Scams Even Smart Women Fall For: How to Spot and Avoid "Get Rich Quick" Schemes
The time is now: Scam artists apply pressure to close the deal as quickly as possible so that you don't have time to investigate, seek advice, or think better of your decision. One salesman told investigators he would promise to put certain locations on hold for the person on the line "emphasizing that I could hold the locations only until they received our packet of materials because there were other people calling from the same area." If you are considering a franchise purchase, patience is a virtue. In fact, the FTC's Franchise Rule, which applies nationwide, requires franchisers to wait at least 10 business days after a prospective customer gets the disclosure statement before they take any money.
We've been at this for years: Most of these companies tell you that they have years of experience. In truth, their game is to set up shop, rip off as many consumers as possible, and then file for bankruptcy before complaints are filed with the authorities. "You don't stay open too long, you don't get too greedy," Russell MacArthur, a promoter with American Entertainment Distributors, told a government informant. "You stay open for a year, tops...[then] you do another product." Unfortunately, determining how long a business has been around can be difficult, especially since scammers sometimes buy the names of existing legitimate companies.
So what's an aspiring entrepreneur to do? Before investing in any business, run the opportunity past your banker, your accountant, or a trusted relative or friend with business experience, as well as a lawyer, who can spot fine-print limitations and loopholes in any contract the company may ask you to sign. You should also check in with someone in your state attorney general's office who has experience with scams. "And never invest in a business opportunity that isn't licensed by its state," says Cantone. "If you have a problem, you'll have little recourse." If you do get taken for a ride, report it to the state attorney general's office or the FTC. You can sue, but suing an out-of-state company on your own is difficult and expensive.
The complaint the woman in Maryland filed did help put Accent Marketing out of business, and as a result of Project Biz Opp Flop, 16 individuals have received jail sentences. The courts have ordered restitution of $18.5 million to more than 2,000 victims. How much of that will actually be collected is anyone's guess, however. Of the Maryland mother and other Accent Marketing victims, Cantone says, "At the end of the day there was no money available to any of the people who invested in this business opportunity -- not even pennies on the dollar." Unfortunately, he adds, "that is also typical." Your best protection is not to fall for a scam to begin with.
Originally published in Ladies' Home Journal magazine, March 2006.