It’s one of the oldest scams around: A businessman approaches investors and banks, talks about how fast his company is growing, backs up his claims with phony financial statements, contracts and collateral, and walks away with thousands or even millions in loan and investment dollars.

It may take months or years before the investors and lenders realize they’ve been duped that the business, if there even is one, is not fast-growing, that the financial records were fake and that the collateral doesn’t exist.

And that they are unlikely ever to see their principal again, much less any returns.

Los Angeles, particularly because of the large number of small start-up businesses here, long has been a center for what is called “the businessman scam.” (Indeed, it is typically men who perpetrate it.)

One of L.A.’s more infamous practitioners was Barry Minkow, who took the ZZZZ Best carpet-cleaning business public and grew the company to a market capitalization of more than $200 million (and his own personal wealth to $100 million). The brash Minkow even bought himself a red Ferrari and a large house in a gated community in Woodland Hills.

The company turned out to be little more than an elaborate pyramid scheme, involving phony documents, check kiting, laundered money and insurance fraud. Minkow was sentenced to 25 years in prison and $26 million in court-ordered restitution to his victims. He served 54 months before being released in late 1994, and is still working on repaying his victims.

Now a senior pastor at Community Bible Church in Mira Mesa, a suburb of San Diego, Minkow hosts a radio program dealing with issues like business scams.

Why was he able to dupe so many? Minkow says it all came down to investors not doing their homework.

“People do more due diligence in the produce section of the supermarket, choosing between the ripe bananas and the unripe bananas, than they do in investing in a business deal,” he said.

Besides investment dollars, scammers also could be looking for lines of credit from other businesses. Those lines are then used to get computer equipment and other goods without paying for them.

For credit references, the scam artist often establishes dummy corporations he himself created, complete with fake addresses and phone numbers in other cities. Phone calls placed to those other cities are automatically forwarded back to L.A., where partners of the scam artist answer the phone.

“They have someone sitting there saying, ‘Oh yes, they’re a wonderful customer. They’re very fast payers,’ ” said Henry Kupperman, director of West Coast operations for Investigative Group International Inc., a Washington, D.C.-based consulting firm.

That type of scam is easier to pull off these days given how accessible and inexpensive cellular phones, pagers and voicemail systems have become. “We now live in a world of virtual reality,” Kupperman said.

Also changing the nature of scams is deregulation. Two current examples are “slamming,” when a phone company changes a customer’s long-distance service provider without the customer’s permission (often leading to higher charges); and “cramming,” when a company adds services to a phone line, resulting in additional charges.

With the electricity industry now in the midst of being deregulated, a similar increase in fraudulent activities will likely occur in that industry as well, said Tom Papageorge, a deputy district attorney who heads L.A. County’s consumer protection division.

The aim of deregulation, to open up a market for new competitors, also opens up the market to swindlers.

“The problem is, so frequently, that fraud artists flood into the market too,” he said. “So scams of this kind grow up where customers are not sophisticated or don’t understand how (the new system) works.”

Bamboozling Creditors

Common Scam: Creating a company and using phony credit references to get computers and other goods on credit with the intent of never paying off the debt.

How It Works: The scam artist creates a fake company and applies for a line of credit with a computer supplier or other business that offers a line of credit. He also creates phony credit references, often with phone numbers and addresses in other cities around the country. Calls to those “references” are actually forwarded to the scam artist and his associates, who then give positive feedback about the fake company. To the victim, the phony company appears to be thriving, and therefore a line of credit is extended.

How It’s Detected: By undertaking more extensive due diligence. Rather than just checking with the supplied credit references, the business extending the line of credit should check such facts as how long the prospective customer has been in business. That can be accomplished by checking the company’s DBA (doing business as) filing at the Secretary of State’s office. The lender can also check court filings for cases involving the company. If the business has been around a long time, it likely has sued or been sued at some point. If the line of credit being extended is large, it may make sense to hire an outside firm to do a background check.