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Feds crack down on work-at-home scams

/ Source: The Associated Press

Make big bucks at home stuffing envelopes! Or designing Web sites! Or assembling refrigerator magnets!

That last come-on attracted an estimated 30,000 people, the government said Tuesday, announcing a crackdown on some 200 scam operations that falsely offered lucrative work-at-home and other questionable business opportunities.

Such schemes cheated tens of thousands of people out of more than $100 million, officials said.

Worse news: They said they can't even estimate how many other such scams are out there.

In a 14-month-long crackdown on promoters of illegal business opportunity and work-at-home schemes, the Federal Trade Commission, Justice Department, U.S. Postal Inspection Service and law enforcement agencies from 14 states took civil and criminal action against more than 200 operations they said engaged in fraud and/or violated consumer protection laws, officials said at a news conference.

Such offers succeed partly because they "appeal to the optimist in all of us _ be your own boss, supplement your income, pay for your child's education," said FTC Chairman Deborah Platt Majoras. The reality, she said, is that many are scams promising results that will never happen.

And victims who lose money they invested in some of the businesses are unlikely to ever get it back, said Peter D. Keisler, assistant attorney general in the Justice Department's civil division.

Some people spent up to $37,500 per machine to invest in a plan to own DVD movie rental vending machines. The company selling them, American Entertainment Distributors of Hollywood, Fla., allegedly said annual earnings from the machines would be $60,000 to $80,000 and that it would help buyers place them in good locations. The FTC alleges the company misrepresented how much help it would give franchisees.

The estimated 30,000 people who signed with National Home Assemblers of Mainesburg, Pa., to make kitty cat refrigerator magnets had to pay $38 for registration and starter kits and a $12 inspection fee. They were promised up to $800 weekly pay, but in most if not all cases, their work was later rejected for "quality reasons," authorities said.

Neither company could be reached for comment. Directory assistance had no number for the entertainment company and the phone was disconnected at the assembling company.

The multi-agency enforcement crackdown, known as "Project Biz Opp Flop," meant the government agencies cooperated with each other to investigate and eventually file criminal prosecutions or civil actions, get cease-and-desist orders and so on.

For example, in Florida, the FTC, Justice Department and Postal Inspectors office recently worked with the local U.S. attorney to hit 14 people with such criminal charges as money laundering and wire fraud.

The state is "one of the consumer fraud capitals of the country, if not the world" because of its high population of immigrants and of senior citizens with nest eggs, said Marcos D. Jiménez, U.S. attorney for the Southern District of Florida.

Elsewhere, judges issued restraining orders against companies that were promising business opportunities such as the chance to make $500 a week doing medical billing from home, designing and setting up Web sites for Fortune 500 companies or selling surplus or discontinued merchandise.

Some of the people running the scams received jail terms, others fines. Not all the 200 of the companies have been shut down.

The agencies involved did not provide details on exactly how many companies had been shut down nor how many people were jailed or fined.

The job of catching questionable schemes offered through ads, the Internet and the mail is daunting. Consumers must be wary, study offers well and get opinions from professionals such as lawyers and accountants, officials said.

The FTC has started a Web site to educate consumers who use the Internet to find business opportunities.