Churches, charities hit in office supply scam


via Churches, charities hit in office-supply scam,

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If you run a small business or nonprofit organization, you already know it’s tough out there. Besides working in a tough economic environment, charities and small businesses find themselves having to look for ways to save a buck every way they can. Unfortunately, that can make them targets of scammers, promising amazing deals that never pan out or even trying to collect money for orders that were never made.

This week, federal regulators announced they’d put a stop to an office-supply scam that allegedly swindled child care centers, educational institutions, churches, hospitals and other nonprofits by calling them and tricking them into paying for overpriced supplies they never ordered.

The Federal Trade Commission got federal courts to freeze the assets of several companies based in Maryland and California that are accused of using a variety of tactics to get companies on the hook for unordered merchandise. The agency announced the action in a news release this week.

“The defendants lied to small businesses, charities and churches to get them to pay for overpriced supplies they didn’t order,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “That’s not only shameful, it’s also illegal.”

In the California case, Beverly Hills-based Telestar Consulting Inc. (also doing business as Kleritec and United Business Supply, and Karl Wesley Angel) allegedly used a variety of tactics to persuade consumers to pay for unordered merchandise. For example, the FTC alleges the defendants called the consumers to offer supposed deals on, or free samples of, items like art supplies and cleaning products.

They also asked consumers to accept an additional shipment by falsely calling it a ‘backorder’ that was supposedly part of an order the consumer had already paid for, and then billed them for the so-called ‘backorder,’” noted the FTC. In other instances, the defendants claimed consumers had agreed to multiple shipments, when at most they had agreed to only one shipment. In addition, in instances in which consumers agreed to make a purchase, the defendants allegedly failed to disclose the total cost and quantity of goods, and the terms of the sale.

If the invoices were ignored or not paid promptly, the companies allegedly threatened to send the organizations to collections agencies. “Consumers who paid under a mistaken belief that they had to do so — some paid thousands of dollars more than what they were legally obligated to pay — often received more unordered merchandise and bills for payment,” the release noted.

In the Maryland case, the FTC charged six companies and three individuals around a scheme involving light bulbs and cleaning supplies. The scheme allegedly hired telemarketers who “falsely indicated that they had done business with the consumers earlier and that they were offering a free sample or catalog, without properly disclosing that they were making a sales call.”

The scheme allegedly relied on the fact the person ordering merchandise and the person processing invoices didn’t know what the other was doing. If invoices were paid, the company received future shipments of unordered merchandise.

This type of scheme is successful for several reasons. For one, many people believe unordered merchandise must be paid for (the law says that, in most cases, you don’t have to pay for anything you didn’t order). Secondly, scams use smooth-talking telemarketers, who trick people (on a recorded call) into answering “yes” to an unrelated question, doctoring the recording and using it as evidence the order was made. And finally, there is often a lack of good communication between those making purchases and those paying the invoices.

To read the complaint in its entirety, visit


Business coaching schemes busted

via Business coaching schemes busted,

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Starting a home-based business is difficult. While working from home or over the Internet can seem like a good idea because it’s cheap and easy to get off the ground, very few new home-based businesses live long enough to celebrate their first birthday. Such failures are not usually because of a lack of effort, motivation or even a good idea; the profit margins are slim, the competition fierce and the marketing landscape complex. Unless you’re very experienced at doing this, you’ll probably need some expert help.

To address this fast-growing market, “business coaching” services have popped up around the globe. This niche is different from “career” or “executive” coaching services, another fast-growing industry that especially caters to people trying to reinvent their careers. (Some experts note that the term “business consultant” is a more appropriate descriptor for the services provided by these businesses.) These folks are usually people with an established track record in a particular business, who put that experience to work helping others develop their own businesses. There is a good deal of crossover between the services offered, and no small amount of confusion.

Many of these are solid, relying on time-tested ideas and good advice. But there are also a lot of scams and shams among the thousands of opportunities.

Last week, the Federal Trade Commission announced they’d taken down a complex web of companies that promised big results from its “personalized” business “coaching” services. A Utah-based company called “Guidance” is accused of hiring telemarketers — known as “sales floors” — to pitch its services to hopeful consumers. Once on the hook, hopeful entrepreneurs were charged thousands of dollars to help them start their own businesses.

One tactic was to use a videotaped testimonial to persuade potential customers. “I’ve grossed over $12,000 last month alone,” bragged the salesperson. “Everything gets better all the time. I’ve got a whole stack of orders over here to prove it. Right behind me, this laptop, I bought this to start my online business. Before that I never owned a computer, I never touched a computer.”

If a potential customer seemed interested, the marketers would encourage them to share their personal stories to get details they could use to convince them to invest. Many potential customers reported they shared details such as their financial status and personal hardships, which the seller then used to tailor the pitch. Interested customers were then routed to a “closer” who asked for a credit card number to pay the initial cost of the program at a cost of up to $10,000, and then were pitched additional products.

According to the FTC, most people who signed up didn’t get the promised benefits. “In fact,” noted FTC blogger Lesley Fair, “the FTC says that the overwhelming majority of people who bought the defendants’ business coaching services were never able to establish a business.”

When choosing someone to help start your new business, it’s easy to make the wrong choice and responding to a telemarketing pitch is steeped in risk. Writing in Entrepreneur magazine, Doug and Polly White gave some great advice. “Too many small-business people aren’t willing to ask for help when they need it,” they noted. “Entrepreneurs by nature tend to be independent risk-takers. They started the company and it is their baby. Obviously, they should know how to raise it. However, none of us knows everything about growing and managing a business.”

The Whites listed five things you should look for in a consultant: unimpeachable character, solid experience, creative problem-solving skills, outstanding communication skills and excellent interpersonal skills. To read their excellent and concise article on the topic, visit