Steve Quayle News Alerts

Sept. 25, 2002
By Stephanie Armour, USA TODAY

Bob Keith worried it would be hard to find a job in the sluggish economy. So he answered ads that promised he could make money easily by getting all the materials he'd need to sell compact discs and espresso drinks. The companies would send him popular music he could sell at shops and coffee-drink machines he could set up in stores. (Related item: Protecting yourself from employment scams)

But instead of earning an income, Keith says, he spent more than $30,000 on start-up materials that didn't pan out or were so obsolete they would never turn a profit.

"This depleted everything I had," says Keith, 54, of Philadelphia, an assistant manager at a Halloween store. "They don't care if it's your life savings. I was left holding the bag. It's a white-collar mugging."

Authorities say Keith was a victim of employment-related fraud — a con that federal officials warn is soaring along with the unemployment rate. Ads that promise you can quit your job and work at home to make thousands of dollars a week are popping up everywhere from the Internet to the handwritten sign on the corner telephone pole.

Most are shams.

The Council of Better Business Bureaus in 2001 fielded more than 460,000 questions about the veracity of work-at-home offers — a 70% jump from the year before. The number of complaints about such scams increased by 20%. Work-at-home opportunities are the most-asked-about type of business at the agency.

Such rackets are on the rise, officials say, because joblessness is climbing in the sluggish economy, and the Internet now enables swindlers to seduce more potential consumers with e-mail pitches and online job boards.

"Every time there are problems in the economy, that makes people more vulnerable," says Susan Grant at the National Consumers League in Washington, D.C. "They play on human nature. We'd all like to think there's a way we can make thousands a month working from home."

Consumers most often victimized by spurious employment offers include stay-at-home moms, the elderly, the disabled, the unemployed and younger workers who are less savvy about the job market. Some have sold their homes, depleted savings, spent months assembling products they'll never get paid for or moved cross-country for jobs that never existed.

"You feel foolish because you put your trust in others," says Eric Nystrom of Fargo, N.D., who says he and his wife, Patty, were bilked out of more than $4,000 through a medical billing operation. "You just wanted to make money in your home. It was a beautiful scam."

How scams work:
* Many scams involve phantom civil service jobs. In these cases, consumers pay for exams or study materials that are supposed to land them jobs with the government or Postal Service. Promised jobs never come, and the money-back guarantee is phony.

And in the past few months, authorities say they're seeing a new twist: scams related to Sept. 11 in which consumers pay for fake training or testing materials guaranteed to get them jobs as airport screeners. The jobs never appear.
* Business-opportunity scams require consumers to pay upfront for vending machines, software materials or other start-up equipment. The materials never materialize or are far less than promised.
* In work-at-home shams, consumers pay fees for tasks such as stuffing envelopes or processing medical claims. Most envelope-stuffing offers are basically Ponzi schemes, in which each victim is told to solicit new victims in order to make money.

Other consumers pay for start-up equipment to make products such as toys. But in order for them to get paid, the products must get final approval from the company — authorization that never comes.

"Even experienced seamstresses find they're not good enough," says Ron Berry, senior vice president of the Council of Better Business Bureaus, adding that victims may work for months before they realize they've been bamboozled. "Some people wind up with a garage full of doodads."

Unemployed most vulernable

Such fraud is big business. In one scheme that offered non-existent postal jobs, consumers paid processing fees of $45. Enough people fell for it that the company bilked them out of more than $25 million. Individual losses can be hefty, with some victims spending tens of thousands of dollars.

"These are the most vulnerable, the out of work," says Gregory Ashe, a staff attorney at the Federal Trade Commission's Bureau of Consumer Protection. "Even if it's $45 or $75, for someone out of work, that's a good portion of what may go to rent or food. The damages are huge."

Scams take all forms. Consider recent cases:
* A new work-at-home scam uncovered this year by the New York State Consumer Protection Board involved hundreds of women in the USA and Canada.

According to officials, the women were told they would earn $1.48 a minute working out of their homes as telephone operators talking to men on a "Lonely Hearts" chat line. To reach customers, they were given a long-distance number to call.

But instead of men, they found themselves talking to women who turned out to be employees of a "Wild Side" telephone sex line. And instead of making money, the women were billed for a total of at least 30,000 minutes of long-distance charges.

