Scamming the Old-Fashioned Way
The Internet has created enormous opportunities for small businesses, but as with any emerging technology, scammers are quick to find ways to exploit it at your expense. But have recent concerns about online fraud caused us to forget the dangers posed by old-fashioned scams?
The heavy focus on computer security these days, while necessary, troubles me just a little bit because it may be overshadowing some of more traditional scams that continue to plague small businesses. On a scale of one to ten, these con artists rate low for creativity and novelty, but as P.T. Barnum once said, "There's a sucker born every minute." It might surprise you to learn that tricksters are still plying these time-honored frauds. But even more surprising is the fact that business owners continue to fall for them.
That's because these scams essentially rely on inattention. They take advantage of business owners who are too busy to pay attention to detail, or to keep up with such things as new government regulations. Age-old bait-and-switch routines and too-good-to-be-true special offers are also staples of the trade. Like locusts these types of scams come around every so often, so it's important to be on the lookout for them.
According to recent news reports, for example, a scam recently made its way through mostly southern states targeting small businesses, especially restaurant owners. A mailing claiming to be from the "Food Service Compliance Center" warned that business owners faced heavy fines for failing to display certain signs.
The signs typically listed labor laws or proper hand-washing techniques. Now here's the catch: If such signs are required by law, the government or trade associations usually provide them for free. But this company was selling them for as much as $60 each. The company even went so far as to rent post office boxes in each state to create the impression it was a local government agency.
In this case, officials in the eight states where this fraud was perpetrated traced the offenders to a company in Michigan. The company signed cease-and-desist orders with most of the states and in most cases made refunds to business owners. It remains in business, however, although it is now required to disclose in any mailing that it is not a government agency.
In the too-good-to-be-true category of fraud, other scammers recently targeted business owners and individuals wanting to start a business with offers of "free" cash. Usually through e-mails, fliers, or advertisements, they offer to match you with a nonprofit foundation that will provide "free" cash grants for your business.
The advertisements often state that results are "guaranteed" or contain such claims as "we've taken the guesswork out of free business grants" or "anyone can get an interest-free cash grant." Scammers have also called people with the same offer, claiming to be government employees. In each case, they charge up to $200 in fees.
Like most scams, this one has a ring of truth. The federal government and nonprofit foundations often do provide grants. But they are usually for very specific purposes and require a lengthy application process. All the scammers typically provide is a list of agencies and foundations. The catch is such lists are available for free at most public libraries or economic development agencies.
A few years ago, another scam surfaced in which callers would contact charities, nonprofit organizations, and small businesses by telephone and offer to provide "free samples" of various cleaning supplies. After sending the supplies, they followed up with bills charging several times the market value of the merchandise.
When business owners complained, the company's telemarketers dunned them for payment or demanded stiff restocking fees to take back the order. In some cases, they insisted that the business had ordered the supplies. Under state and federal law, however, unsolicited goods that arrive at your doorstep can be considered "gifts," and the recipient is not obligated to pay for them.
Variations of the scam can also involve copy machine toner and business directories. Acting as if someone in your company has already placed an order, telemarketers will attempt to get your confirmation for "shipping purposes." They hope you are too distracted to check, or just say yes to get them off the phone. Then, they either send more product than you can ever use -- and charge you for it -- or else they send merchandise of low quality.
According to experts, the first line of defense against supply scams is good recordkeeping and a clear delegation of responsibility. One person (or office) should oversee both the ordering of merchandise and monitoring of its shipment and arrival.
As I mentioned, scammers count on the fact that businesses are too distracted or too disorganized to catch bogus invoices or unauthorized shipments. Today, many of those scams are virtual, but don't forget the dangers of the real world as well.
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