# Presentation: 496775

## Scams TargetingSmall Businesses & Organizations

**Notes:**
Project Boss
The number of small businesses has grown tremendously in the past decade.  They are powerhouses in our economy, and the foundation of this Nation’s economic growth.  For example, small businesses have provided virtually all of the nearly 20 million net new jobs added to the economy since 1992.  The approximately 24 million small businesses in this country, however, are all potential targets for unscrupulous scam artists.  Of course, medium and large businesses can be victims too.

## Just the Facts

- Common scams
- Office supply fraud
- Yellow Pages invoice scams
- Public safety fundraising fraud
- Web site cramming fraud
- How they work
- Pointers to prevent losses

**Notes:**
Just the Facts
The purpose of this presentation is to identify common scams that target small businesses and organizations, explain how they work, and provide some pointers to help you protect your organization against potential losses from these scams.  Although the focus will be on office supply fraud, I also will discuss briefly yellow pages invoice scams, public safety fundraising fraud and Web site cramming.

## Office Supply Fraud

- Chronic problem
- Affects all types of businesses and organizations
- Companies lose $200 million annually

**Notes:**
Office Supply Fraud
Office supply fraud is a serious, chronic problem, and all businesses and organizations are at risk – including franchisees, charitable organizations, places of worship, government offices and sororities and fraternities.  
The Imaging Supplies Coalition, an organization that combats telemarketing fraud and other illegal activities that affect its members and their customers, estimates that office supply fraud costs small businesses and non-profit organizations an estimated $200 million a year. 

##   Trademarks of Office Supply Fraud

- A bill, statement or invoice that looks legitimate for:
- Toner
- Light bulbs
- Cleaning supplies
- Air canisters
- Tape
- First-aid kits

**Notes:**
Trademarks of Office Supply Fraud
Office supply fraud occurs when small businesses or organizations are billed for merchandise, generally non-durable or consumable products, based on misrepresentations and false pretenses.  The scam is often successful because the product being shipped is one that businesses normally order on a regular basis and the bogus bill sent by the fraudulent company looks just like the many legitimate invoices that arrive at a small business every day.

## How the Scam Works

- Telemarketers state or imply that:
- They are calling from the regular, previous or “authorized” supplier
- It is time to reorder before prices go up
- They are calling to complete an existing order
- They are asking for confirmation to send previously ordered merchandise

**Notes:**
How the Scam Works
Regardless of the product, office supply scams usually operate the same way.  In boiler-rooms furnished with dozens of desks and telephones, telemarketers arm themselves with lists of companies and phone numbers, and they call. The telemarketers make the employee answering the telephone feel as if he or she is dealing with the regular supplier of office supplies.  Sometimes, the caller states that it’s time to reorder before prices go up.  Scam operators also may call and ask for “help” completing a pre-existing order, or merely ask for confirmation that it’s okay to send out previously ordered merchandise.  

The telemarketer’s phone call to a business or organization also sets the stage for the scam by asking for key information from the employee or volunteer answering the telephone.  Such information typically includes the name of the employee or the name of the person in the office authorized to order supplies, and the serial number or brand of copier machine or printer used by the office.  The telemarketer also may ask for confirmation of the business’s address or whether the business wants to receive a free gift.  The primary purpose for the call, though, is to obtain information that makes the invoice for unordered merchandise look legitimate.

## How the Scam Works

- Telemarketers ask for:
- Name of the person that orders supplies
- Serial number and brand of equipment
- Confirmation of business address
- Does the business want a free gift?

**Notes:**
How the Scam Works
The telemarketer’s phone call to a business or organization also sets the stage for the scam by asking for key information from the employee or volunteer answering the telephone.  Such information typically includes the name of the employee or the name of the person in the office authorized to order supplies, and the serial number or brand of copier machine or printer used by the office.  The telemarketer also may ask for confirmation of the business’s address or whether the business wants to receive a free gift.  The primary purpose for the call, though, is to obtain information that makes the invoice for unordered merchandise look legitimate.

## Subsequent Events

- Supplies arrive at the office
- 	(not the kind usually ordered)
- Invoice follows several days later
- “Past due” invoices and collection efforts

**Notes:**
Subsequent Events
A short time after the telephone call, cleaning supplies or light bulbs or toner cartridges arrive at the office.  They’re not likely to be the brand, size or type the office usually orders.  An invoice will follow, addressed to the attention of a person whose name was obtained over the telephone.  The invoice follows several days later for two reasons:  First, the price charged for the supplies often is inflated, a fact that is less obvious if the invoice arrives after the supplies have been received and put away.  The invoice typically ranges from a few hundred dollars, up to $1,000.  Second, it is likely that the victim will have opened the package and used the contents before the invoice arrives.  Having done so, the victims feel obliged to pay for the products.

