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Ways to protect yourself from fraud, scams and phantom projects

Stars + Stripes

Can anyone give advice on the best ways to protect yourself legally from investors who could potentially be creating phantom projects abroad?  Anyone ever experience this before? 

 
Sep 20, 12 11:45 am
gwharton

Not sure exactly what your question is, but here's a couple of pointers:

If you're concerned about getting scammed by a potential client outside the US, the best thing you can do is demand a mobilization fee or retainer payable before you start work. This guarantees that you will be paid for at least part of the work. My firm does a lot of work in parts of the world where the legal infrastructure associated with contracts is...er...rudimentary at best. Getting and clearing a mobilization fee or retainer prior to beginning work is an assurance of good faith. We reciprocate by offering lots of design insight during the negotiation phase.

Once you've got an agreement, banked the retainer, and are working full speed ahead, be careful about the circumstances by which you transfer design information to the client. Many clients in the "developing" world in particular will demand highly detailed design information on very short time schedules, including all your CAD or BIM files as deliverables. Be very careful about that. It's not that unusual for a foreign architect to deliver a set of "progress" files of floor plans, sections, or something at what we're thinking of as the Concept Design phase, only to have the client take them and start building off them. Getting payment for the work can be very problematic in that situation.

Overseas clients also will often only pay on the full "completion" of a phase of work, conditioned on their acceptance of that phase work as fully complete. This is a big issue, since they will be constantly expanding their definition of what work the phase includes and whether or not it is complete or "acceptable." This is the most common client relationship problem I've seen in overseas projects, and it's a biggie. Contracts don't really protect you against it. They will routinely use a strategy of scope creep, questions, clarifications, and revisions to drag out and grow your concept design phase into full-blown DD without paying you for any of it. You have to establish with them early on that you will be billing for percentage of work complete according to the schedule and expecations you are setting under the agreement, and if you are not paid in a timely fashion with stop work, demobilize, and they will incur a fee for remobilization. They will try to call your bluff on this, so you have to stick to it, even if it looks like the project might get killed in the process. They will adopt a position of confrontational outrage over it, but that's usually just a negotiating stance. Westerners are notorious for trying to play nice and being pushovers on this stuff, and they all know it. Stand your ground, and they will respect you more for it.

For other types of scam projects or shady clients, the same sort of rules apply, depending on the situation. Architects should generally ask to see the financial statements of any client proposing to hire you for a significant project. You're entitled to do this, and asking for it means you're serious. Most legit clients won't have a big problem with it so long as you agree to full confidentiality. Getting a retainer prior to starting work used to be commonplace in the US, but fell out of favor during the bubble. It's probably time for that to make a comeback. Contracts have more teeth domestically, but they still can't protect you from everything. Don't depend on them. Be careful and do your due diligence before getting in bed with a client. Trust, but verify.

Whether the client is domestic or foreign, you should ALWAYS get a retainer before working on a foreign-located project.

Sep 20, 12 12:40 pm  · 
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Stars + Stripes

gwharton,

Thank you!  This is great advice.  It's this type of experience that I was looking to hear about.  I'm definitely keeping all of it in mind.

Sep 20, 12 1:42 pm  · 
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citizen

That's a really useful primer on the subject, gwharton.  Thanks for taking the time.

Sep 20, 12 1:53 pm  · 
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gwharton

I also recommend that when travel is necessary for foreign project work, the client should arrange and pay for it directly. Don't do that as a reimbursible expense unless you have a standing relationship with the client and an established relationship of trust (including them paying their bills on time). Travel expenses can add up fast (a single overseas project meeting can cost tens of thousands of dollars) and you don't want to get stiffed for that stuff.

And when they make the arrangements, insist that they don't skimp. No business class? No meeting. No argument.

Sep 20, 12 1:55 pm  · 
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citizen

"No business class? No meeting. No argument."

This is the new "no shoes, no shirt, no service."  Excellent.

 

Sep 20, 12 3:43 pm  · 
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Oh, this is an easy one.  Ask them to do something ridiculus, like say, pose for a photograph with two other men while wearing women's clothes and sucking on cucumbers.  A legitimate business opportunity will react with a giant WTF? Seriously bro? but a desperate scammer may very well oblige.

[image removed by moderator]

(image via belch.com)

Scambaiting, yo!

Sep 20, 12 6:11 pm  · 
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Apurimac

No business class, no meeting, no argument.

I'm going to find someplace I can actually put that in my contracts and proposals.  Priceless gw.

Sep 21, 12 6:35 pm  · 
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curtkram

handsum, that is awesome.  (unless you're one of the people in the picture.  then i apologize).  i could spend a day at http://www.419eater.com/ - they have a trophy room of pictures like that and a forum for how they did it.  they even have mentorship opportunities for aspiring scam baiters.

Sep 21, 12 6:49 pm  · 
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Yeah, 419eater is great.  Everybody should check it out.

Yo!

Sep 22, 12 10:13 am  · 
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That photo is really fucking offensive.  I just flagged the post.

Sep 22, 12 11:33 am  · 
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curtkram

read through that 419 website donna.

ever get one of those nigerian bank scam emails?  there are also a lot of dating site scams and loan scams and other criminal shit those people are doing.  the people in that photo are criminals and bad people who sent an email like that and were trying to take advantage of someone and steal their money.  the person who got the email decided to fight back and screw with them.  part of screwing with them involved building up a certain amount of trust and saying "in order for me to know you're real you have to take a picture in women's clothing" and do the stuff you see in that photo.

that photo is not offensive.  what those people did that lead to the creation of that photo is offensive.  what that photo says, is that if you screw with the internet the internet will screw you back.

Sep 22, 12 11:41 am  · 
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