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The U.S. Postal Service reports that phony invoice scam artists succeed in collecting a significant percentage of all the bills they mail, but notes that due to the nature of the crime, it is impossible to determine the exact extent of losses.

While law enforcement officials are unable to place an actual dollar figure on the amount swindled each year, the fact that this type of con artist mails thousands of phony invoices, and solicitations disguised as invoices, on a regular basis, points to an annual loss to businesses that may run into billions of dollars.

Table of Contents
* Anatomy of a Phony Invoice Scam
* Solicitations in the Guise of Invoices
* Phony Advertising Solicitations
* Bogus Yellow Pages Bills
* Phony Fax Directory Schemes
* Federal Law
* How to Protect Your Business
* What to Do If You Are Victimized

Anatomy of a Phony Invoice Scam

Phony invoicing schemes, typically prey on the inefficiency of targeted businesses. For their successful execution, these schemes rely on sloppy bookkeeping, inattention on the part of employees, and perhaps most importantly, the failure of one arm of a business to know what the other arm is doing.

The Call---While there is no set formula for these invoice schemes, most involve the use of an initial telephone contact. The call helps the swindler obtain the names of key business contacts, as well as some important details about the operation of the business and its products or services. The persons making these calls are, for the most part, remarkably smooth operators. Often brazen and forward in their approach, they have been known to talk their way through a chain of receptionists, secretaries, assistant managers, supervisors, and vice presidents to gain access to heads of companies. In most cases, however, they need gain access to only lower-level employees.

The Invoice-- The con artist's next contact with the intended victim usually comes in the form of a phony invoice sent through the mail. The invoice, which includes names, figures, and other details that add to the appearance of legitimacy, may be paid unwittingly along with a number of other routine bills.

In many cases, the amount of the invoice is just small enough to slip by the check writer's attention. The swindler has had considerable experience calculating the most effective dollar amount, depending on variables such as the size of the firm, and the control it seems to have over its management system. Thousands of mass-mailed invoices, each for a small sum, may prove more lucrative, for the con artist, than several large invoices.

The Scare Tactics---Scare tactics sometimes are used to increase the odds of success. A phony invoice, or past-due notice, stamped "Pay This Bill Now" or "We Are About to Start Action" may intimidate the victim into rushing to make out a check without carefully investigating the supposedly delinquent charge.

Solicitations in the Guise of Invoices

One of the most common variations of the phony invoice scheme is issuing solicitations disguised as invoices. These documents, which are actually solicitations for the purchase of goods or services, are carefully designed to look like legitimate invoices for goods or services ordered and received.

In some cases, the small print may identify the bogus bill as a solicitation. The deceptive solicitation may be received through the mail, or it may be presented in person by a con artist who visits a business office on the pretext of saving the company handling charges.

The business that pays a solicitation disguised as an invoice may receive the merchandise or service it was duped into ordering; more often, it will not, and efforts to trace the fraudulent firm that issued the "invoice" will prove futile.

Phony Advertising Solicitations

In the case of phony advertising solicitations, the "advertising salesperson" may make the transaction seem routine, asking if the business wishes to renew an ad allegedly placed "last year." Often the invoice is supported by fabricated proof of the ad's placement-- a trumped-up "clipping" created by the con artist using an actual company ad.

Most advertising solicitation schemes involve the issuing of invoices for ads in magazines, newspapers, or directories targeted at specific special-interest groups. The promoter may try to manipulate the victim's emotions, or create embarrassment in order to sell an ad. Often the sales pitch implies that part of the advertising revenues will be used to support community programs. In another twist, the businessperson, fearful of appearing uncooperative, may be pressured into placing an ad in a phony law enforcement publication.

One telltale sign of the advertising solicitation scheme is the unusually flexible salesperson who quickly reduces the advertising rates when a customer seems hesitant.

Bogus Yellow Pages Bills

If you receive an invoice for renewing your advertisement in a local business directory, beware of the scam in which solicitations disguised as invoices for yellow pages listings are mailed to businesses by hundreds of copycat directory publishers.

These misleading solicitations, usually for about $100, fall just short of actually breaking the law. Most include the disclaimers required by federal postal law to distinguish a solicitation from an invoice. But many recipi-ents who may not read the fine print are misled by the names of the soliciting companies, which resemble those of well-known business directory distributors, and by the familiar "let your fingers do the walking" logo. Use of the logo is not illegal, since neither the logo nor the term yellow pages is a registered trademark.

Most of the soliciting firms publish a directory of sorts, but the value and circulation of these publications may be questionable. The targets of the solicitations usually are selected from ads placed in local yellow pages directories, and some solicitations even include clippings of bona fide yellow pages ads. The misleading solicitations may be stamped "Renewal" or "Amount Due," and may warn that businesses failing to pay promptly will be left out of the next telephone directory.

Businesses receiving "invoices" for yellow pages listings are advised to scrutinize them carefully. If in doubt, contact your local Better Business Bureau for a report on the soliciting company. And remember that, with few exceptions, charges for legitimate directory listings are included in advertisers' monthly phone bills, not billed separately.

Phony Fax Directory Schemes

If your company receives an official-looking invoice requesting payment for a listing in an international business telefax or telex directory, be on the alert. The "invoice" may be a solicitation in disguise, issued by a fraudulent "directory company." Often, the directory does not even exist. In fact, the fine print on the invoice may simply indicate an intention to print the directory - making legal recourse nearly impossible, if you find out about the scam only after you have paid the bill. To further complicate matters, the address to which you are directed to mail your check, often a post office box, may be nothing more than a mail drop.

