Every year businesses lose millions of dollars to con games and fast-
talking promoters through a wide variety of different schemes. There is
no limit to the imagination of the con artist who is scheming to defraud
a company of its earnings.
While law enforcement officials and government agencies are constantly
trying to halt schemers who prey on business, successful operators are
usually just one step ahead of the law as they dream up new tricks and
"Bogus Ad Solicitations"
The business executive receives an advertising solicitation, usually over
the telephone, for an unfamiliar publication. The publication-- either a
magazine or a newspaper-- may be a "special edition" or be limited to a
particular readership, such as the local police or farm workers. A
telltale element in this scheme is the very flexible salesperson who
quickly reduces the advertising rates if the customer sounds hesitant.
The pitch may also imply that part of the advertising revenue will be
used to support community programs.
Although the publication may have the word "national" or "American" in
its name, the promoter if asked will probably provide only vague
circulation figures. In fact, the publication may not even exist, or is
distributed only to advertisers; its rates may be inflated and its actual
"Advertising Specialty Product Promotions"
Businesses often receive high pressure phone calls fromcompanies
promising them fabulous prizes such as cruises, color televisions, video
recorders, and microwave ovens if they will order products from the
companies or pay a fee. The products may be vitamins or various
advertising specialty products, including key chains, pens, ice scrapers,
first aid kits, desk calendars or other merchandise, often imprinted with
the purchaser's name or company name.
The merchandise is usually paid for by the customer COD (collect on
delivery), by cash or money order, or charged on a credit card, sometimes
without the customer's authorization. According to the U.S. Postal
Service, the overall majority of the participants in these promotions
receive gifts that are of far less value than represented.
Schemers know that a business sometimes makes mistakes or can be careless
in its accounting, so they prey on these weaknesses. Lifting names from
mailing lists, business registers, the Yellow Pages or published
advertisements, swindlers send "pro-forma" invoices for directory
listings or advertising in various publications, journals or directories.
The invoice may seem genuine to the company's accounting department, and
may even include the name of a company executive as the "authorizing
agent." However, the invoice may be a solicitation in disguise and in
very fine print contain the following disclaimer: "This is a
solicitation. You are under no obligation to pay unless you accept this
Although the law states that it is illegal to send such a solicitation
without the disclaimer being conspicuous and in large print, there are
those who flout the regulations and send disguised solicitations. These
phony invoicers are often persistent and they may send a company two or
more invoices for the same advertising in the hopes the "bill" will be
"Office Supply Schemes and Paper Pirates"
This scheme covers a wide range of goods that are peddled around business
offices. But whether the offer is for photocopying paper, copying
supplies or ballpoint pens, the deal looks like a bargain. Sometimes, the
supplier makes a pitch over the telephone, or may just show up on the
premises. Usually, the supplier tries to deal with an employee who is
unfamiliar with purchasing procedures.
A common approach is for the salesperson to claim "liquidation of stock"
or "going out of business." One often-heard story is that "just by
coincidence" there is a shipment of supplies that was mistakenly labeled
with your company's name and you can have them for a "rock-bottom" price.
Or, maybe there is a claim that another business in the community has
canceled the order and the supplies are in town ready for immediate
Whatever the reason for the bargain prices, the merchandise is usually
"bad news" for business. The supplies may be inferior to those described
in the sales pitch, greatly overpriced, or may come in amounts twice
"Advance Fee Loan Brokers"
Businesses in need of commercial loans to expand or even stay afloat may
use the services of loan brokers. While some advance fee loan brokers are
legitimate, many are not. In this scheme, a business will answer an
advertisement regarding the availability of money to lend. During a
meeting with the loan broker, a contract is signed and the client is
asked to submit an advance fee for finding the risk capital or loan. The
advance fee is payment to the broker to prepare a business plan and
present it to prospective investors. However, the disreputable "broker"
may make no effort to find funds as promised. Instead, the business
receives no loan, and loses all advance fees paid to the broker.
"Shifty Service Rep"
This scam takes place right on the business premises. A company is
approached by someone other than the usual repair or service
representative. The person may show up at the loading dock or in other
work areas, away from the employee responsible for arranging the service.
This unfamiliar service representative may make special offers such as
"free inspections" or "two for one" deals to persuade an unsuspecting
employee to use the services.
The trademarks of these con artists are shoddy materials and poor
workmanship. Perhaps these people will even try to steal a machine. For
example, while repairing a typewriter, a switch might be made to an
inferior model without the office personnel being aware of the theft. Or,
the schemer may claim that the particular model is being recalled and
will leave with the machine, never to return.
"The Vanity Pitch"
"Dear Business Executive" begins the letter. "We would like to include
your name and accomplishments in our next edition of 'Who's Who in the
Business World.'" All too frequently, such pitches for "Who's Who" type
publications, biographies of successful people, or nominations for awards
or special memberships have a catch to them. The executive who is
flattered into providing the details ofhis or her career may be stuck
with a subscription fee, a charge for the listing, or an inflated price
for buying the publication.
