Farmers warn of online hay marketing scams
No doubt about it: The Internet can be a great place for hay buyers and sellers to conduct business. With just a click or two of the mouse and/or a few keystrokes, you can locate hay supplies and negotiate buy/sell deals with people clear across the country.
For all of the advantages, though, there can also be a downside.
Ask Cumberland, WI, dairy producer Dan Schullo. Last spring, while looking to replenish a depleted hay supply for his 800-cow herd, Schullo stumbled on a Montana-based hay broker's Web site offering hay at a reasonable price.
“It was hard not to be impressed by the site,” he says. “It was extremely slick and very professional looking.”
He contacted the broker about buying five semi loads of hay — roughly 100 tons. The agreed-upon price was $19,000. Before sending payment via a wire transfer, he had the broker fax him a copy of the hay-test results. Next, he contacted the broker's lending institution, twice, speaking to two bank officers. As a final check, he had a representative from his bank contact the one in Wyoming.
“We really felt like we had done our homework and everything possible to protect ourselves,” says Schullo.
A few days after wiring the money, Schullo sent his son, Travis, and another driver to Wyoming to pick up the hay with his tractor-trailer rig.
“When they got to the ranch, there were six other trucks in the yard looking to pick up hay,” he reports. “The ranch owner came out and told everyone he didn't know anything about the hay sales. He also said he never used a broker to sell his hay.”
When Schullo called the broker, he was assured the whole episode was the result of a misunderstanding and his money would be returned the following morning. Over the next two weeks, he called the broker daily and heard a variety of excuses about why the money had not been sent.
“The last thing he said during the last phone call was, ‘You people will never get your money,' ” he recalls.
Eventually, Schullo turned the matter over to his county's district attorney. The broker was charged with felony theft, but has yet to appear in court. Along with the payment, Schullo's out roughly $3,000 in expenses for the 1,800-mile round trip.
“If the original payment had been returned, we probably would have let the trucking expenses go and just thought of it as a $3,000 education in how not use the Internet,” he says. “But no business can afford a $19,000 hit. We have to see this through.”
Enterprising thieves have found other ways to use the Internet to carry out illegal activities. In what has now become a well-publicized episode, several hay dealers with high-profile Web sites were targets of a so-called “phishing” scheme in 2007.
Pretending to be established businesses, the scammers used certified checks, wire and money transfers and other forms of payment to defraud the legitimate parties. Aden Brook Farms, a distributor of hay, straw and wood shavings in Pine Bush, NY, received three bogus certified checks from the scammers but didn't cash them. The amount of the first check was $38,000.
“We immediately flagged it as suspicious because the people who sent it didn't try to negotiate a price,” says CEO Nick Fitzpatrick, noting that Aden Brook Farms does a large volume of business via the Internet. “We didn't ship anything. We were fortunate.”
The phishing stopped after Fitzpatrick and other hay organizations launched an informal educational campaign to alert unsuspecting buyers and sellers. “That's the general pattern of these kinds of things,” he says. “Once the word gets out among members of a particular group about what's going on, the scammers move on to some other industry or group.”
A major pitfall of doing business on the Internet, says Fitzpatrick, is dealing with strangers. When he buys hay, he tries to deal only with people with whom he's had longstanding business relationships. When that's not the case, he travels to sellers' locations to look at the hay firsthand.
“I want to see the hay, meet the farmer and shake hands,” he says.
As another preventive measure, Fitzpatrick recommends that hay buyers use credit cards for transactions with sellers they don't know.
“That way, if the hay isn't delivered or there's a dispute over quality, you call the credit card company and have it deal with the seller,” he says. “It's a way to transfer some of the risk.”
When he's selling hay to a new buyer, Fitzpatrick does not extend credit. In some cases, he contacts the Better Business Bureau and professional organizations to learn more about the buyer's reputation.
“You have to be extremely careful,” he says.
Don Kieffer, executive director of the National Hay Association (NHA), advises hay buyers and sellers to be extremely skeptical of information posted on Web sites.
As a case in point, he notes that NHA recently yanked the membership of a hay dealer for violating the association's code of business ethics. NHA considered the matter closed, but then learned the former member was continuing to post the NHA membership logo on his Web site.
“We contacted him and told him to stop,” says Kieffer. “But in the end, there really wasn't much we could do about it.”
He advises people doing business with companies using the NHA logo to check with his office if they have doubts about the legitimacy of the affiliation. Kieffer can be contacted at 800-707-0014 or email@example.com.