State, Federal Law Enforcers Launch Sting on Business Opportunity, Work-at-Home Scams

In a coordinated attack on business opportunity and work-at-home fraud, the Federal Trade Commission, the Department of Justice (DOJ) and 17 state law enforcement agencies have launched a law enforcement sting and consumer education campaign targeting hucksters who use deceptive earnings claims and paid "shills" to promote their scams or otherwise violate consumer protection laws. Seventy-seven operations have been caught in the sting.

"Business opportunity scams and work-at-home schemes are frauds that can cost consumers their life savings, and destroy their dream of owning a successful small business," said J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. "That's why we launched Project Busted Opportunity, a joint federal-state attack on business opportunity and work-at-home schemes."

Using undercover investigators and special computer tools, the FTC identified business opportunity advertisements that made earnings claims without including cautionary language required by the FTC's Franchise Rule. The investigators posed as prospective investors and listened to sales pitches from operators who hyped the business opportunity and touted the earnings potential. Then the investigators were given "references" - supposedly successful owners and operators of the business opportunity who could verify the earnings claims. In the course of their investigations, the FTC staff uncovered evidence that some of the "references" didn't own or operate a business. They were shills - actors paid by the operations to pose as successful and prosperous owners. Indeed, one of the "references" was actually a shill for three of the defendants named today and another had been a shill in a previous FTC case where he testified, "I was paid to lie."

The operations ranged from envelope stuffing work-at-home schemes to snack and soda vending machine businesses. In some cases, like medical billing work-at-home schemes, the sellers overstate the demand for the services, according to the FTC. In others, like vending machine businesses, the operators allegedly misrepresent the amount of assistance they would provide to the franchisee. All of the operators targeted by the FTC were allegedly characterized by one key element: earnings claims that were unsubstantiated or deceptive.

In 11 cases, the FTC has filed complaints in U.S. District Court seeking a permanent halt to the deceptive claims and, where franchises are involved, court orders requiring the defendants to provide future investors the disclosures required by the Franchise Rule. The agency also will seek redress for consumers. In four related cases, promoters of medical billing, paralegal and craft work-at-home schemes have settled FTC charges filed earlier. The settlement in two of the cases permanently bans the defendants from selling business ventures, employment opportunities or work-at-home opportunities and requires that they post a $1 million bond before engaging in telemarketing. In the other two cases, the settlements require the defendants to post $1 million bonds before engaging in the promotion of work-at-home opportunities.

In 11 cases coordinated with the DOJ Office of Consumer Litigation, the agencies will seek consumer redress, civil penalties, and a permanent halt to the deceptive claims. In a related matter, Robert Ferrara, a defendant in a previous case filed by the DOJ, has pled guilty to violating a court order relating to selling franchises and defrauding consumers.

In addition to the FTC and DOJ cases, 17 state law enforcement agencies have announced 48 actions against business opportunity sellers. Those actions include lawsuits, cease and desist orders, consent agreements, and fines.

The states and federal agencies are also launching an extensive consumer education campaign, including a Spanish language component, to help consumers avoid fraudulent business opportunity and work-at-home schemes. The FTC has four free consumer publications, Net-Based Business Opportunities: Are Some 'Flop-portunities'?, Could 'Biz Opp' Offers Be Out For Your Coffers?, Answering the Knock of a Business 'Opp,' and Can You Recognize a Business Opportunity Fraud. They are available on the Internet at http://www.ftc.gov/bizopps.

State participants in the sweep include: Alaska Attorney General, Arkansas Attorney General, California Attorney General, Florida Attorney General, Florida Department of Agriculture and Consumer Services, Indiana Attorney General, Iowa Securities Bureau, Kentucky Attorney General, Louisiana Attorney General, Maryland Attorney General, Michigan Attorney General, North Carolina Department of Justice, North Dakota Attorney General, Ohio Attorney General, Texas Attorney General, Washington State Department of Financial Institutions, Securities Division and the Wyoming Attorney General.

The FTC's cases were brought with the invaluable assistance of the following organizations:

FTC v. Accent Marketing, Inc. - Southern Alabama Better Business Bureau, Police Department of Daphne, Alabama, and the United States Marshals Service.  

FTC v. America's Shopping Network, Inc. - Better Business Bureau of Massachusetts, Massachusetts Attorney General, and the Jupiter, Florida Police Department.  

FTC v. Associated Record Distributors, Inc. - Aventura, Florida Police Department.  

FTC v. Komaco International, Inc. - Better Business Bureau of the Southland, Better Business Bureau of Southern Nevada, U.S. Postal Inspector - Southern California Division, U.S. Postal Inspector for Las Vegas, Nevada, California Attorney General, Nevada Attorney General, U.S. Marshals Service, and the Monterey Park Police Department.  

FTC v. Leading Edge Processing, Inc. - Florida Attorney General, Central Florida Better Business Bureau, and the Orange County Florida Sheriff's Department.  

FTC v. Inspired Ventures, Inc. - Florida Department of Agriculture & Consumer Services, and the Miami-Dade Police Department.  

FTC v. Universal Greeting Card Corporation - Miami-Dade Police Department.   FTC v. Vendco, LLC - Nevada Attorney General.  

FTC v. American Vending Ventures Group, Inc.,

FTC v. Century Placements, Inc., Espresso Italia Marketing, Inc., Nationwide Premium Cigar Distributors Corp., and Perfumes Unlimited, Inc. - Florida Attorney General, and the Florida Department of Agriculture & Consumer Services.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

NOTE: A stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the complaints, settlements, and the consumer education materials 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. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.