Cyberspace Due Diligence Options

A Hot Tip about Country Risk in China

Last updated: 5 Sep 2011

How to get the FACTS about on-line frauds and scams for free in less than 60 minutes...

Overzealous on-line vigilantes rely on assumptive investigations and guesswork. Sometimes they manage to expose a scam, but sometimes they smear innocent parties while hiding behind fictitious screen names. Should they be punished? For many years, I have often used se veral on-line fraud reporting forums to find leads for suspects, perpetrators, or missing witnesses required for my various due diligence investigations. Surprisingly, they often provided me with missing pieces to the p uzzle at hand. But in perusing these many well-intentioned forums, I would often encounter serious drawbacks that would greatly mitigate or even negate the credibility of what I would find there. Over the last decade, I saw the credibility gap grow from minor to major in the following ways? 1. Some public forums self-appoint themselves as the judge and jury rather than as only an investigator. Instead of just presenting unbiased facts one poster or another with simply draw the most negative conclusion rather than look for plausible explanations. For example, many such sites will falsely conclude that any new web site in China simply must be a fraud because it is too new to be real (in their own personal judgment). In reality, many companies have more than one web site in various countries, especially if they are a site that creates enemies and are prone to hacking or blocking by the Chinese government. Anyone who has hosted a .cn within China can tell you all about this including Google which had to move its servers from a Beijing suburb to Hong Kong to avoid constant hacking and blocking. (See this news archive for details: google-china-idUSTRE7550CV20110606). The China Trade Commission experienced similar harassment on its .cn site for over seven years before deciding to wisely host outside of China. So when a new site pops up from a company that claims old copyrights or a longer history, the on-line snoops assume the worst. Sometimes they are right, but often they are wrong and taint good people earning an honest living. All plausible explanations should be considered before jumping to conclusions. 2. Then there are the posters who because they can hide their true identity behind the anonymity of fictitious screen names get gratuitous liberal with their assumptions and allegations knowing they have only a slight chance of being identified and sued for slander or libel. So they will make accusations that they would never do otherwise if they had to sign their name and mailing address for legal service. 3. There is also what we call ?Poster?s Pride?. Once a poster makes his allegations, most public forums do not provide a way for the poster to remove their comments in the event they later discover they were wrong, or perhaps inaccurate in their allegations. Without this editing feature, a poster wanting to right his wrong, would have to go on-line and basically say ?Hey people, I wrongly accused Joe Doe of being a pedophile? which would not only invite a quick law suit from Joe Doe, but diminish his/her image and future credibility within the forum. Those posters with a conscience will quietly ask the site administer to delete the thread, while others who risk embarrassment will stick to their guns and continue shooting from the hip to maintain their image ? even while knowing they are wrongly tainting and smearing others. Some will deliberately even make selective omissions of fact that simply contradict, or outright disprove their own posts. They can rationalize their unethical actions by convincing themselves ?These people are 5,000 miles away in China and my false allegations in English won?t affect them?. A real judge and jury might think otherwise. 4. The worst case of cyberspace smearing occurs when the one making the false accusations turns out to be a long-time senior poster, or even a moderator. In the case of the latter, the entire site could lose credibility, especially if the guilty moderator decides to censor out rebuttals or posts of others who attempt to correct or challenge the false allegations made by the moderator. This ugly scenario just recently took place with the China Trade Commission with a moderator who had to assume multiple identities so he could fool others into believing others also made or believe the same false remarks or rumors. No public forum can truly be called ?public? if civil rebuttals from those accused are censored out just to protect the on-line reputation of a moderator who is not decent and objective enough to correct his own errors. Ideally, if rebuttals are censored the original allegation should be deleted. In the real world however, a moderator believes that only he knows what he censored out and nobody will be the wiser. Sadly this is often the case. We even caught a moderator making false abuse reports to remove press release and ad links that clearly contradicted his own false accusations. 5. Rumors and gossip are NOT facts, but posters with an ax to grind will find devious ways to insert wicked gossip or rumors into their posts knowing full well that their comments cannot be proven or disproven but will serve to create doubt and fear in the minds of the readers. For example ?Mr. Smith when contacted by a local reporter, refused to say whether or not he embezzled the money?. A real investigator would cite the name and contact number of that newspaper reporter so everyone could independently confirm the remark and not be forced to believe an anonymous poster. 