HOME-FRONT BOOBY TRAPS
Hang on to that gratuity, Chum! The shysters will clip you more mercilessly than any Army barber
ROYD E. BEAMISH
HALF a million servicemen are returning to civil life in the course of the next 10 or 12 months and bringing with them hundreds of millions of dollars in new purchasing power. War service gratuities, re-establishment credits and a flood of wartime savings will be released into the stream of Canadian commerce with their demobilization. All of it will be new money in the sense that it has never been available for private spending until now.
To the serviceman the money he receives from a grateful government is a reassuring "nest egg”—something to help him establish himself for the long years ahead. But to one unscrupulous group of Canadians those millions of dollars represent the largest amount of potential ‘‘sucker money” ever turned loose in Canada at one time. And these men are pledged to the doctrine of sharpsters everywhere: ‘‘Never give a sucker an even break.” They have started their operations already, developing new techniques and new “corneous” for ex-servicemen, but up to now it has been just in penny ante proportions, with only a handful of them sitting in on the game. When the heavy sugar comes into the picture, and half a million veterans have their chips on the table, the boys are planning to really go to town.
They are the racketeers, the phony business brokers, the boiler room stock salesmen, the rapacious moneylenders, the smooth-talking gyp artists, who live by their wits or the other fellow'’s lack of them. With virtually every returned man representing a minimum of $1,000 ready (and willing) capital, they have polished up all their old gags and invented quite a few new ones, custom-tailored for war veterans with money to spend.
At present the honors seem to go principally to unscrupulous so-called “business brokers” and moneylenders. Thousands of soldiers are returning to Canada with dreams of using their gratuity money to open their own businesses, and some of them are so keen to do what they have never been able to do before that they will swallow almost any bait remotely resembling a business opportunity.
There was Veteran A., for instance, who saw a tobacco and confectionery business
advertised in a daily paper. The advertiser was a “business broker” and the proposition he outlined was delightfully simple and clearcut. The business was for sale for $4,200—half cash and the remainder to be paid off at a minimum of $90 per month, with interest at 6% secured by a chattel mortgage. In addition there was the trifling amount of $50 a month to be paid for rent of the premises.
It looked pretty good to Veteran A., who had never owned a business in his life, so he paid the “broker” $200 cash to bind the bargain and went to the Department of Veterans’ Affairs to arrange for his re-establishment credit to be used to cover as much of the down payment as it could. The move saved the soldier’s tiny fortune.
When the DVA is asked to grant money for such purposes, its officers have a habit of examining the proposed business venture thoroughly, and the investigators are men of experience. In this particular case investigation revealed that the stock inventory, totalling $2,200, had been taken at retail prices, giving the business a thoroughly inflated value, and that the fixtures were not worth more than $800. The veteran was being asked to pay the same amount for the goods in the shop as if he had bought each item over the counter, and to hand over a bonus of $1,200 for the privilege!
In addition it was discovered that the license had just been cancelled by the city and t here was no guarantee that a new one would be granted. This, of course, was the vendor’s principal reason for wanting to sell. The Veterans’ Welfare Officer not only steered Veteran A. away from that pitfall but even managed to get his $200 deposit back for him.
Veteran B. had no specific plans in mind when he received his discharge, but in January of this year a “business broker” saw him and said that a very profitable rooming house was going begging because the present operator had to move elsewhere for his health. The contents would be sacrificed for $2,000 cash, of course—he whispered, and the lease on the building was good for 16 months. Multiply 16 by the number of bedrooms and multiply that by the revenue each room would produce, he explained, and even a beginner could see that the $2,000 would be returned several times over before the lease expired. Then it would be a simple Continued on page 40
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matter either to renew the lease or take over another place.
Investigation here revealed that the lease, instead of expiring in May, 1946, was due to expire in May, 1945, and the vendor had already received notice to vacate because the house was being sold. Needless to say, the deal was cancelled, and here again the DVA was able to arrange the return of the veteran’s deposit, in this case $500.
Veteran C. ran into better luck than either of the other two, for he was not only prevented from sinking his money into a highly dubious venture but was actually established in the sort of busi-
ness he wanted, after having received the benefit of found advice and assistance from experts in the field.
This veteran was approached by a “business broker” and offered a fish and chip store for $1,800. The business, he was told, had been grossing $300 a week, the fixtures were completely paid for and the profits were something to dream about.
The last clause of the “broker’s” statement contained at least the refreshing virtue of accuracy, for investigation revealed that the only profits the previous owner had known in recent months had been those he dreamed about. The DVA investigator went directly to the biggest fish supply firm in the city for his informa-
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tion and learned the business had been showing a losa over a period of months, that its profits had never been anything but meagre and that there existed a chattel mortgage against the fixtures amounting to $600. The supply firm itself held the mortgage.
