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My response to shuttered "Busted a stealth wealth magnate today" thread
Old 06-17-2016, 08:37 PM   #1
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My response to shuttered "Busted a stealth wealth magnate today" thread

Wow, you guys are efficient (at getting threads shut down ). I post an interesting nugget from my day, go to sleep, recreate a bit and come to ER dot org to find it Porkied already. I wanted to respond to some of the suppositions of the facts and the comments in the original thread so I'll do so here.

Here's the original thread from yesterday: Busted a stealth wealth magnate today

Credit to Rodi for pointing out that "[f]olks - the point of this post was that a guy who was buying the truck was more successful than he first appeared. Stealth wealth." That's all I was trying to say. Just a surprising moment for me that completely violated my expectations of what the guy was probably like.

Maybe he lied to me. Maybe he's a tax dodger. Who knows?

He's in business with his 2 brothers, so divide any revenue projections and profit forecasts by 3 to get individual earnings. Whether he has $10 million in revenue or not is anyone's guess. As some mentioned in the original thread, new build residential construction is seasonal work and around here (North Carolina) it's very busy in the spring, summer and fall, and tapers off in the winter (can't do exterior paint in the winter; can't easily/cheaply lay concrete in freezing temps).

He put the van in his buddy's/family member's name (I didn't ask who he was). Maybe he's spreading ownership around to others in his family for asset protection reasons? Maybe he runs the crews on commission where they are 1099's and he gets a cut of their contract value? Maybe he lends them the purchase money for the van and equipment and makes $ as they repay over time.

I honestly have no clue how his business is structured, but I'm guessing somewhat loosely. I doubt there's a C Corp at the top that owns a bunch of subsidiary corps with separation of operations and assets. My 100% pure guess is that the three brothers each have many vans in their own names, then others in the family have some vans in their names (each brother might have a wife; probably lots of nieces, nephews, cousins, etc). I also get the feeling from the velocity of buying vans is that he's riding the local construction boom (not sure how long or strong it's been since I'm out of the business, but 6-12 months for new build residential is my guess; my engineering/development friends are crying about working 60 hour weeks once again). I hope he can ride the bust when it happens (and he probably can if he's paying cash for his assets).

As for the guy having dirty clothes and shoes, it wouldn't surprise me if he's doing some punch list walk throughs with project managers and/or owners. 29 crews is big but not that big. He's also out doing estimating work too. Drywall and paint are fairly cookie cutter in terms of quantity take off and unit costs, but maybe something he's more hands on about. It's really not that strange to have the top echelon of guys out in the field from time to time, though I agree he's probably not mudding and sanding every day as a laborer. When I worked on billion dollar heavy construction projects as the owner's rep, we would meet up with the top project manager on the job and occasionally do site visits and walk throughs and he always had mud on his boots (and knees, and sometimes shirt) even though he had well over 500 employees (and at least as many headcount with subs). Same with billionaire owners of construction companies, but to a lesser extent (but maybe they were trying to impress us owners). I get the feeling my van buyer wasn't a hands off delegator doing primarily office work and paper work, shaking hands, and rainmaking. Instead, he's probably known in the business by word of mouth as someone who does quality work in a timely fashion at a very competitive price (the magic combo to dominate the construction market).

The $5500 wad of cash I received at my bank was from Bank of America (at least he pulled it out of a BOA envelope). BOA is where the buyer offered to meet at first for the notary until I suggested by bank since it was closer (and safer for me so I could deposit the $ directly and stand zero chance of robbery after walking out of the bank). Maybe the guy I dealt with has an account there, maybe it is in someone else's name. For all I know he might have a commercial line of credit for six figures using the fleet of 29 vans and 29 sets of scaffolding, ladders, and miscellaneous equipment as collateral (and he might own a warehouse or storage facility that could serve as further collateral - got to park 29 vans somewhere). I know how easy it is for me to get hundreds of thousands of dollars in unsecured credit with no verification of income, assets, or ability to repay, so it wouldn't surprise me that having six figures in assets to serve as collateral plus contracts in place would qualify someone for a decent line of credit to be able to pull $6500 in cash for a last minute van purchase. He might be paying people in cash and $6500 might be pocket change to him (daily payroll during busy times would top $10,000-20,000 if he's working all 120 of his staff).

