Modern scams and how to beat them

The overpayment ploy can not only net materials for the scammers, but a refund too if the seller acts too quickly before making sure the check clears. Perpetrators of this scheme will often emphasize the need for the item in a hurry, prompting haste over sound judgment.

Smart Tip: It’s better to be safe than sorry. Never send products or refunds to a first-time buyer until their check has cleared the bank.

Valuation fraud
“The business sends faxes asking if you’re interested in selling your business,” says Sue McConnell, PR director for the Cleveland Better Business Bureau. “If you want to sell your business, they claim they’ll find buyers interested in your company. You send a fax back, and they send someone to come out to speak with you. After that, you pay several thousand dollars in advance to have a valuation done to determine what your business is worth. After you’ve paid, they disappear,” explains McConnell, whose office has issued a warning to the local media and on its Web site after this scam was reported by several area business owners who’d been duped.

According to the warning issued by the Cleveland Better Business Bureau, “The Secret Service is investigating complaints from hopeful sellers who report they were duped into paying advanced fees ranging from $5,000-$11,995 to Global (Business Acquisitions) for the valuation. Once the fees were paid, Global made no further attempts to assist the seller with finding a buyer. Although Global promised to refund the fees upon request, victims who tried to get a refund were either denied or discovered the telephone number was disconnected.”

Smart Tip: Think twice before pursuing any faxed inquiries about selling your business. Always check a company’s references before prepaying for any services.  

Directory fraud and a bit of harassment
“At one point, they called six times in a row and were yelling at me,” recalls Lorraine Price, front office manager for McCune Audio Video Lighting in Anaheim, Calif. The persistent calls followed an initial phone conversation her boss had had with a sales representative from Central Com Marketing Inc., who told him that a directory listing was about to expire and he needed to renew it. Without much information, her boss initially OK'd the request. When the bill for $489.99 arrived, however, it was for a directory that neither he nor Price had ever heard of.

“They lied and said we were renewing something, but we told them we’d never heard of, or seen, their directory,” explains Price, who was never sent a copy of the so-called existing directory even after she requested it.

“I sent back the invoice and explained that we weren’t interested in their services,” adds Price, who then received numerous phone calls over the next few months from Central Com. Price reports that she contacted the FTC and her local Better Business Bureau, the latter of which contacted Central Com by mail, requesting that they find a way to resolve the situation. They then followed up to make sure Price never heard from them again. Later, after conducting an extensive Internet search on her own, Price says, “I found a lot of fraud reports on Central Com.”

The concept of bogus invoices has been around for years. The glut of modern directories — in print, online and on CDs — is a new springboard for scammers who sign up businesses but never produce a directory. To steer clear of the law, some businesses will reportedly print — but never distribute — a few copies of a directory to have something to show for their efforts.

Smart Tip: The bottom line is, if you haven’t seen a directory before and can’t verify that it’s actually distributed, you’d be wise to steer clear of any such offers.

Blue sky scams
Most industries have their own inherent scams. For years, the used-car industry received the bulk of the abuse. Today, however, many industries have their own inside scam stories.

In the vending industry, for instance, scamming is so prevalent that it has a name: blue sky scams. “In this industry, if you get a few good locations, you can make a living. That’s the basis of the blue sky schemes,” says industry expert and Vending Times editor and chief Tim Stanford. “Companies try to convince you to spend $30,000 on machines and they’ll find you good locations and set it all up for you. Then they don’t come through.”

In 1987, Beverly Bowers found herself the victim of a blue sky scheme. “I bought a vending machine package from what I later found out was a blue sky company,” says Bowers, now owner of Blue Moose Locators in Cincinnati. “I spent three times what the equipment was worth and basically lost my shirt on the deal.

“But I got lucky and found some good locations on my own and eventually dug out from under and made the business work,” adds Bowers, who built up a vending business, which she ran for 20 years before selling it and starting a locating business to help other businesses find prime locations for vending machines. Unfortunately, many people aren’t as resourceful as Bowers and instead wind up deep in debt, with thousands of dollars of equipment — for which they’ve grossly overpaid — and no prime locations in which to put them or guidance from the operators who promised them the world, then disappeared.

Smart Tip: If it’s the vending machine business you’re interested in, do your own homework and contact companies you’ve done your research on. And be leery of local ads for new vendors that offer a toll-free number and a chance to make “big bucks.”

Whether it’s bogus invoices or prepaid shipping requests you're dealing with, staying one step ahead of the scammers is critical for all business owners. To do so generally means taking a cautious approach on fax, phone and e-mail orders and offers as well as making sure you’ve got the money on hand before parting with your goods or services. Above all, trust your gut: If something sounds to be good to be true, well, it generally is.

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