The manager of the firm had a long discussion with Veteran C., pointed out the impossibility of making anything like a good living out of such a venture and showed him exactly what his costs were likely to be in relation to the volume of business he did,
“We’ll foreclose our mortgage,” he offered, “and if it is not met by the present owner we’ll turn the business over to you for $600. But I wouldn’t put a cent more in it if I were you.”
The mortgage foreclosure did not take place, as the owner met his obligation, but the fish supply firm manager did not stop there. He had further discussions with the veteran and, finding that the young man had a sound lousiness sense once he had grasped the principles of operation, and that he was still enthusiastic about the fish and chip business, the manager picked out for him a much better location and helped him establish himself in it.
Veteran C. has been there too short a time to indicate his possible success, but to date he is doing well. He has started from scratch, not with two strikes already called by some sharpshooting “business broker.”
Perhaps none of these instances represent flagrant racketeering. In no case was any effort made to mulct the victim of bis entire wealth in exchange for absolutely nothing. There was no element of “buying Brooklyn Bridge” involved, but to all intents and purposes the objective was just as disastrous to the veteran concerned, for had he embarked on the enterprise he would eventually have lost everything. And the smooth-talking “broker” who engineered the transaction would have made his healthy profit without leaving himself open to any form of criminal proceedings.
Warnings Don’t Always Register
Better Business Bureaus have been murmuring warnings about this sort of thing for more than a year now. Currently they are beginning to raise their voices to a shout, as events indicate that returning servicemen either have not heard them' or just don’t want to listen.
Take, for instance, the case of another veteran who was eager to get started in civilian life as an automobile mechanic. There was nothing wrong with his ambition—only with his overeagerness. And before the DVA
could do anything about it he had already signed up to buy tools for over $600 through his new employer. In this case the deal had already gone too far to make any change possible.
In another case a young ex-soldier came to the DVA office in his city
and asked that $400 of his re-establishment credit be applied to the purchase of brushes, ladders and other equipment. He said that he wanted to establish himself as a painter and house decorator and showed a license from the Wartime Prices and Trade Board, permitting him to carry on this business.
The interviewing officer noted the amount would take up almost all of the young man’s credit. He then noted that the veteran’s previous business experience had been confined to working as a laborer and to pushing a truck around a wholesale grocery warehouse—neither of which occupations was particularly good training for a painting and decorating business.
So he asked questions. And presently it came out that the young veteran had been talked into a partnership with an older man who was an experienced painter—but who had been in trouble, such trouble that he could not get a WPTB license to operate under his own name. Another “deal” fell through right then.
What the soldier fails to realize is that, even under the most favorable circumstances, investing in a new' business is a hazardous undertaking. Dun & Bfádstreet, Inc., in a statistical* study of industry and commerce in the United States, report that, in the retail field, one out of three concerns does not Survive the first year and two out of three close their doors within six years. In wholesaling and manufacturing, one out of five fail in the first year and two out of three go out of business within nine years.
When to these natural hazards are added the handicaps of starting off in a business whose potentialities have been misrepresented, or for which an unduly high price has been paid, the prospects of success Lire dim indeed.
A DVA check on behalf of a veteran who was going to buy a small restaurant revealed that the property in question had been sold eight times in 16 months. Each time the “broker” who arranged the deal exacted his commission. Each time the purchaser, discovering that he could not make a living and keep up his payments, was only too glad to pay another commission to have the business taken off his hands and resold.
There are many reputable and reliable business brokers operating in Canada to¡day who would have nothing to do with a proposition like that. The unscrupulous are a minority, and, in fact, they could not operate at all if it wefe not for the cloak of respectability afforded them by the integrity of their established, Kifehprincipled colleagues.
They Trade Scruples for Dollars
But it is not only in the buying and selling of businesses that veterans of this war have come close to making costly missteps. The money-lending fraternity also numbers in its membership men ever ready to trade scruples for dollars when the occasion presents itself.
Veteran E. wanted $500 in a hurry— too great a hurry to wait for the reestablishment credit machinery to begin rolling—so he went out to put a $500 first mortage on his house. Someone steered him to an individual who gladly offered to make the loan, on his own terms. To get $500 the veteran was told he would have to pay a bonus of $100, or, in other words, to pay back a total of $600—plus 12% interest on the whole $600! Fortunately Veteran E. was alarmed at the heavy cost involved and checked with his Better Business Bureau before accepting the deal He was referred to an established
mortage company, where he was able to negotiate his loan at a reasonable cost.
