19 charged in manufacturing fraud plot

Shanghai police said yesterday that they had detained 19 people in a contract fraud case where the suspects lured victims into the business of making ballpoint pens and lighters, then took their money.

The scam started early last year, and it was unclear how many people had been victimized, said the Minhang District police, who are still finding victims.

The alleged scam was led by two major suspects, surnamed Chen and Qin. They recruited manufacturing partners on popular websites promoting the low-risk business of making lighters and pens, police found.

"They would tell the victims that the applicants could use the company's equipment for free and the company would also be in charge of the sales of the produced lighters or ballpoint pens," said Ma Junwei, a police officer.

"The applicants could also earn the processing charges of 0.2 yuan (3 US cents) to 1.2 yuan of each lighter or pen."

The victims would be asked to sign a contract with the company and had to pay deposits to take the company's machines to produce the lighters or pens. The deposit was 4,800 yuan for the machine to produce lighters and 9,600 yuan for the three machines to make pens.

Under the contract, an applicant could get the deposit back if he produced 50,000 lighters or pens. But the victims never got their deposit back as none of their products passed the company's check, said Ma.

"The products' passing percentage should be above 80 (under the contract), otherwise the company had the right not to accept them," Ma said. "None of the victims passed the check as what the suspects really wanted was the deposit."

"A victim could get his deposit back if he brought two new applicants and could also earn 500 yuan for each machine the new applicant would rent," Ma said. "It was like pyramid selling, and as far as we know at least five victims had joined the suspects."