In what is already a challenging industry, shops in recent months have found themselves the target or victim of a wide range of fraud and scams. The tough economic period the country has experienced only increases such illegal activity – and make it more important than ever that shops take steps to protect themselves.

Here's a look at some of the latest or most common ways businesses in the industry have fallen prey to the unscrupulous, and what you can do to avoid the same fate.

An inside job

Police arrested the bookkeeper of a collision repair shop in Clovis, Calif., in mid-2008, saying she embezzled $415,000 from the business. The shop owner said the woman worked at the shop, which has annual sales of about $3.5 million, for about four years. During that time, authorities allege, she would run credits of up to $1,000 a month on a personal credit card (a call from the bank about this activity is what alerted the shop owner). She also would indicate in the shop's books that checks made out to herself were actually payable to shop vendors.

“Because she balanced the checkbook, I never looked at the checks,” the shop owner said.

He suspects the total amount he lost may be closer to $1 million.

Jesse Henry said he, too, suffered heavy losses at the expense of an embezzling bookkeeper.

“I trusted this woman with everything,” said Henry, owner of Superior Automotive, a 25,000-square-foot body shop in the heart of San Francisco. “She did my payroll and everything. It was just the two of us in the office then. She wrote herself checks and bought computers and iPods on our credit.”

But as if the embezzling weren't bad enough, Henry's employee also helped organize a Christmas party for employees at the shop, during which her boyfriend, thanks to a tip from the woman, broke into Henry's home and stole $50,000 worth of property (some of which police eventually recovered at the woman's apartment).

One thing both shop owners now recommend: Conduct background checks before hiring. The Clovis, Calif., shop owner said he had been unable to check his employee's previous references because, ironically, her last two employers had gone bankrupt. But a background check would have alerted him she'd had some trouble in her past.

Other internal fraud prevention tips: Sign checks yourself or review copies of checks each month. Make sure all checks are accounted for, including those damaged or voided. Compare accounts payable checks to vendor statements. Assign different people responsibility for writing checks and reconciling the account. Have bank statements mailed to your home.

Credit card fraud

Dozens of shops have reported receiving operator-assisted “relay calls” (designed to assist the hearing impaired) from a “Dr. Sherry Smith” who says she wants to get a vehicle painted. The caller offers to put $1,000 down on a credit card, but wants the shop to wire $820 to a shipping company that will deliver the car to the shop.

The Better Business Bureau of Northern Indiana cautions that such exchange of funds usually involves a scam using stolen credit card numbers.

Sensing a scam when she took such a call, Muffy Revell of Sisk Auto Body in Owings, Maryland, said she contacted AT&T and the Federal Communications Commission about such a call the shop received last year and was told the calls often are placed via the Internet and thus cannot be traced.

She did receive a packet of information from the FCC including its alert reminding businesses that they should not hang up on such callers (the Americans with Disabilities Act requires companies to make their services available to those with disabilities) but to take precautions when accepting credit card payments:

-- Be wary of cards that are not signed or lack the standard security features (hologram, 3- or 4-digit security code).

-- Consider asking for identification from anyone paying with a credit card.

-- Use the address verification service that card processors offer. This is particularly important when accepting a card payment over the phone. It allows you to enter the cardholder's address in addition to card number to make sure it matches the account.

Protect your ID

Two shops in the same Ohio town say their companies' federal tax ID numbers were fraudulently used last year to establish cell phone accounts or make purchases at national office supply chains.

Dawn Hilty of Wingate Body Shop in Findlay, Ohio, said she received a call last year from AT&T to confirm that her business was applying to purchase 25 cell phones. She received similar calls over the next week, learning someone was attempting to purchase a total of 100 cell phones.

The following week, she received a letter from Staples saying it was denying her credit application (she had not applied) as well as an invoice from Office Depot for $5,224 for four laptop computers purchased in Montgomery, Alabama.

Vanessa Boutwell-Dietsch at Boutwell Collision, also in Findlay, had a similar experience, getting calls about attempts to establish credit in her company's name (using its federal tax ID number) at Home Depot and Cincinnati Bell Wireless, and receiving a Staples card showing the shop had applied for and been approved for a $5,000 credit line.

Both women say they are out no money, but after hours spent on calls to the police, FBI, Federal Trade Commission, banks and credit bureaus, they now realize there is far less in place to protect businesses (as opposed to individuals using Social Security numbers) from such “identity theft.”

Hilty said she eventually was able to get a fraud alert placed with Dun & Bradstreet. But she and identify theft experts caution businesses to protect their federal tax ID number by:

- not including it on estimates;

- limiting how many employees have it and ensuring they know how it is to be used or shared;

- not giving it out to callers without confirming who they are and that they have a legitimate need for it; and,

- shredding any documents to be disposed of that include it.

Jury duty calls

Another West Coast shop warns of a "jury duty" scam the FBI issued a warning about back in 2006 but that still continues. A caller to the business identifies himself as an officer of a local court and tells the person taking the call they failed to report for jury duty and that a warrant has been issued for their arrest. When told a jury summons was never received, the caller says he can clear up the matter but just needs a birth date and Social Security number for "verification purposes.'

There's no way to protect your business 100 percent from a determined scam artist. But by following the advice outlined here – and helping your employees develop their own nose for deals that aren't such deals – you can at least make sure the unscrupulous have to work as hard as you do in order to get at any of your money.

