ftc consumer feature

Bureau of Consumer Protection Federal Trade Commission

Contact: Brinley Williams, (216) 263-3414

Donna Miles, (202) 326-3679

May 2000

Confronting Community Cons

CLEVELANDSay youre a small business owner who gets a call saying that the ad you

previously agreed to place in a publication has been printed and is being distributed. Youre

told that the bill is on its way.

Its all for a good cause, part of a program to educate children about drug abuse and other

health and safety issues. Heres the rub: you dont remember agreeing to buy the ad, nor does

anyone else in your office. But now that its printed and on the street, its too late to do anything about it, right?

Thats the dilemma thousands of business owners around the country faced when they fell

victim to a rash of fraudulent telemarketing schemes during the past several years.

The companies, mostly small businesses, never had agreed to buy the ads. The telemarketers werent affiliated with any local youth groups. The ads usually were never printed, and the

publications were rarely distributed. Worst of all, the payments some of the businesses made

werent donations to support community programs  just money to line the scam artists pockets!

When confronted by the fraudulent telemarketing companies, some businesses had reluctantly forked over payments ranging from $30 to several hundred dollars per ad. Others refused, insisting that theyd never agreed to buy an ad, only to be threatened that the bill would

be turned over to a collection agency or reported as a bad debt. In some cases, the fraudsters

collected for the unordered ads by sending the company a collection-on-delivery (COD) package containing nothing but a receipt for the ad. The bill was the cost of the ad.

And once a business finally anted up and paid, it was inundated with new bills. To further

confuse the business owners, the fraudulent telemarketers referred to the date the last bill was

paid as the date the business had agreed to buy still another ad.

The companies using these tactics sold the names of their victims to one another. The most

vulnerable businesses ended up being hit repeatedly by several of the scams at the same time.

Some businesses ultimately were taken for thousands of dollars over several years.
ftc consumer feature page 2

Fortunately, some of the victims now are getting at least some of their money back. The

Federal Trade Commission sued six Fort Wayne, Ind., companies for collectively defrauding

thousands of businesses, largely in Indiana, Kentucky, North Carolina, Tennessee and Ohio.

Two of the companies acknowledged guilt; the others did not, but agreed to discontinue their

practices. The FTC now is dispersing redress funds to victims of the most recently settled

case.

What makes this particularly unconscionable is that these people preyed on business owners commitment to their community, said Brinley Williams, a lead attorney on the cases,

filed by the FTCs East Central regional office.

People thought they were contributing to their local community, Williams said. But in

fact, their payment actually ended up hurting their communities because it left less money to

support legitimate community causes.

Williams urges business owners and consumers to be on the lookout for similar scams,

pointing out that because the operators often traded their victims names, previous victims

remain likely targets. This is one instance when lightening does, in fact, strike twice at the

same place, he said.

But, he added, all businesses are vulnerable. To avoid being scammed by community

cons, Williams encourages business operators to:

n Designate one person in the company to be responsible for all advertisement purchases

and charitable donations.

n Establish a policy requiring written verification of all oral business commitments.

n Verify the identity of anyone selling advertising or requesting donations. If the caller

claims to be associated with a community-based organization, ask for a local contact

and check it out.

n Notify any local group if you believe its name is being used deceptively to support a

scam.

n If you suspect youve been a victim of a fraudulent telemarketer, contact the Federal

Trade Commission on its toll-free helpline at 1-877-FTC-HELP (382-4357) or online

at www.ftc.gov.

Federal Trade Commission Toll-free 1-877-FTC-HELP

 www.ftc.gov For the Consumer