Would Lord Fraud's loan scam fool you?
Edward Davenport, who adopted the title Lord Davenport, and was known to his friends as Fast Eddie, was jailed last month for running a £4.5 million loans fraud. The news of his fraud was kept under wraps by a court restriction, which was lifted yesterday.
His 51 victims were entrepreneurs, desperate for cash in the credit crunch. But would you have fallen for Fast Eddie?
Edward Davenport was jailed for seven years and eight months for ripping off his victims. These included dress designer Elizabeth Emanuel (pictured), who lost her life savings.
The scam worked by promising loans to businesses that were desperate for cash. However, before the loans would be handed over, they had to pay an up-front fee, which he said was for 'due diligence' investigations into the businesses. In all his cronies took £4.5 million in deposits and fees but never paid out the £2 billion they had promised cash-strapped companies around the world.
What can we learn?
So why did they believe him, and what can we learn from their mistakes?
First, they trusted him because they thought they knew him. He was well-known on the celebrity party circuit. He was pictured with everyone from Kate Moss to Mick Jagger at a host of parties, including several at his £30 million home.
It's important therefore never to take anyone on face value when it comes to handing over money. Check they are regulated by the FSA, do your own research into their business, and assume the worst until you know better.
Second, he had a plausible story. When it comes to money, many people find it tricky to get their heads around the details, so are only too happy to defer to someone who sounds plausible.
If you are to protect yourself, you need to understand exactly what you are dealing with. Before handing over fees, these entrepreneurs should have checked whether this is common practice, whether due diligence is something reputable lenders charge for, and what the money was going to be used for. Just because someone is believable, it doesn't mean you should take them at their word.
And third, they were desperate. When we are in dire need and someone offers to cure our ills, we often jump at the chance. This is why the scammers prey on the desperate. The upfront fee scam is relatively common among those who rip off individuals as well as businesses. The rule of thumb is to assume every offer is bogus and that everyone who approaches you is a scammer. If you need money, approach a charity debt adviser and ask what you should do, don't throw yourself on the mercy of the criminals.
Davenport has said he will appeal and that he is completely innocent. We will have to wait for the judge's verdict on that one. In the interim there are plenty of conmen out there, and it pays to protect yourself.