By Jenny Callison
This is the second in a two-part series on business-opportunity fraud, in which con artists scam would-be investors or those who want to work at home. The FTC says consumers are losing more to this kind of consumer fraud than any other.
The current economic slump has business-opportunity scammers working overtime.
"We see victims who are educated people, accountants and teachers," said Todd Leatherman, director of Kentucky's Consumer Protection Division. "A lot of people these days are looking for a career change. They have a nest egg. The salesperson paints the opportunity in glowing terms: `Live the life you've always wanted. All you have to do is follow the instructions, work hard and take a little risk.' Unfortunately hundreds of thousands of people sink their life savings into these things."
Seventeen state law-enforcement agencies, including the attorney generals of Ohio, Kentucky and Indiana, have announced 48 actions against business-opportunity sellers. Those actions include lawsuits, cease-and-desist orders, consent agreements and fines.
But many of these organizations simply move or change their names, so they are hard to find and prosecute.
The best defense is a wise and aggressive offense. If you are intrigued by a business opportunity, you owe it to yourself to check it thoroughly.
First, order the free publications available through the Federal Trade Commission. They are: "Net-Based Business Opportunities: Are Some `Flop-portunities?' " "Could `Biz Opp' Offers Be Out For Your Coffers?" "Answering the Knock of a Business Opp" and "Can You Recognize a Business Opportunity Fraud?" They are available on the Internet at http://www.ftc.gov/bizopps.
Next, get in writing what your initial investment gets you and what is expected of you, advised Staci Schneider, press secretary for the Indiana Attorney General's Office.
Stephanie Beougher, spokeswoman for the Ohio Attorney General's Office, offered similar counsel.
"Get all information in writing: what the job entails, who pays for what, and how much money is required up front," she said.
"Then contact an attorney, an accountant and someone else whose advice you trust, and run the information by them. The goals should be realistic; there's no such thing as overnight success."
A business-opportunity company that requires an investment of $500 or more must be registered with the state in which it does business.
"A lot of these organizations will make the individual's investment $499 or less, so they don't have to take out a surety bond or register with the state," said Ms. Schneider. "So no one is watching."
The Federal Trade Commission urges would-be investors to ask the business-opportunity company for disclosure statements. If the business opportunity is a franchise, it falls under the FTC's franchise rules and must provide details about the cost of starting and maintaining the business, a financial statement, and the names and addresses of 10 franchisees in the area. If the information looks good, call every one of the franchisees, and seek out other franchisees that are not on the list.
If you smell a rat, don't invest any more time or money. And report deceptive business practices to your state's attorney general. Government agencies can't take action if they don't know about problems. Don't be embarrassed if you've been taken in: many other people have, too.
As a result of consumer complaints, states are taking a variety of actions, from sending warnings to filing lawsuits, against companies whose practices violate the law.
"Eliminating business-opportunity fraud is a process of education: of the consumer, of the prosecutors and of the judiciary," Mr. Leatherman said.
Beware: Scammers working overtime
Old tires turned to new uses
Branching out helps Silky Way grow more business
Small Business Advice: What can GOP do for you?
Quilt business finds pattern for success
Tristate Business Notebook
Business Meetings This Week
Commercial Real Estate Transfers
Hollywood can't scare DVD-copier company
Organic, nonorganic separated