Fraudster fools UK distributor in 'Nato' scam

A small English distributor was caught in a scam which saw industry giants such as EDS lose millions of pounds to a con man posing as a Nato official. Reading-based Envisage Distribution lost £500,000.

The distributor was lured by the prospect of substantial management fees for its role as an intermediary between computer suppliers and a man who claimed to be a representative of a top secret $120bn (£75.4bn) Nato project.

Envisage said it understood orders would be placed for digital video, audio and computer equipment after an evaluation exercise had been completed.

Suppliers were told their products would not be returned because this evaluation would involve "testing to destruction".

Jonathan Tickner, a solicitor acting on behalf of Envisage, said the distributor was convinced by substantial amounts of documentation with official letterheads. "He used highly sophisticated language and demonstrated a high degree of technical knowledge," Tickner said.

Envisage introduced 30 vendors to the project. Two vendors are suing EDS to recover money lost, but Tickner said no companies are suing Envisage.

The man who called himself 'Colonel Reed' has not been caught. Nato has admitted it was notified of the existence of this 'fraudulent entity' in 1997 and decided to take no public action. Envisage is considering whether it can take any legal action against Nato.