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The Honolulu Advertiser

Posted on: Wednesday, February 23, 2005

Get-rich-quick businesses targeted

 •  Spotting fraud

By Kimberly Morrison
Knight Ridder News Service

WASHINGTON — Federal authorities said yesterday they were cracking down on home employment get-rich-quick swindles that promise, but don't deliver, high pay and commissions.

The scam businesses come in many forms. Some offer high pay for stuffing envelopes, designing Web sites or medical billing at home. Others promise that their vending machines or ATMs will make franchisees rich. Some say they'll give investors everything they need and don't. Others require a buy-in fee and costly training for businesses that can't work.

"These so-called opportunities appeal to the entrepreneur in all of us," said Federal Trade Commission Chairwoman Deborah Platt Majoras.

But they also share another similarity: unsubstantiated or deceptive earnings claims.

Bogus moneymaking schemes ripped off $100 million from 950,000 people in 2004, officials said.

The scams are centered mainly in South Florida, "one of the consumer-fraud capitals of the country, if not the world," according to Marcos D. Jimenez, the U.S. attorney for the southern district of Florida.

The key to this ignominy, he said, is South Florida's large number of immigrants, college students and the elderly — populations likely to be desperate for money and credulous when pitched with the schemes. California and Arizona also are fertile for such scams.

The FTC claims 200 arrests and other enforcement actions nationwide against such scammers in 2004. It's now combining with the Justice Department, the Postal Inspection Service and law enforcement agencies from 14 states in a crackdown called "Project Biz Opp Flop."

For the victims, the American dream of a self-owned business turned into a costly nightmare.

Although the FTC has pending actions against 31 corporations and 33 individuals, few of the victims will ever get their money back. The businesses and their operatives often are as quick to disappear as the money collected from victims.

The crackdown focuses on criminal prosecutions, civil enforcement actions by the FTC, state enforcement actions and civil penalty actions by the Justice Department.

• • •

SPOTTING FRAUD

Business opportunity frauds and work-at-home scams have some common characteristics:

• They promise lots of money for little time and work.

• They often use the reputability of classified ads or TV commercials to make their offers seem respectable.

• They tout their employees' or investors' personal freedom: Set your own hours, work from home, be your own boss.

• They often have what sound like real executives and good references, because they sometimes hire actors to pose as company officials, satisfied customers or references.

Report suspected fraud to the state attorney general's office, your local or state consumer protection office, the Better Business Bureau or the FTC at www.ftc.gov or (877) FTC-HELP (382-4357).

For more information on spotting business fraud, go to www.ftc.gov/bcp/conline/ecards/bizopps/fairytale.htm.

Source: Federal Trade Commission