6. Often whistle-blower sites take on a role of a self-proclaimed ?Sheriff? and make public demands for disclosure of facts online such as ?If you really are an American living in Orlando, Florida then put up a post with your home address and telephone number so we can confirm it!? First, they have no legal right to make such demands, and most people value their privacy and feel no obligation to make such disclosures online and would only do confidentially to official law enforcement officials. Yet the poster will respond with claims of concealment announcing in another post that ?See - the party must be a fraud because they refuse to provide the information we requested.? 7. Generalization and stereotyping is prevalent on line and contributes to the smear tactics of a malicious posters who may just want to kill the sales of a legitimate competitor. For example, because there are so many fraud web sites operating from China and Africa, anyone can safely attack any Chinese or African competitor on line with false allegations knowing that the general public will probably believe their dubious remarks and never even bother to double check themselves. Such a comment would be something like ?This is just another scam export web site based in China.? And then they may even plug their own export company somewhere else in the thread. 8. Multiple identity bashing. Just as scammers use shills to bolster their false image on-line, those looking to smear a competitor will often create several internet IDs to generate false complaints or more phony allegations to make it appear that many people share the same views or mean spirit of the original poster caught in a dilemma of not being able to prove his accusations. Only those very familiar with analyzing IP addresses can catch these clever clowns in the act. For the average web surfer, it will appear as if there is indeed fire when there was not even a wisp of real smoke to begin with. So above is just a sampling of why whistle-blowing sites cannot automatically be believed, especially when they are totally unregulated and self-policing. Abusive and even proven slanderous posters are never prosecuted (it costs money!) and negligent or unethical moderators are not replaced because finding good and dedicated moderators to volunteer their time is not easy. Moderators do an awful lot of work for free and often make honest mistakes as well. So how can these fraud reporting sites regain the public?s trust and confidence? We have a few ideas that the CTC will be recommending to Congress, the FTC, and major search engines as follows? The China Trade Commission submits that every fraud reporting, due diligence, and whistle-blowing public forum web site should subscribe and honor the following code of ethics to safeguard the reputations of honest people everywhere: 1. No criminal accusations should be allowed to be posted without some documentation that can be verified, such as a cancelled check, email archive, telephone call recording, etc. to confirm the allegation(s). If not available the poster should be required to at least post their real name, real email, driver license number, and IP address so they can be tracked and sued for false statements. 2. Moderators should only ?moderate? and not be allowed to voice their own personal opinions. Their role should be limited to stopping hateful and foul language comments and deleting real spam. 3. Anyone accused of anything online should have the inalienable right to defend themselves with an on- line rebuttal within the same thread without editing provided no foul language or threats are used. Any moderator who censors legitimate and civil rebuttals should be terminated immediately. 4. Any poster or moderator caught posting false abuse reports to remove press releases or ad links of any party should be terminated and reported to law enforcement authorities immediately. 5. Assumptions, gossip, and rumors need to be universally banned from public forums that affect the business and personal reputations of others (i.e. due diligence forums). 6. An internet Ombudsman should be appointed to regulate and enforce ethical and professional standards and publish monthly quality control reviews of on-line due diligence web sites. Perhaps this task can be assumed by the folks at, or perhaps a special UN Internet Commission can be established to provide some recourse and remedy for those wrongly accused. 7. Any post that alleges criminal acts or wrong doing should be immediately deleted if it is disproven by any party either by an independent third party, documentation, or written statements of witnesses whose identities are verified to be genuine. 8. Web sites must be held accountable for any blatant, bald, accusations that do not include pertinent facts such as time, dates, place, names of victims, amount of fraud, how payments were made, etc. Simply posting legal disclaimers should not be enough since such disclaimers remove the incentive and motive to conduct professional and ethical oversight. 9. All posters should be required to register their real identities with the site administrator who should be required to do at least a call-back verification as Google now does on foreign email accounts. 10. Web sites that violate these ethical standards should be punished with 30 day suspensions for the first two violations and banned completely on the third strike. If implemented, the above guidelines would make the Internet a more honorable, ethical, and less malicious place for people to enjoy, surf, and expose real crimes. People from every country deserve protection from anonymous, cyberspace character assaults and smears with equal, ethical, and timely enforcement. Malicious perpetrators of slander should be prosecuted. - CTC
Posted: 02 September 2011, last updated 5 September 2011

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