After the office supplies and the deceptive invoice arrive, and if the business does not respond to the invoice, it will be sent additional invoices, often marked “past due.”  Scam operators dedicate considerable resources to collection efforts, because, unfortunately, an organization that pays for unordered supplies may be targeted for additional scams.  The fraud artists also count on the fact that a small business or organization will worry about its credit rating or reputation, and thus feel under pressure to pay even bills that are dubious.

## Fighting Back

- When a business fights back,the scam artists . . .
- Bully the caller with litigation threats
- Try to negotiate a lower price
- Appeal to sympathy
- Charge a “restocking” fee
- Make the organization return supplies at its own expense

**Notes:**
Fighting Back
Some businesses contact the scam operator and complain that the office supplies are unordered or that the price is too high.  In these cases, scam operators react in predictable ways.  The scam operator may try to bully the business by threatening, “they were ordered, and if you don’t pay, we can take you to court.”  The scam operator might also try negotiating with the business to accept the goods at a lower price.  After all, the goods and services are so overpriced that almost anything the seller gets is profit.  The scam operator might also appeal for sympathy by stating, “we really need the business, I’ll let you have it for...”  The scam operator may try charging you for returned supplies.  He might say that he can accept returns if they are accompanied by a “restocking fee,” which often is more than the supplies are worth.  The scam operator might also try to get the organization to return the supplies at its own expense.  If you reasonably rule out that a legitimate mistake has not occurred, don’t pay to return the merchandise at your expense.

## Why This Fraud Thrives

- Invoices appear legitimate
- Employees may not be familiar with regular vendors and the cost of supplies
- Employees may feel they have consented to the transaction
- The scam succeeds even when a business returns the supplies, pays a “restocking” fee, or negotiates a lower price

**Notes:**
Why This Fraud Thrives
Office supply scams succeed because the invoices appear to be legitimate and so they often get paid.  Employees of small businesses and volunteers at nonprofit organizations may handle bill payment duties sporadically, and may not realize how much supplies should cost and which vendors are the regular suppliers.  Some businesses and employees may feel they consented to receive and pay for supplies, even though they were tricked.
And, if a business returns the supplies to the fraudulent company, or pays it a “restocking fee,” or is convinced to pay a lower price for the supplies, the scam has succeeded because the fraudulent company has made a profit, or can ship the supplies to another potential victim.

## How to Protect YourBusiness or Organization

**Notes:**
How to Protect Your Business or Organization

## 1. Know Your Rights

- Don’t pay for unordered merchandise.
- Don’t return unordered merchandise.
- The Telemarketing Sales Rule offers protections
- It requires disclosures
- It prohibits telemarketers from misrepresenting material information

**Notes:**
 Know Your Rights
You can protect your small business or organization from becoming an office supply fraud victim.  Here’s how:

1. Know your rights.  If you receive supplies or bills for services you didn’t order, don’t pay, and don’t return the unordered merchandise.  Once you’ve ruled out that an honest mistake may have been made, you may treat unordered merchandise as a gift.  By law, it’s illegal for a seller to send you bills or dunning notices for unordered merchandise, or ask you to return it — even if the seller offers to pay for shipping.  Further, if the seller sends you items that differ from your order in brand name, type, quantity, size, or quality — without your prior express agreement — you may treat the substitutions as unordered merchandise.

The FTC’s Telemarketing Sales Rule offers additional protections.  The Rule requires telemarketers to tell you it’s a sales call and who’s doing the selling before they make their pitch.  They must tell you the total cost of the products or services they’re offering, any restrictions on getting or using them, and that a sale is final or non‐refundable before you pay.  It’s illegal for telemarketers to misrepresent any information, including facts about the goods or services being offered, such as brand name or quantity.

## 2. Use Purchase Controls

- Consider assigning a designated buyer
- Use purchase orders
- Send a copy of every purchase order and bill of lading to accounts payable or designated staff

- Refuse merchandise that does not match your purchase order or bill of lading.

**Notes:**
2. Use Purchase Controls
2. Assigning a designated buyer is a good idea.  For each order, the designated employee should issue a purchase order to the supplier with an authorized signature and a purchase order number.  The order form should instruct the supplier to note the purchase order number on the invoice and bill of lading.  The buyer should send a copy of every purchase order to your accounts payable department or employee who pays the bills.  Keep blank order forms secure.