His wife might be an accountant or the mastermind scheduler for all I know. Her English wasn't great but that doesn't mean she's not a whip at the books. There are also accountants that are certified to offer services to the public (ACPs? CPAs? something like that ). Maybe they pay one of those. In any event, I doubt a large home builder would take on a complete mess of a sub (at least not more than once!), and they would likely require liability and other insurance with the prime contractor listed as additional insured. Performance bonds might also be required. I've mostly dealt with heavy construction as owner's rep for a public entity with very strict and formalized contracting rules, so not sure how fast and loose the home builders play it since their projects usually have 3-4 fewer zeros in the contract than what I was dealing with.

FYI, the van wasn't mine, it was my father in law's. I was helping him out by dealing with buyers and I've got a prime spot for selling cars. And I'm okay at negotiating and habla un poco espanol tambien (until they decide their broken English is superior to my broken Spanish ). I plan on verifying it's actually been re-registered in a couple of days. We took the license plate, so unless he puts one of his own on there, he's likely not going to make it too far on our roads. Plate vs vehicle mismatch is an extremely easy way to get pulled over for a traffic stop (though he might be able to slap another white van license plate on the new van and get by for a while), and something that cops look for all the time around here.

I didn't even think of issuing the guy a 1099 - didn't think it's required in this case for a private individual selling a van (it's technically a business asset for FIL's construction business as a sole proprietor, but they owe no taxes due to tiny income). I would have required cash of some sort to close the deal - not a check or cashier's check. We could have closed at BOA with him using a personal check that I cash at the front, but I didn't want to walk out of his BOA branch holding $6500 (the BOA is on the edge of the ghetto and I didn't know if he might ambush me). There was a slight risk of counterfeit currency, but the guy had no problem walking all around the video-recorded premises of my bank and using photo ID with the notary (pretty sure he withdrew at least $5500 straight from BOA shortly before the deal).

Senator mentioned "The real contractors may use legitimate subs, they have a license to lose. The subs use cash/1099 labor when they can. They do not use union labor." We don't have unions down here (it's North Carolina!), so anyone can set their rates at any price they want and anyone can get paid whatever they can get (including below min wage if they are set up as 1099s - let the employment lawyers figure out if it's legit). I really have no clue about his labor force, how many are undocumented aliens, or whether they are all W2 employees that passed federal employee eligibility screening.

From what I know about our local construction industry (professional experience; virtually everyone in DW's family are/were in the biz; I talk to people), poor compliance with labor laws is the worst kept secret around. It's how we build houses for $100,000 or less in many cases. Buyers are happy, real estate agents are happy, workers are happy (or at least have food in their bellies and enough cash for overseas remittances to keep food in their wife and kids' bellies back home), construction companies are happy. I can't recall meeting disgruntled displaced tradesmen because they either (1) start their own company and hire cheap labor, (2) get out of the biz, or (3) compete in an extremely high quality niche that can support above market wages (not saying immigrant labor pools can't be high quality; but rather there is a niche for anyone who can produce perfection).

edit to add: The list price on craigslist was $6,800. Eventual sale price was $6,500. KBB values for the year, make, model and mileage of van were:
Dealer:
Ask $7,631.00
Sale price $6,531.00
Private Party
Excellent $5,871.00
Very Good $5,216.00
Good $4,439.00
Fair $3,786.00

I'd say the van was in fair condition at best. Check engine light was on, at least one cylinder misfiring, rode rough due to misfiring. Back door wouldn't unlock from outside. Air conditioning blower motor or switch was stuck in "low". Many dings, scratches, large dents. Very dirty (filthy!) inside and out. Nothing that a shade tree mechanic couldn't fix to make it run well for $500 or so, so no biggie if you have the cash to fix it up.

I had one firm offer for $6,000 from the guy who didn't quite have the cash (but was going to get it the next day). Probably 3-4 inquiries within the first couple days including a few showings. So the list price was just about right, possibly a little low since I wasn't in a hurry to sell. Looking at the KBB values, my list price was about $1,000 to $3,000 above the KBB price for private party sales, but the van had a roof rack and some interior shelving/cabinets, so maybe add a few hundred for that on the secondary market. I also saw the same make and model and year in a lower mileage list for $14,000 (!!!) at a nearby car dealership, which perhaps suggests there's a tight supply of these vans in the used car market today. Cheap gas prices help sell these big V8's too. I don't think there was anything suspicious about the guy making a cash offer "$3,000 above KBB".

