Skip to content
Anatomy of an Economic Development Scam

Anatomy of an Economic Development Scam

By: Phil Hardwick - August 11, 2023

Because most communities will do just about anything for more jobs, elected officials are especially vulnerable to unscrupulous real estate developers.

This is a warning to local elected officials and community leaders. There are phony scam artists out there who will take advantage of your community.

Because most communities will do just about anything for more jobs, elected officials are especially vulnerable to unscrupulous real estate developers who will promise shopping centers, office buildings, distribution centers, and all manner of development in return for some type of incentive for their investment in the local community. I’ve seen some scams that were almost admirable in their complexity and others that were so simple it was laughable.

In this column, I profile one case that happened a few years ago in a medium-sized city in Mississippi. A scam artist, whom we will call Mr. Insurance, contacted the city council president and said that he could bring in “as many jobs as you want” to the community. His story was that he was the owner of an insurance company that was ready to move south to a state where business conditions were more favorable. His tale was that his company operated a nationwide call center for several insurance companies. The jobs would be above average in pay and benefits, and the company was known for being involved in the community.

After a tour of the community in the city council president’s car, Mr. Insurance got down to business. In return for bringing jobs to the town, he wanted a fully furnished building and training for future employees. Interestingly, this “prospect” never contacted anybody at the Mississippi Development Authority or even the local chamber of commerce. The city council president placed the item on the agenda for the upcoming meeting. 

Two days before the meeting, Mr. Insurance called the city council president and asked for an immediate meeting. He requested that the city council president meet him at the local airport at 4:30 P.M.  “I’ll be arriving on my plane.”  The city council president went to the town’s general aviation airport and watched as a Lear Jet landed and taxied over to the official. Off the plane came Mr. Insurance. He got in the city council president’s car and with a sense of urgency said that another city in another state had agreed to screen the workers and to send them to the company’s existing training center instead of training them locally. Mr. Insurance said that this was much more efficient because their trainers were already in place. The city council president got nervous, afraid they were about to lose the deal.

“Let’s get to the bottom line,” said the city council president. “What do we have to do to get your company to relocate here?”

“As I said,” replied the prospect. “If we could have that training expense paid, we could come here.”

“How much?”

“If we trained a hundred people for a week, our expenses would run about three thousand per person, so that would be …”

The city council president did the math and immediately said, “Three hundred thousand. Let me see what I can do. I’ll let you know by tonight after I poll the other members and the mayor.”

And then away flew the jet, leaving the council president a bit nervous. He knew that this could be the biggest thing for his town or a colossal disaster. 

He called the state attorney general’s office immediately and told an investigator what was happening. The state investigator first checked on the private jet and learned that it was registered to an aircraft brokerage company. A few more phone calls and it was discovered that a man fitting the description of the prospect had taken the jet on a test flight after telling the aircraft company that he was interested in buying a plane. Further investigation revealed that the prospect was an insurance broker in another state and that his license was on suspension. In short, he was not who he said he was.

Fortunately, this was a case that ended without the city losing any money. It also brings up the need to do basic research on any individual who shows up wanting to help a city by bringing in jobs or revitalization projects. 

Here are some things that officials can do to check out such individuals:

1. Perform an Internet search of the individual’s name and any others mentioned.

2. Personally contact someone in the building permit or planning office of the prospect’s hometown.

3. Ask for financial statements of the company and previous projects (note – a pro forma is not a financial statement in these cases).

4. Ask for and contact references.

5. Contact the Better Business Bureau.

6. Contact the business editor of the prospect’s hometown.

I’ll stop there because it is evident that these are very basic things that should be done when doing business with anyone. Nevertheless, it is incredible to look back on these types of scams and see how few times such inquiries are not done.

About the Author(s)
author profile image

Phil Hardwick

Phil Hardwick is an award-winning business columnist and semi-retired economic developer. He also served as an adjunct faculty member at the Millsaps College Else School of Management for many years. He has taught over 1,000 students, written over 800 columns, written 11 books and assisted over 100 communities and organizations with strategic planning. In February 2016 he was inducted as a Lifetime Member of the Mississippi Economic Development Council.
More From This Author