In what is already a challenging industry, shops in recent months have found themselves the target or victim of a wide range of fraud and scams. The tough economic period the country has experienced only increases such illegal activity – and make it more important than ever that shops take steps to protect themselves.

Here's a look at some of the latest or most common ways businesses in the industry have fallen prey to the unscrupulous, and what you can do to avoid the same fate.

An inside job

Police arrested the bookkeeper of a collision repair shop in Clovis, Calif., in mid-2008, saying she embezzled $415,000 from the business. The shop owner said the woman worked at the shop, which has annual sales of about $3.5 million, for about four years. During that time, authorities allege, she would run credits of up to $1,000 a month on a personal credit card (a call from the bank about this activity is what alerted the shop owner). She also would indicate in the shop's books that checks made out to herself were actually payable to shop vendors.

“Because she balanced the checkbook, I never looked at the checks,” the shop owner said.

He suspects the total amount he lost may be closer to $1 million.

Jesse Henry said he, too, suffered heavy losses at the expense of an embezzling bookkeeper.

“I trusted this woman with everything,” said Henry, owner of Superior Automotive, a 25,000-square-foot body shop in the heart of San Francisco. “She did my payroll and everything. It was just the two of us in the office then. She wrote herself checks and bought computers and iPods on our credit.”

But as if the embezzling weren't bad enough, Henry's employee also helped organize a Christmas party for employees at the shop, during which her boyfriend, thanks to a tip from the woman, broke into Henry's home and stole $50,000 worth of property (some of which police eventually recovered at the woman's apartment).

One thing both shop owners now recommend: Conduct background checks before hiring. The Clovis, Calif., shop owner said he had been unable to check his employee's previous references because, ironically, her last two employers had gone bankrupt. But a background check would have alerted him she'd had some trouble in her past.

Other internal fraud prevention tips: Sign checks yourself or review copies of checks each month. Make sure all checks are accounted for, including those damaged or voided. Compare accounts payable checks to vendor statements. Assign different people responsibility for writing checks and reconciling the account. Have bank statements mailed to your home.

Credit card fraud

Dozens of shops have reported receiving operator-assisted “relay calls” (designed to assist the hearing impaired) from a “Dr. Sherry Smith” who says she wants to get a vehicle painted. The caller offers to put $1,000 down on a credit card, but wants the shop to wire $820 to a shipping company that will deliver the car to the shop.

The Better Business Bureau of Northern Indiana cautions that such exchange of funds usually involves a scam using stolen credit card numbers.

Sensing a scam when she took such a call, Muffy Revell of Sisk Auto Body in Owings, Maryland, said she contacted AT&T and the Federal Communications Commission about such a call the shop received last year and was told the calls often are placed via the Internet and thus cannot be traced.

She did receive a packet of information from the FCC including its alert reminding businesses that they should not hang up on such callers (the Americans with Disabilities Act requires companies to make their services available to those with disabilities) but to take precautions when accepting credit card payments:

-- Be wary of cards that are not signed or lack the standard security features (hologram, 3- or 4-digit security code).

-- Consider asking for identification from anyone paying with a credit card.

-- Use the address verification service that card processors offer. This is particularly important when accepting a card payment over the phone. It allows you to enter the cardholder's address in addition to card number to make sure it matches the account.

Protect your ID

Two shops in the same Ohio town say their companies' federal tax ID numbers were fraudulently used last year to establish cell phone accounts or make purchases at national office supply chains.

Dawn Hilty of Wingate Body Shop in Findlay, Ohio, said she received a call last year from AT&T to confirm that her business was applying to purchase 25 cell phones. She received similar calls over the next week, learning someone was attempting to purchase a total of 100 cell phones.

The following week, she received a letter from Staples saying it was denying her credit application (she had not applied) as well as an invoice from Office Depot for $5,224 for four laptop computers purchased in Montgomery, Alabama.

Vanessa Boutwell-Dietsch at Boutwell Collision, also in Findlay, had a similar experience, getting calls about attempts to establish credit in her company's name (using its federal tax ID number) at Home Depot and Cincinnati Bell Wireless, and receiving a Staples card showing the shop had applied for and been approved for a $5,000 credit line.

Both women say they are out no money, but after hours spent on calls to the police, FBI, Federal Trade Commission, banks and credit bureaus, they now realize there is far less in place to protect businesses (as opposed to individuals using Social Security numbers) from such “identity theft.”

Hilty said she eventually was able to get a fraud alert placed with Dun & Bradstreet. But she and identify theft experts caution businesses to protect their federal tax ID number by:

- not including it on estimates;

- limiting how many employees have it and ensuring they know how it is to be used or shared;

- not giving it out to callers without confirming who they are and that they have a legitimate need for it; and,

- shredding any documents to be disposed of that include it.

Jury duty calls

Another West Coast shop warns of a "jury duty" scam the FBI issued a warning about back in 2006 but that still continues. A caller to the business identifies himself as an officer of a local court and tells the person taking the call they failed to report for jury duty and that a warrant has been issued for their arrest. When told a jury summons was never received, the caller says he can clear up the matter but just needs a birth date and Social Security number for "verification purposes.'

There's no way to protect your business 100 percent from a determined scam artist. But by following the advice outlined here – and helping your employees develop their own nose for deals that aren't such deals – you can at least make sure the unscrupulous have to work as hard as you do in order to get at any of your money.