Officials Take Aim at Easy-Money Ventures

WASHINGTON — Instead of raking in promised big bucks, Americans are losing millions of dollars by responding to phony business opportunities touted in classified ads, government authorities said Monday in announcing a wave of cases against such promotions.

The Federal Trade Commission, the Justice Department and securities officials have filed complaints against 68 operations they accuse of deceiving people about work-at-home and other business ventures, such as leasing vending machines. Several state attorneys general, including California Atty. Gen. Bill Lockyer, joined in the complaints.

The promoters target consumers with teaser ads promising the chance to make big money in various business plans. For example, some ads promise that by stuffing envelopes at home, people can easily earn thousands of dollars. Others claim participants can take in $10,000 monthly by owning and operating pay phones.

Prospects who request more information receive deceptive pitches about how much help they will get in setting up their businesses and how much money they will make, said Steve Gurwitz, an assistant director in the FTC’s Division of Marketing Practices.

Rich Torland of San Antonio, a full-time college student who wanted to earn some money in his off-hours, said he responded to an ad offering just that for doing medical billing from his home computer.

“The idea of being able to come home and work on my own time and make some money, it was worth checking out,” Torland said. “At first, the way the ad was worded, I thought I would actually be working for a business.”

But after he paid $350 for the software to do the billing, Torland learned that the promoter was not going to provide him with clients. He asked for a refund but was put off repeatedly. When Torland set up a Web site detailing his experience, he received e-mails from others with similar tales. He eventually lodged a complaint with regulators but said he is still waiting to get his money back.

In other cases, consumers paid as much as $5,000 to $7,000 for vending machines or pay phones they were told they could operate for profit. The companies advertising these ventures often furnished people old equipment and could not secure them the kinds of locations that would actually bring in money, officials said.

Federal rules require companies selling franchises and other business ventures to provide potential customers with disclosure information that includes the identities of current and former franchisees. The rules also require that claims about potential earnings be substantiated.

The complaints filed Monday would force the targeted promoters to change their business practices and provide prospects with the required information.

The FTC filed 13 cases in federal court, nine of which resulted in temporary restraining orders with the businesses’ assets frozen to provide refunds to buyers. The Justice Department filed 22 other complaints for the FTC in federal court, seeking civil penalties. State officials filed the remaining 33 actions.

More than 100 newspapers in small and medium-sized cities have agreed to publish classified ads informing consumers of what to look for in legitimate business promotions, officials said.

In California, people who have been the victims of a fraudulent business opportunity or who want to learn whether a business opportunity is registered with the state should contact Lockyer’s office by calling (800) 952-5225 or writing to: Attorney General’s Office, Public Inquiry Unit, P.O. Box 944255, Sacramento, CA 94244-2550.

The FTC offers detailed information on the suits on its Web site, https://www.ftc.gov.

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How to Avoid Scams

The Federal Trade Commission offers these recommendations:

* Get all earnings claims in writing. Be sure the information includes the number and percentage of recent or current clients who have earned at least as much as the promoter claims.

* Interview references provided by the promoter.

* Study the business opportunity’s franchise disclosure document, which includes information about the company, including whether it has faced lawsuits.

* Contact the state attorney general’s office, state or county consumer protection agency and the Better Business Bureau.

* Consult an attorney, accountant or other business advisor before you put down any money or sign any papers.

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Source: Associated Press