FTC Announces Settlement in an Office Supply Scam Case and Provides Tips for Small Businesses on How To Defend Themselves Against Business-To-Business Fraud

This is National Small Business Week, a time to celebrate and recognize America's small business entrepreneurs, and to remind America's small businesses how to defend themselves against business-to-business fraud. In connection with National Small Business Week, the Federal Trade Commission announces a settlement with one defendant, Scott Earl, who was involved in an alleged business-to-business office toner supply fraud. In addition, as part of the FTC's efforts to protect small businesses, the Commission has initiated a new grassroots business education campaign known as Project BOSS (Banish Office Supply Scams).

The Commission sued National Supply & Distribution Center, Inc., Data Distribution Service, Inc., Steven Rayman, Larry Ellis, Lee Siegel and Scott Earl as part of "Operation Misprint," a December 1999 multi-agency law enforcement effort to crack down on bogus office and maintenance supply telemarketing schemes targeting large and small businesses and nonprofit organizations. The FTC's complaint alleged that the defendants deceptively marketed exorbitantly priced toner for office copy machines in violation of the FTC Act and the Telemarketing Sales Rule. Defendant Scott Earl has agreed to a settlement involving his role in the deceptive scheme. Under the terms of the settlement, Earl is banned from engaging or participating in telemarketing, or assisting others who are engaged or participating in telemarketing. The settlement also prohibits him from engaging in any of the deceptive practices alleged in the complaint, in connection with the advertising, promotion, offering for sale or sale of any good or service. In addition, Earl is prohibited from selling National Supply or Data Distribution's customer lists. The settlement includes a $2,000,000 "avalanche judgment" clause, to be paid if the court finds that Earl misrepresented his financial condition.

The FTC announced Project BOSS at a Senate Small Business Committee hearing in March 2000. In October 1999, the Commission appeared before the same Committee to testify about Web site cramming. The Commission testified at both hearings that business education is one of the most powerful tools to prevent fraud.

As part of its consumer education drive, the FTC has prepared some tips for small businesses to avoid being scammed by fraudulent office supply telemarketers and others:

1. Know your rights. If you receive bills for goods and services you didn't order, don't pay. The law allows you to treat unordered goods and services as a gift. Double-check, however, to make sure that an honest mistake hasn't been made.
2. Review your phone bills as soon as they arrive. Be on the lookout for charges for goods and services you haven't ordered or authorized. If you find an error on your bill, follow the instructions on your statement for filing a dispute.
3. Assign purchasing to designated staff. And document all your purchases.
4. Train your staff in how to respond to telemarketers. Advise employees who are not authorized to order goods and 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. Authorized employees should be skeptical of "cold" or unsolicited calls and feel comfortable saying "no" to high-pressure sales tactics.
6. Check out the organization with the Attorney General or Better Business Bureau in your state or the state where the organization is located before you send any money for any product or service. This is not foolproof: there may be no record of complaints if an organization is too new or has changed its name.

Some of the common schemes that prey upon small businesses and nonprofit organizations include:

• Office Supply Fraud - telemarketers pretend to be the regular supplier of copier machine or printer toner, light bulbs or cleaning supplies, and charge highly inflated prices for inferior merchandise;

• Web Site Cramming - con artists charge small businesses for Web site design services that they never ordered;

• Yellow Pages Scams - con artists deceive small businesses into paying for advertising in phone directories that are not widely disseminated;

• Public Safety/Civic Purpose Fund-Raising Scams - for-profit telemarketers solicit small businesses to make charitable contributions by purchasing advertising in bogus publications.

Visit www.ftc.gov/bcp/edu/microsites/supplies/ for more information about Project BOSS and other scams targeting small businesses.

Copies of the legal documents in the National Supply & Distribution matter will be available shortly. Copies of news releases pertaining to other office supply scam cases are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710

(National Supply & Distribution -- Civil Action No. CV-99-12828 HLH (AJWx))