Outside the circles of reputable realestate men are clipsters who regard the house-seeking veteran as choice game and deadfall him without compunction if given a chance.
High-pressure methods are being used by these shady agents at this time of extreme housing scarcity to sell the veteran and his family homes which are jerry-built, unsuitably located and priced far in excess of their worth.
One young man, discharged after four years overseas, brought his bride to an Ontario city where he had secured a job. He hunted up a realestate agent who, in a surprisingly short time, found him a house priced at $3,500. The veteran paid a $200 deposit.
The couple, pleased with their “luck,” then applied for the husband’s rehabilitation credit so that they might complete the down payment on this “home of their own.” But an investigator who checks the city assessment rolls found the house was assessed for tax purposes at $950, and an independent appraisal showed that, even allowing for current higher values, the place might be worth a top market price of $1,500. It had sold for $1,000 cash a year previous.
Best protection for the veteran eager to buy a house is a session with a reliable expert—an architect or builder —who for a moderate fee will give him a report on the actual condition and value of the dwelling.
Even when the veteran buys a house he’s not yet out of the woods. He needs furniture, and there are sharp dealers who won’t scruple to trim him. As one superintendent of rehabilitation put it, “There are furniture stores which are quite adept at finding out how much credit and gratuity a veteran is getting and selling him right up to the limit.”
The number of minor “rackets” aimed at the veteran—and at anyone else who happens to have ready cash —is too great to permit the quoting of case histories, and their pattern too uniform to require it.
Door-to-door peddlers of fancy wrist watches and men’s clothing have also done a land-office business and gypped veterans and others out of staggering amounts of cash by simply passing off almost worthless products and materials as the “real thing.”
Officials of the Department of Veterans’ Affairs and of Better Business Bureaus across Canada will go to any lengths to protect veterans from swindles such as we have described, but they require a certain amount of co-operation from the veterans themselves. It’s easy to avoid being taken in, and the rules for self-protection are so simple as to make them seem obvious, but the success of racketeers to date suggests that they are still not widely enough known. Briefly, and in general terms, the rules are these:
1. Before you invest—investigate. Don’t put money into any business or commercial enterprise until you have investigated it thoroughly. The man who has no ulterior motive for selling will not mind showing you his books and all records pertaining to the
business. Nor will he hedge in answering any straightforward questions about it.
2. Unless you are thoroughly familiar with the business concerned, have the investigation made by men who are. They know what to look for. The Department of Veterans’ Affairs will conduct enquiries for you or put you in touch with qualified experts.
3. Read before you sign—and keep a copy. Practically every business transaction involves a contract in some form. You should not sign a contract or agreement without reading it and understanding its terms. If you do not understand certain terms, phrases or fine print in a contract, take it to a lawyer or your -DVA legal adviser and have all papers checked by him. The reasons are obvious. Your signature to a contract means that you have agreed to all its provisions.
4. Don’t put any cash down until you are thoroughly satisfied that the business is as represented, that you will receive a clear title to it when you make your purchase and that there are no mortgages, liens or accounts outstanding of which you have not been fully informed. Men who want cash deposits in a hurry generally have a reason—and it’s not one that will do you any good.
5. Beware of “Partner Wanted” propositions. They are often nothing but frauds to get your investment in a supposedly profitable business, claiming the need of new funds. Remember that in a partnership each partner is responsible for all the debts of your firm and that you can be held responsible for your partner’s debts if he clears out. Know your partner or operate alone.
6. Decide whether you can afford to lose before you invest in any new enterprise. A large number of new enterprises fail.
7. Don’t buy anything from itinerant peddlers or salesmen unless it is of such trifling value that it can’t make much difference if it doesn’t live up to expectations. There are reputable used car dealers, men’s wear stores and jewellers’ shops in your own town where you can be sure of receiving value for your money.
8. If you must borrow money go to a bank or a recognized loan company, when you deal with them you are protected against paying exorbitant interest, “bonuses,” or any of the other fancy (and costly) gimcracks of the shyster moneylender. Beware of the promoter who offers to “arrange a loan” if you first pay his expenses.
9. Similarly, there are established mortgage, loan and trust companies whose business it is to lend money against real estate. If you don’t know one your Veterans’ Welfare Officer, Better Business Bureau or Chamber of Commerce will direct you.
10. Discuss your plans fully with your Veterans’ Affairs counsellor before you attempt any capital investment. These officers know reliable men in every field to whom they can send you for information and advice. Don’t wait until you’ve got yourself involved in a financial tangle before bringing your problem to them. After all, they can’t work miracles all the time.