To avoid getting taken by a phony fax directory scheme, make certain your accounting department is aware of the scam, and remember, legitimate fax directory publishers generally do not charge for listings.

Federal Law

Federal law is clear-cut and specific in its position on solicitations. It is against U.S. Postal Service regulations to mail a bill, invoice, or statement of account due that is actually a solicitation, unless it bears one of the following disclaimers:
THIS IS A SOLICITATION FOR THE ORDER OF GOODS OR SERVICES, OR BOTH, AND NOT A BILL, INVOICE, OR STATEMENT OF ACCOUNT DUE. YOU ARE UNDER NO OBLIGATION TO MAKE ANY PAYMENTS ON ACCOUNT OF THIS OFFER UNLESS YOU ACCEPT THIS OFFER. or
THIS IS NOT A BILL. THIS IS A SOLICITATION. YOU ARE UNDER NO OBLIGATION TO PAY UNLESS YOU ACCEPT THIS OFFER.

One of these disclaimers must be conspicuously printed on the face of the solicitation in at least 30-point type.

Print colors must be reproducible on copying machines and cannot be obscured by folding or other means. If the solicitation is more than one page, the disclaimer must appear on each page, and if it is perforated, the required language must appear on each section that could be construed as a bill. Regulations prohibit any language that modifies or qualifies the disclaimer, such as "legal notice required by law."

Regulations regarding copycat "government documents"---solicitations by nongovernmental entities that use a seal, insignia, trade or brand name, or any other term or symbol that implies a federal government connection or endorsement-require the following disclaimer to appear, in conspicuous and legible type, on the face of the solicitation:
THIS ORGANIZATION [or PRODUCT or SERVICE] HAS NOT BEEN APPROVED OR ENDORSED BY THE FEDERAL GOVERNMENT, AND THIS OFFER IS NOT BEING MADE BY AN AGENCY OF THE FEDERAL GOVERNMENT.

ln addition, the mailing envelope or outside wrapper must bear this disclaimer, in capital letters and in conspicuous and legible type: THIS IS NOT A GOVERNMENT DOCUMENT.

Mailing solicitations that do not meet these requirements can result in a U.S. Postal Service stop order under which responses are returned to the sender, cutting off the soliciting firm's source of revenue.

Other forms of phony invoice schemes may involve mail fraud, or may violate other federal postal regulations.

How to Protect Your Business

The best protection against phony invoice scams is knowledge and vigilance. Your company's accounting department, or the individuals responsible for paying bills, should be made aware of solicitations disguised as invoices and other dubious bills from unfamiliar companies.

Specifically, observe the following precautions:

* Never place an order over the telephone, unless there is no doubt that the firm you are dealing with is reputable. Get the organization's name, address, and phone number, as well as its representative's full name and position.
* If a significant amount of money is involved, ask for business and local bank references and check them. Find out how long the firm has operated out of its present location. If possible, visit the company or firm. Ask your local Better Business Bureau for a reliability report.
* Check your records to confirm claims of previous business dealings.
* Before placing advertising, make sure the publication exists. Verify its circulation figures and that its circulation suits your needs.
* Establish effective internal controls for the payment of invoices.
* Channel all bills through one department.
* Insist that employees fill out pre-numbered purchase orders for every order placed.
* Check all invoices against purchase orders and against goods or services received. Make certain that order numbers correspond with the invoices.
* Verify all invoices with the person who gave written or verbal authorization.
* Clear all invoices with the appropriate executives.
* If the invoicing company claims to have a tape recording of the order, insist on hearing it.

What to Do If You Are Victimized

If you receive a phony invoice, or a solicitation dis- guised as an invoice, use the following procedure to report the matter to the U.S. Postal Service and your local Better Business Bureau: 1. On the envelope in which the phony invoice or solicitation arrived, note the date received and sign your name. Be sure all the solicitation material is returned to the envelope in which it was received.

2. Prepare a notarized affidavit. See the following sample.

TO: Chief Postal Inspector
Attn: Fraud Section
United States Postal Service
Washington, D.C. 20260

AFFIDAVIT

I, ________________________________________ being duly sworn, depose and say:

1. I am ________________ of _________________________
(position) (company)

located at __________________________________________
(address and zip code)

2. On or about ______ our firm received through the United States mail a solicitation from

____________________________________________________________________
(name and address)
which resembles a bill, invoice, or statement of account.

3. I have dated and signed the solicitation material and enclosed it herewith.

4. Our firm has never done business with ______________________________
(name)
and we have not requested a listing or authorized the insertion of our advertisement in the publication referred to in the solicitation.

5. It is my opinion that the subject solicitation represents an attempt to elicit a remittance from my firm by means of deception.

_______________________________ (signature)

Subscribed and sworn to before me this _______ day of_____________

My commission expires ________________________

3. Send the solicitation material and the original affidavit to the Chief Postal Inspector, U.S. Postal Service. Keep a copy for your records, and send a copy to your local Better Business Bureau.

If you become aware of the scheme only after payment has been made on the fraudulent invoice, immediately contact the Chief Postal Inspector, your local police department, and the BBB. In most cases, you will be instructed to stop payment on your check or money order. The postal authorities should also inform you if any recourse is possible. If potential losses are considerable, contact your attorney for help in expediting your case.

A Better Business Bureau Business Advisory Service Publication
Published by Council of Better Business Bureaus, Inc.
4200 Wilson Blvd., Arlington, VA 22203
Copyright 1994, Council of Better Business Bureaus, Inc.

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