Despite pages upon pages of concrete, solid evidence that proves the misconduct of these companies and the masterminds behind it, there will still be people who would continue to bring businesses to, and transact with such scam companies, and such outcome is not unheard of.
There is a form of cheating, known as small cheats, or low level cheating. There is a piece of essay written by a Professor of Law that describes this very well. I will share it here and hopefully it will shed some light on this, and let people be informed of such phenomena so they can make better informed decision when deciding which company to do business or invest with.
I will copy a short extract of the article in this post, and anyone interested can give it a read.
"INTRODUCTION
On May 29, 1622, the English Court of Star Chamber found the London grocer Francis Newton guilty of a nearly decade-long pattern of cheating on the weight of wares and containers. The court fined Newton the enormous sum of £1,000 and required him to make a public apology before the Grocers’ Company, the London guild to which he belonged. The men who heard this confession on July 26, 1622 were his trading partners, customers, friends, guild brethren, enemies, and neighbors. They were part of a network that ran from the import merchants and local manufacturers from whom the grocers bought wares, to the provin- cial middlemen and retailers to whom the grocers in turn sold those goods. These men all knew about the allegations against Newton. Three lawsuits over the previous four years had involved deposition testimony from over 100 individuals, including some of the men in that room and many of the men and women who sold to and bought from Newton. Gossip about his misdealing had spread through the grocer community of London and well out into the countryside. The organization of Newton’s trade encapsulated the prerequisites of public- and private-ordering explanations for cooperation in contract- ing. He engaged in repeat, bilateral transactions with a large number of other traders. All of these traders together existed within a dense net-work in which reputation-creating gossip could flow almost costlessly. A powerful guild could, in theory, impose and enforce boycotts, and an extensive and sophisticated court system provided a state-sanctioned means of punishing defectors. And yet, despite the existence of the presumed preconditions for cooperation, Newton cheated. He cheated a lot of people, each a little bit, and he got away with it for a long time. And then, even after he was
caught and very publicly punished, he continued to do business within the same network, in the same location, for the rest of his life. He died in 1630, a man of property, perhaps not as successful as he would have
been but wealthy enough to leave land in the countryside and a going concern in central London to his heirs. Fathers continued to place their sons with him as apprentices, and none of his existing apprentices left him after his sentence, though they could have done so under the rules and practices of the guild. Merchants continued to sell him expensive goods. His old customers did not abandon him. And not- withstanding the fact that his nephew, the eventual heir to his business,
had been his apprentice during the time of his trial and punishment and testified on his uncle’s behalf, no stigma seems to have attached to him in his career. The nephew became a governor of the Grocers’ Company,
a knight, and a very wealthy man. Private-ordering theories would likely not predict this outcome.
These theories hold that merchants have an incentive to act honestly because they will get a bad reputation if they act dishonestly, and this will damage their future business prospects. This Essay argues that
reputation-based private-ordering theories predict the wrong outcome in the Newton case, and in similar cases of low-level cheating both historical and modern, because they fail to recognize that not all opportunistic behavior is the same. Reputation-based private ordering that creates a disincentive for individuals or firms to commit big cheats may not effectively prevent the sort of small cheats in which Newton engaged. The difference between big and small cheats lies primarily in the difficulty of discovery, the cheater’s plausible deniability, and the victim’s willingness to suffer the flawed performance in silence. The big cheat— failure to deliver or to pay, delivery of unusable goods, hold-up, or signifi-cant misrepresentation—will rarely pass unnoticed. But victims of small cheats—the chiseling, shirking, and taking advantage at the margins— may never detect the cheating. And if victims discover the breach, the cheat may be minor enough that they may not be sure whether a trading partner had merely made a mistake she will happily correct, committed
an inadvertent breach that will never happen again, or deliberately wronged them. In addition, even if victims discover what they believe is low-level cheating, they may still prefer not to publicize it. Doing so may
be too much effort; victims may want to continue to do business with the cheater; or they may not be certain that others will believe their claims that the cheater cheated. If victims do not realize they have been cheated or prefer not to impugn the cheater’s reputation, they cannot leverage either private ordering or the courts to discipline the cheater.
From the cheater’s perspective, therefore, honesty may not pay when one can profit from small cheats without suffering future consequences.
Small cheats thus appear to raise governance challenges that neither public nor reputation-based private ordering can solve. Today, firms
with bargaining power can put monitoring and verification terms into their contracts to try to prevent shirking and punish small cheats with
liquidated damages. Consumers, by contrast, facing contracts of adhe-sion and unable to monitor the performance of the companies with which they transact, have limited options."