In contrast, I listed our 2000 Honda Accord at a few hundred dollars above the private party "excellent" condition at the exact same time. A few inquiries (but I blasted it all over the county on facebook buy/use/trade sites, craigslist, friends on facebook, etc). Zero showings so far after 6 days. White construction vans are hot is what I conclude based on all the interest. The van sale was most likely a legitimate transaction for business purposes and nothing nefarious.


====================================

I'll be happy to expound on any of this as long as the thread remains open. So please keep it civil.
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Old 06-17-2016, 09:41 PM   #2
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Thanks for the add'l detail.


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Old 06-17-2016, 11:50 PM   #3
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Thanks for the explanation, Fuego.

I'll admit I had a hard time understanding how paying cash for a craigslist transaction translated to running a questionable business... Craigslist tends to be cash... and doesn't reflect whether the buyer pays taxes, hires documented/legal workers, etc... No correlation, IMO.

Again, thanks for updating.
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Old 06-18-2016, 04:50 AM   #4
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Why are you surprised that someone can pay $6500 cash for a vehicle? Yep, hassle to seller on depositing but not unusual IMHO
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Old 06-18-2016, 06:03 AM   #5
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Great update. Once a poster mentioned something about stereotypes, the thread was shut down. There was nothing about stereotypes other than businesses with 129 employees, paying a large amount of cash.

This transaction would have generated an entry in the banks books when you made the cash deposit, and another similar sized one would likely to have flagged you as a money launderer or cash structure-er. It may have even gotten your account shut down. The same with the buyers account.

When I originally read the thread, I though that guy buying the van needed to borrow money from a cousin, when he had a crew of 129.

The guy could well have been legit. Most legit semi-large businesses do not do business like that. Likely a cashiers check would have been given you could cash there, or some sort of documentation of payment, like a bill of sale and your signature. He may have had 129 employees, and a stealth wealth magnate, but likely was a bit stealthy in other areas.

America is a place where anyone can be a millionaire, regardless of where they started. If you work hard enough, have enough ambition, drive and determination anything is possible. Anyone that doesn't think so, does not have the traits listed above.
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Old 06-18-2016, 06:23 AM   #6
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Great update. Once a poster mentioned something about stereotypes, the thread was shut down.
[mod hat on] When members began to accuse each other of bias the thread was closed to avoid an unfriendly outcome. [/mod hat off]
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Old 06-18-2016, 06:52 AM   #7
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Living in southwest Florida, this scenario doesn't surprise me at all. These newcomers are go- getters. The " build the barn before the house " mentality is alive and well. I met a 24 year old immigrant last month whose framing and drywall business did 20 million last year. They have no fear. The next greatest generation, IMO.
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Old 06-18-2016, 08:07 AM   #8
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This is just a general things going on in the country today. As far as the reputable long in business home builder. Hiring them nowadays is like having an operation. Who exactly is going to cut into you on the table, the nationally ranked surgeon you went to, his resident assisted by an intern? It puts another layer in a transaction that might be out of your control and make you feel like you might not be getting exactly what you pay for. and that you always need to watch everything like a hawk, which is what you thought you were paying the contractor for.

Yes it's nice to save money but it also has taken away a lot of local full-time jobs with benefits.
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Old 06-18-2016, 08:44 AM   #9
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I like cutting out the middle men when it comes to things like home repairs, painting, etc. Last year when we tiled the house I saved over half by buying my own materials and hiring setters directly. Why should a contractor take the lions share of the sale when the setters do all the work? That is sooo 2005.
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Old 06-18-2016, 08:49 AM   #10
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Senator - have you ever purchased a used car on Craigslist? If so, were you able to pay by check?

I have both bought and sold on Craigslist. I had to go to the bank and withdraw the cash when I was purchasing. I had to go to the bank and deposit the cash when I was buying. I did not have to fill out any special forms. If it were a business transaction, I would keep track of the details in my accounting.