A variation on this scheme is the vanity publisher who offers to publish
an executive's book and then charges an exorbitant price for the printing
and materials. The author is even left to distribute the book personally.
"The Charity Plea"
Businesses often are asked to buy tickets for a charity event or to
donate to a worthy community cause. Promoters may ask executives to buy a
block of circus tickets, with the proviso that underprivileged children
will attend and the ticket income will benefit a certain charity. Another
common appeal may be from a group that sounds as if it is connected with
a law enforcement agency, soliciting for troubled youth, or for the
families of slain police officers.
Businesses may feel very positive about donating to a worthy community
cause. While not all fund raising events are cause for concern, deception
comes into play if the solicitor implies that all funds will go to the
charity, when, in fact, most of the money collected goes directly to the
fund raisers themselves.
And the Schemes Continue...
While the aforementioned schemes are the most common, they by no means
represent the con artist's full bag of tricks. Other scams, like the ones
listed below, come and go at different times of the year and in various
parts of the country.
* Official decals: Promoters sell police, fire department, sheriff or
highway patrol decals with the implication that the stickers will give
the car owner "added protection."
* Collection services: The fly-by-night collection agency greatly
overcharges for its services. A twist on this scheme is to sell a
business a series of collection letters.
* Peddlers: Young people may show up in the office selling high priced
magazine subscriptions, or overpriced chemical cleaners, with a sob story
about putting themselves through college.
* Damage claim artists: They may stage an accident in your office or
building, threaten to sue, then settle for an out-of-court payment.
* Coupon promoters: A business is persuaded to offer discounts or
extras in coupon books sold by promoters to consumers. But, the promoters
may change the terms of the coupon to make them more attractive to
buyers. Then, the books may be over-sold, or sold outside the firm's
normal business area.
"Red Flags" to Watch for
Knowledge is an important and useful tool in recognizing and defending
your business against a swindle. Following are some common warning signs
that may indicate a scheme is underway to bilk your company:
* The deal is almost "too good to be true." Look very carefully at any
offer with fantastically reduced prices, unrealistic claims of high
quality and low cost, or lots of extra service and giveaways.
* The sales pitch sounds more than just "aggressive." Be wary of
salespeople who use intimidation, harassment, or threats to make their
* Insisting on an immediate decision, either over the telephone or in
person, may signal an unscrupulous schemer.
* A con artist will avoid or side-step even reasonable questions. For
example, it may be difficult to get a straight answer about the
circulation of a touted publication or about the promoter's references.
* The promoter has a shady or vague business history. Be on guard if
it is difficult to learn about details of other companies and other
business people who have dealt with a promoter.
* Sometimes the schemer will drop the name of a higher executive in
your company, or the name of a company with whom yours does business, in
order to persuade you that the offer is legitimate.
How to Protect Your Business
Businesses can protect themselves if they are constantly wary of
Never let your guard down. Use common sense in all your business
dealings. Clearly, not all strange sales or promotions represent schemes
against business. Be wary of unfamiliar service or sales personnel,
telephone promoters or charity appeals. Yet, realize that many reputable
businesses offer legitimate goods and services described in this
pamphlet. A business armed with the facts of a deal should be able to
separate the scheme from the honest transaction.
The following suggestions might help if you are in doubt about a business
* Refuse to make commitments with unknown persons, especially over the
telephone. Ask that all advertising propositions, charitable appeals,
requests for biographical information, and sales pitches of any type be
made in writing.
* When dealing with publications, insist on verifiable circulation
figures, details of publication dates, name(s) of publishers, number of
paid subscribers, and sample copies.
* Institute strict controls in the accounting department. the handling
of invoices, for example, should be centralized and authorization should
be closely checked.
* Keep a list of regularly used publications as protection against
schemers who claim that the company previously has used the publication.
* Centralize the control of supply and repair orders, so that fewer
employees will be vulnerable to the sales gimmicks of disreputable
* When asked to donate to various causes, find out the full name,
address, and purpose of the charity and ask for a copy of the
organization's latest financial statements. Make checks payable to the
charity itself, not to an individual solicitor.
* Compare the prices and quality of products with other suppliers if
you are offered a deal from an unknown salesperson.
The BBB Can Help
If your employees are approached by a possible con artist, or if you want
to find out more about a certain business proposition, or if you have a
complaint, contact your local Better Business Bureau, or the Council of
Better Business Bureaus (4200 Wilson Blvd, Arlington, VA 22203).
Better Business Bureaus provide assistance in the following ways:
* Reporting on businesses and charities; and providing booklets on a
variety of business and consumer-related
* Providing guidance and assistance on complaints.
* Monitoring advertisements and investigating misleading and
* Working with industry and business groups to develop voluntary
A Better Business Bureau Business Advisory Service Publication
Published by Council of Better Business Bureaus, Inc.
4200 Wilson Blvd., Arlington, VA 22203
Copyright 1978, 1994, Council of Better Business Bureaus, Inc.
Brought to you by - The 'Lectric Law Library
The Net's Finest Legal Resource For Legal Pros & Laypeople Alike.