Check your documentation before paying bills.  When merchandise arrives, the receiving employee should verify that it matches the shipper’s bill of lading —  paying special attention to brands and quantity — and your purchase order.  Refuse merchandise that doesn’t conform.  If everything’s in order, the employee should send a copy of the bill of lading to your accounts payable department or employee you designate to handle bills. 

## 3. Train Your Staff

- Instruct employees on how to respond to telemarketers
- Employees should refer callers to the designated buyer
- Require telemarketers to get a  purchase order

**Notes:**
3. Train Your Staff
3. Train your staff.  It’s a good idea to train new and existing employees and volunteers on how to respond to telemarketers.  Advise employees who are not authorized to order supplies and services to say, "I’m not authorized to place orders.  If you want to sell us something, you must speak to ______________ and get a purchase order." 

Buy from people you know and trust.  Authorized employees should be skeptical of "cold" or unsolicited calls and should not give out information on office equipment (such as brand name or serial number).  They should feel comfortable saying "no" to high pressure sales tactics. Legitimate companies don’t pressure you to make a snap decision.  Finally, consider asking new suppliers to send a catalog first.

To assist training efforts, the FTC has available a new Tip Sheet to give to new and existing staff on detecting and avoiding office supply scams.

Besides office supply fraud, there are a few other common scams that target small businesses and non-profit organizations.

## Yellow Pages Invoice Scams

- The solicitation has the appearance of an invoice
- It may bear the logo and feature the name “Yellow Pages”
- It may falsely suggest the publisher is your local telephone company
- It may lead you to believe your business has already been listed in the directory and you are now being billed

**Notes:**
Yellow Pages Invoice Scams
That mail invoice bearing the familiar "walking fingers" logo and the name "Yellow Pages" could be a camouflaged invitation to lose money.  Unscrupulous promoters are soliciting advertising for online, "bogus" or nonexistent business directories.  Although these directories appear to be legitimate Yellow Pages publications, they are not distributed to the public, posted on the web, or promoted as promised.  As a result, the directories ‐ if they exist at all ‐ offer no benefits to businesses that pay to advertise in them.  The solicitation to buy ad space may look like an invoice and bear the "walking fingers" logo and the Yellow Pages name, but  neither the name nor the logo is protected by federal copyright or trademark registration.  That's how fraudulent promoters are able to lead businesses to believe they are affiliated with local telephone directories distributed in a particular area.  Fraudulent operators also may lead you to believe that your business already has been listed in the directory and you now are being billed. 

## Avoiding These Scams

- Check out the company and publication
- Call local Yellow Pages publisher
- Ask for a copy of a prior edition
- Ask for online address and call advertisers
- Ask for written information regarding publication, distribution and circulation
- Check with consumer protection agencies
- Contact local postmaster or postal inspector

**Notes:**
Avoiding These Scams
Before you buy advertising space through a mail solicitation or pay a Yellow Pages "invoice," take the following steps:
1. Check out the company and its publication.  Call your local Yellow Pages publisher to see if it is affiliated with the soliciting company.  2. Ask for a copy of a previous directory edition.  3. Ask for the online directory's Web address and call advertisers in the directory to ask if their listing has been a good buy.  4. Ask the publisher for written information about where the directory is distributed, how it is distributed (does every local telephone customer receive it?), how often it is published, and distribution or circulation figures.  5. Check with your local and state consumer protection agencies to determine if any complaints have been filed about the publisher.  6. If you think you've been scammed by a promoter pitching bogus Yellow Pages or business directories, contact your local Postmaster or Postal Inspector.  

## Public Safety Fundraising Fraud

- Raising money for local police or fire personnel
- Selling advertising that will appear in local law enforcement journals
- Raising money to help fight drug abuse in the schools or community

**Notes:**
Public Safety Fundraising Fraud
Every day, police and firefighters risk their lives to make your community safer.  To show your support, you may consider making a donation when a fundraiser calls from a fire or police service organization.  Before you write the check, consider these facts:
Simply having the words "police" or "firefighter" in an organization’s name doesn’t mean police or firefighters are members of the group.  Just because an organization claims it has local ties or works with local police or firefighters doesn’t mean contributions will be used locally or for public safety.  Most solicitations for police and fire service organizations are made by paid professional fundraisers.

## Blowing the Whistle

- Ask for identification
- Ask how your contribution will be used
- Call to verify legitimacy
- If you cannot verify legitimacy, report telemarketer
- Be wary of “special treatment” offers
- Don’t be intimidated!

