Trust in Economic Transactions

Trust in Economic Transactions

September 26th, 2007

I had heard that finding housing in Paris was tough, so I started looking online before coming to Paris. I found some websites renting furnished apartments aimed at short term visitors, who would prefer an apartment to a hotel, but I found that the rates were too high for my student budget. Having lived in the U.S., I had used websites such as eBay, Amazon.com, Paypal and Craig’s List without any problems and had developed some amount of trust in the use of online services. So I looked on Craig’s List and after a little while, I found a place close to the university where I will be based at a very good price. I e-mailed the person, who called himself Lionel Doyen, showing interest in his posting. I did not hear back from him until some days later. We had a serious e-mail exchange between July 15th and August 8th, 2007 regarding the details of the proposed real estate deal.

In his first reply to my inquiry, he wrote, “Excuse me for my poor english, I am a french speaking. You send me a message for a sublet studio in Paris center. The studio is still available, because I was not in Paris for longtime. I have just come back in Paris. I will try to explain you the things clear. it is a private studio. (…)full equipped (…). The monthly sublet is 500 euro, charges included. This apartment, I stay there since 7 years. But, now, I have finish the university, I am married and will stay with my wife in the biggest apartment from September. But, the problem is my junior sister will come to Paris next year (September 2008) to go to the university. That is why I want to conserve this studio for her (…) it is the reason I want to sublet it for a year, from this September until September 2008 or less.”


Lionel Doyen presented himself as an international graduate student from Africa who had graduated from Sciences Po. The story sounded feasible to me, yet after receiving this email, I asked for more details about the condition of the place and the street. He then insisted that I, or someone I knew, go visit the apartment. I asked a friend of mine living in Paris to do that for me. He went to see the studio and met Lionel. He found nothing wrong with the guy or the place, except that there was no talk of the mandatory renters insurance. And he told me that the French law about sublets is different that in the United States.
So, I addressed this issue with Lionel over email. Lionel said he would talk to the owner about subletting. At first he told me that the owner had told him that it was not possible. I asked him to insist. Some days later he told me that he had talked to the owner and that the owner would accept me as a sublettor, provided that I pay him directly. Lionel told me that the owner was a Canadian person living in Belgium, called Ernest Olivier Koumang. He also told me that he required a one month deposit in order to secure the apartment for me.

Given that this apartment was the only option I had seen online that fit my price and that it was extremely close to Sciences Po, with the understanding that online / international transactions always involve some degree of risk and trust, I wired the requested security deposit to the Belgian bank account.
Soon after, Lionel confirmed that the transaction was complete, but then I never heard from him again, including how we could coordinate for him to give me the keys. He ignored my e-mails and voice messages from that point forward.

When I arrived in Paris, I went to the address of the apartment. No answer. I talked to the employees of the business located at street level of the building; they told me that the apartment rent was a scam, and that they had had dozens of people asking about the same thing in the last months.

I went to the American Center in Sciences Po and told them my story. They told me that the same thing had happened to a graduate student from American University a week before. Indeed, doing a simple Google search on the above names returns a lot of recent warnings in English about this scam. He seems to specialize in English-speaking students coming from abroad, who want to find housing in Paris, online, and prefer to communicate in English. By offering apartments in nice neighborhoods at good prices and in English, he fills this niche. He does not deliver the product but keeps the deposits.

I went to the police but they told me the case would take a long time and that they could do little about the situation. While many others had reported the case to the police, the French police is not that well coordinated across different precincts and because this scam involves “an American website” and a Belgium account, they pass it to Interpol which is poorly funded and under-staffed (see a recent interview with the head of Interpol, Ron Noble, on 60 Minutes, during which he was moved to tears talking about the failure of the US to take Interpol seriously
http://www.youtube.com/watch?v=Yw1Qisp6hmQ.

Was this scam, due to lack of intelligence and vigilance, trusting too much? Maybe, and partly so, but this reminds us that all economic transactions depend on trust.

Taking a cynical and historical view, Professor Mihm of the University of Georgia says in relation to the recent housing mortgage crisis,

“John Adams, the former president, wrote in 1809 that ‘every dollar of a bank bill that is issued beyond the quantity of silver and gold in the vaults represents nothing and is therefore a cheat upon somebody.’ But Adams, you might argue, was missing an important point: credit is by definition a contradictory creature. It depends on trust and confidence and yet invites the possibility of fraud or, at the very least, grave disappointment. In some deep, unsettling sense, credit depends on credulousness. Or to put the matter differently, credit depends on promises — and promises, as the saying goes, are made to be broken” (Mihm, 2007).

Nor that I agree with the last statement, I want to believe in a system of exchange that is always reliable and just. But when there are no known previous transactional records, personal knowledge, strong regulation, stories, or the possibility to build new social relations, internet transactions between private citizens (“de particulier à particulier” as the French say) depend entirely on trust. And trust involves risk. But so does life.

To learn more see:

Mihm, Stephen. 2007. Counterfeit Nation. The New York Times Magazine. Idea Lab. August 19, 2007

http://www.nytimes.com/2007/08/19/magazine/19wwln-idealab-t.html?_r=1&oref=slogin

Mihm, Stephen. 2007b. A Nation of Counterfeiters: Capitalists, Con Men and the Making of the United States. Cambridge, MA: Harvard University Press.

For an analysis of trust and distrust and their much larger implications read:

Tilly, Charles. 2005. Trust and rule. Cambridge: Cambridge University Press.