The Winnipeg-based employer was shut down in February, according to a release. Some victims lost as much as $2,000.
* In August, a Utah man was indicted for setting up an employment scheme in which he allegedly pretended to be with the U.S. Department of Defense. According to legal documents and the attorney general's office, he recruited employees for a bogus top-secret project. Job applicants had to fill out forms that asked for personal information that officials say could have been used to cheat them out of money.

The man "outlined work schedules, pay and benefits, as well as uniform issues and weapons-qualifications issues," according to an affidavit from an agent who investigated the case.

About 140 were duped, officials say. Some gave notice to their employers, and one relocated to Utah for a job that never existed, authorities say.
* The Federal Trade Commission this year filed a complaint in federal court against a Florida-based company, Stuffing for Cash, that used e-mail and an Internet Web site to offer people opportunities to work at home.

For $40, consumers expected to get sales letters and pre-stamped, pre-addressed envelopes, federal officials say. They were offered $2 for every envelope they stuffed at home. Officials say most consumers who sent money didn't get a thing.

Thousands of consumers were taken in by the scam and were bilked out of more than $2 million in the past year, officials say. A U.S. District Court barred the company from engaging in further deceptive practices and froze its assets, according to a release.

Late to suspect trick

Often, victims don't get suspicious until it's too late.

Mechanic Randall Gott says he had no idea he was being tricked. His wife, Maria, 30, worked at a restaurant but wanted a second income source. To help her, he answered an ad in the local paper offering to sell him vending machines that would turn a profit.

But first he had to send an $8,500 cashier's check. Gott wasn't suspicious: Company officials spoke to him on the phone and sent glossy, 25-page pamphlets on their product. There were no complaints, he says, on file with the local Better Business Bureau.

So Gott took out a home-equity loan and sent the money. The machines, he says, never came.

"I didn't get anything," says Gott, 44, of Milford, Ohio, who says he is still paying interest on the loan. His wife had to take another job working full time. "I called and they said (the owner) would call back, but I would never hear from him."

The Ohio attorney general's office, which sued the company, Advanced Marketing Systems of New York, says four consumers lost about $40,000. But a spokeswoman says the case is languishing because the company's owners have vanished.

That's not unusual. Victims never recover much, if any, of the money they've invested. That's because the companies tend to burn through cash at a furious pace, leaving nothing to be recovered. Or they may stash money in offshore accounts.

Nevertheless, government agencies are cracking down. This summer, a federal sting operation netted 77 operations in 16 states. The employment scams were found throughout the USA — including Alaska, Arkansas, California, Maryland, Michigan, North Dakota, Washington and Wyoming.

Online job boards also are trying to ferret out scammers. At Monster.com, which has been used by some attempting to post employment rip-offs, a team of employees screens postings. Questionable ones — such as ads requesting Social Security numbers, personal financial data or upfront fees — are removed and may be reported to the Better Business Bureau.

"We have to do whatever we can to provide a safe site," says Steve Pogorzelski, president-North America for Monster. "We believe we're very diligent."

And while some outfits posting ads are legitimate, most are not — especially those that require upfront fees or promise jaw-dropping earnings. How many are scams? The Better Business Bureau in 2000 undertook a yearlong study of 112 work-at-home operations advertising in newspapers, the Internet, on posted signs and in magazines. Not one of the ads yielded the money that had been promised.

Yvonne Gibson is still waiting for her cash. The 43-year-old restaurant manager in Madison, Ala., was trolling the Internet for home-based businesses when she came upon a Web site promising up to $1,200 weekly stuffing envelopes in her home.

She sent in about $50 in processing and start-up fees and waited for the work to arrive. Instead, Gibson says, she found what is described as a pyramid scheme: She was instructed to mail letters to other people soliciting them to send money. The North Carolina Better Business Bureau says more than 2,200 victims complained about the company, Tolbert Enterprises. The attorney general's office stepped in, and the company shut down in June.

Its owners could not be reached for comment.

"I didn't get my money back at all. To me, the advertisement was misleading," Gibson says. "I sent my money and waited for a response, and when I got it I said, 'This is not right.' I learned if something sounds too good to be true, it is."

http://www.usatoday.com/money/bcovwed.htm