**Notes:**
Blowing the Whistle
Taking the following precautions can help ensure that donation dollars will benefit the people, organization, or community you want to help.
	1. Ask fundraisers for identification.  Many states require paid fundraisers to identify themselves as such and to name the organization for which they’re soliciting. 
	2. Ask how your contribution will be used.  Ask what percentage of your contribution will go to the fire or police organization, department, or program.  Also ask if your contribution will be used locally.  Get written information. 
	3. Call the organization or your local police or fire department to verify a fundraiser’s claim to be collecting on behalf of the organization or department.  If the claim cannot be verified, report the solicitation to your local law enforcement officials.
	4. Be wary if a fundraiser suggests you’ll receive special treatment for donating.  For example, no legitimate fundraiser would guarantee that you won’t be stopped for speeding if you have a police organization’s decal in your car window.  Don’t feel intimidated about declining to give.  A caller who uses intimidation tactics is likely to be a scam artist.  Report the call to your local law enforcement officials. 

## Website Cramming Scams

- The “Offer”
- Free website
- Nominal fee
- Cancel anytime
- The “Catch”
- Sites contain limited information
- Sites are not listed with major search engines

**Notes:**
Website Cramming Scams
If you're interested in using the Web to expand your small business, be cautious.  Some unscrupulous companies, claiming to provide free Web design and hosting services, are billing small businesses for services that were never authorized and have little value.  The bogus charges usually appear on businesses' phone bills ‐ an illegal practice known as "cramming" ‐ or on  fraudulent invoices. 

For example, you may get a call from a company offering you a free, 30‐day Web site. They say you can continue the service for a nominal fee, say $25 or $30 a month, and cancel at any time.  Some service providers state that you'll be billed automatically after the 30‐day period; others claim you won't be billed after the 30 days unless you tell them you want to continue the service.  Before or after explaining the offer, the provider asks for basic information about your company, and tells you that your free Web site will be up and running within a week.  In fact, unscrupulous service providers bill you, whether you authorize the services or tell the provider that you want to cancel.  Moreover, many of the services have little value because these providers design and host sites that contain limited information about the business, and most of the sites are not listed with major search engines.  If customers can't find your site, it's worthless to your bottom line.

## Don’t Get “Crammed”

- Treat unordered services as a gift
- Review phone bills promptly
- Assign purchasing to designated staff
- Document purchases
- Train your staff on how to deal with telemarketers
- Buy from those you know and trust

**Notes:**
Don’t Get “Crammed”
You can protect your business from losing money to unordered Web Site Cramming. Here's how:
	1. Know your rights.  If you receive bills for services you didn't order, don't pay.  The law allows you to treat unordered services as a gift. 
	2. Review your phone bills as soon as they arrive.  Be on the lookout for charges for services you haven't ordered or authorized.  If you find an error on your bill, follow the instructions on your statement. 
	3. Assign purchasing to designated staff, and document all your purchases. 
	4. Train your staff on how to respond to telemarketers.  Advise employees who are not authorized to order services to say, "I'm not authorized to place orders.  If you want to offer or sell us something, you must speak to ______________." 
	5. Buy from people you know and trust.

## Where to Complainand Get More Information

- <date/time>

- Where to Complainand Get More Information

- Federal Trade Commission
- 1-877-FTC-HELP (382-4357)
- _[www.ftc.gov](http://www.ftc.gov/)_
- FTC, Washington, DC 20580
- State Attorney General
- _[www.naag.gov](http://www.naag.org/)_
- Local Consumer Protection Office
- Better Business Bureau
- _[www.](http://www.bbb.org/)__[bbb](http://www.bbb.org/)__[.org](http://www.bbb.org/)_

**Notes:**
Where to Complain and Get More Information
Report office supply fraud and other scams to the Federal Trade Commission, your state Attorney General, local consumer protection office, or Better Business Bureau.  

You can file a complaint with the FTC by contacting the Consumer Response Center by phone: toll-free 1-877-FTC-HELP (382-4357); TDD: 202-326-2502; by mail: Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Ave., N.W., Washington, DC 20580; or through the Internet, using the online complaint form at www.ftc.gov.  Although the Commission cannot resolve individual problems for consumers, it can act against a company if it sees a pattern of possible law violations.

The FTC publishes free brochures on many consumer and business issues.  For a complete list of publications, write for Best Sellers, Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Ave., N.W., Washington, DC 20580; or call toll free 1-877-FTC-HELP (382-4357); TDD: 202-326-2502.  Or visit the FTC on the Web at www.ftc.gov.

## Federal Trade Commission

**600 Pennsylvania Ave, NW**
**Washington, DC  20580**
**1-877-FTC-HELP (382-4357)**
- _[www.ftc.gov](http://www.ftc.gov/)_

**Notes:**
Federal Trade Commission