies
The FBI is interested in talking with dealers who are being contacted by these companies now or are in the process of doing business with them. Keep all emails and other correspondence and send it to the NRLA, which is working with the FBI field office in Albany, N.Y. to investigate the scam.
If you’ve provided materials to these companies already but they are in transit, contact the trucking company immediately. If you believe you have been a victim of the scam, contact your local or regional building material dealers' association.