On craigslist, private party auto sales are cash. That's just the way it is.
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Old 06-18-2016, 09:30 AM   #11
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+1 most larger craigslist transactions that I have done are cash... why in the world would I take a check from a stranger? Sold a car late last year for $10k.. met at the bank parking lot deposited the cash in my account and then I signed the papers. Similar for sale of $2k snowmobiles. Sold a boat for $7k and accepted a cashier's check for that one. A buddy bought a plow truck for $7k cash. Very common in this area.
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Old 06-18-2016, 09:34 AM   #12
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Yep, we took cash or cashiers check (where I went to the bank with the buyer to see the check issued) when we sold an RV and sailboat way back in 2005.
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Old 06-18-2016, 09:40 AM   #13
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...cashiers check (where I went to the bank with the buyer to see the check issued)
If you or the seller aren't comfortable dealing with a big wad of cash, this is about the best way to be sure the check is good. I did take a cashier's check from an out-of-town buyer for a boat I sold on Craigslist, but prior to signing over the title I called the issuing (small town) bank to confirm they had issued the cashier's check to the buyer.
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Old 06-18-2016, 10:10 AM   #14
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Fuego says: "White construction vans are hot is what I conclude based on all the interest." (end quote)
+++

I don't know anything about the construction business...

"Hey, redduck, add that to the list."
"It's already on the list."

...but the color of the van (let's say white is a color) was mentioned several times (ok, at least once) in the now-deceased thread. Would a green or blue or brown van be less desirable? Anyhow, why would a white van be so desirable?
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Old 06-18-2016, 10:20 AM   #15
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generally the white vans have the interior set-up of a service van, not a passenger van. I think of the service vans I see on the road at least 90% of them are white.
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Old 06-18-2016, 10:26 AM   #16
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Fuego says: "White construction vans are hot ..... Would a green or blue or brown van be less desirable? Anyhow, why would a white van be so desirable?
You bought a brown painter's van (blue carpet layer's, green drywaller's...)? What are you? A bad undercover cop? It would be like a cowboy with a porkpie hat or a doctor in sweatpants.
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Old 06-18-2016, 10:27 AM   #17
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+1 most larger craigslist transactions that I have done are cash... why in the world would I take a check from a stranger? Sold a car late last year for $10k.. met at the bank parking lot deposited the cash in my account and then I signed the papers. Similar for sale of $2k snowmobiles. Sold a boat for $7k and accepted a cashier's check for that one. A buddy bought a plow truck for $7k cash. Very common in this area.
Agreed. But when a BUSINESS does a transaction, cash is not preferable. A $6500 cash transaction borders on money laundering. The BUSINESS also needs to pay sales tax on any purchases, whether it is a vehicle, a couch or a lawn mower - even if purchased from a private individual.

The government loses the ability to track income and expenses if you use cash.
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Old 06-18-2016, 10:32 AM   #18
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[mod hat on] When members began to accuse each other of bias the thread was closed to avoid an unfriendly outcome. [/mod hat off]
Right call in my view. Nice hat.
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Old 06-18-2016, 10:38 AM   #19
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You bought a brown painter's van (blue carpet layer's, green drywaller's...)? What are you? A bad undercover cop? It would be like a cowboy with a porkpie hat or a doctor in sweatpants.
I have to admit, my late father was a surgeon and I never once saw him in sweatpants. Ugly bright Hawaiian shirt, shorts, and Mexican sandals when on vacation, yes, but sweatpants? Never, not on your life. At the office he always wore a conservative suit, tie, and starched white shirt. The idea of him in sweatpants has me laughing uncontrollably.
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Old 06-18-2016, 10:58 AM   #20
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Agreed. But when a BUSINESS does a transaction, cash is not preferable. A $6500 cash transaction borders on money laundering. The BUSINESS also needs to pay sales tax on any purchases, whether it is a vehicle, a couch or a lawn mower - even if purchased from a private individual.

The government loses the ability to track income and expenses if you use cash.
Interesting. My dentists office offers a 5% cash discount. Not CC, or check, but cash. I bring cash. He's a legit business person. I suspect the cash discount is because checks can bounce and CC's charge fees. I recently paid $199.50 in cash for my son's filling. It would have been $210. As far as I know, the dentist isn't laundering money... he takes insurance (but we don't have dental insurance), he does billing... he doesn't advertise the cash discount - I had to ask if there was one - and then discussed exactly what it meant (no checks). His office manager explained it was a discount for ensuring he was paid in full with no risk. Apparently about 10% of the checks they receive bounce.

I have no reason to believe my dentist is laundering money.
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