Scams Even Smart Women Fall For: How to Spot and Avoid "Get Rich Quick" Schemes

Tens of millions of dollars a year are lost by those who yearn to run their own businesses. Here's how to make sure you don't get sucked in.
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The Get-Rich Epidemic

The ad in the respected newspaper was enticing: Invest $35,000 in vending machines and make more than $7,500 a month. Accent Marketing, the Alabama company hawking this business opportunity, even promised to line up 25 bars and restaurants eager to have the machines installed.

One young working mother in Maryland with two young children and a cabdriver husband saw the vending machine offer as the perfect way to spend more time with her kids while still earning good money. Before investing in the business, she did her research. She called the Better Business Bureau (BBB) to confirm that there were no complaints against Accent; she called the three referrals Accent gave her, who all said they were raking in money with the machines; she even went to Alabama to visit the company headquarters. Everything checked out, so she was delighted when the 25 machines arrived just before Christmas 2001.

"That's when everything fell apart," says Dale E. Cantone, an assistant attorney general for the state of Maryland. "She went to deliver the machines to each of the 25 locations provided by Accent, and every one turned her down -- some angrily." The three referrals turned out to be shills. And the victim had squandered her family's money on useless machines that no one wanted.

Sadly, stories of business opportunity fraud like this are all too common, with nearly a million incidents in 2004 alone. That's why in February 2005, Maryland and 13 other states, the Federal Trade Commission (FTC), the U.S. Postal Inspection Service, and the Department of Justice joined to take action against nearly 200 companies in Project Biz Opp Flop, a nationwide crackdown on these rip-offs. Gone are the days when all the scam offers were for Popsicle-stick crafts or the proverbial "stuffing envelopes": The bust included not only vending machine schemes but other now-common scams, such as medical billing systems, Web site businesses, and Internet kiosks. The FTC estimates that tens of thousands of people lost more than $100 million to just the 16 operations that the FTC helped bust.

The victims of business-opportunity scams can ill afford the thousands of dollars that they invest: Many are stay-at-home moms or out-of-work dads. Sometimes they take out loans or borrow from retirement funds to invest. "Again and again I hear of people who lost their jobs, unwittingly invested their severance in scams, and lost it all," says Eileen Harrington, deputy director for the Bureau of Consumer Protection at the FTC. "People try to do the right thing for their families and are completely taken."

These would-be investors are lured by promises of healthy income, flexible hours, and the chance to make their own success rather than be a cog in the corporate wheelhouse. One former scammer told investigators he persuaded potential investors by comparing the money his customers made to the earnings of real-estate agents. "But real-estate agents have to go out in the elements, drive everywhere, work seven days a week, and wait for things to happen," he would continue. "[Our] affiliates enjoy working at home, setting their own schedule, and making things happen on their own terms."

Scammers also exploit fears of job insecurity, offering their targets a supposedly safer, more secure alternative. "You can no longer expect large corporations, or any business for that matter, to provide job security or a steady paycheck (Enron, Tyco, WorldCom, to name a few)," argued a brochure touting Money Movers Inc., a phony Florida company selling change-making machines. To bolster the appearance of legitimacy, scammers are increasingly paying for impressive promotional packets and slick Web sites as well as sophisticated ads in newspapers and magazines and on cable television.

Continued on page 2:  The Tip-Offs

 

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