Green Eggs & Scam 17 business scams--from telephone trickery to Web wrongdoing--to avoid at all costs

Something smelled fishy to George Sarris. When the 49-year-oldowner of The Fish Market Restaurant in Birmingham, Alabama, openeda letter from a disgruntled customer demanding a $6.89 refund, hisgut told him to check it out. He didn't recall the customerand, after a few phone calls, realized that the author of theletter was nowhere to be found. Then, Sarris started hearing thatsimilar letters were popping up in eateries all over town. In fact,the same "customer" who had written to Sarris hadblanketed other area restaurants with demands for refunds.

"He didn't ask for a lot of money, so some people wouldprobably send it, no questions asked," says Sarris. "Ifhe sent out 1,000 letters and got half back, that's over$3,000."

Sarris is just one of thousands of entrepreneurs targeted byscam artists each year. In fact, the Association of CertifiedFraud Examiners estimates that fraud, ranging from bogusbilling and dishonest direct mail to sales scams, costs U.S.businesses more than $400 billion annually. Shirley Rooker,president of Call for Action Inc., a nonprofit scam-bustingorganization in Bethesda, Maryland, thinks more businesses need totake the problem seriously.

"I don't think businesses think in terms of beingvictims of fraud," Rooker says. You must be aware that scamartists are threatening businesses like yours, often preying onemployees who may be less likely than you to question theirsmooth-as-ice approach. Warns Rooker, "Often, the weak pointis the person answering the phone who unknowingly gives outinformation."

Royal Rip-Offs

The tactics used by scam artists range from the classic to the high-tech. Here's a rundown of what to watch out for:

Fraudulent Charities: Within 48 hours of the September 11 terrorist attacks, reports of bogus charities claiming to collect for relief efforts began to surface. You can check out any charity before sending money by visiting the Web sites of watchdog groups such as the Better Business Bureau (BBB) and the American Liberty Project, a cooperative effort between Amazon.com, AOL Time Warner, Cisco Systems, eBay, Microsoft and Yahoo! If you wish to donate to smaller, community-based organizations, which may not be listed on watchdog sites, you should get information in writing and request references. Another tactic: Check the charity's Web site domain through the WHOIS function at Network Solutions to find out who registered it and whether the name on the registration matches the name of the charity. If it doesn't, you should be suspicious.

90# Scam: In this scenario, callers who claim to be telephone company representatives ask the receptionist to dial 90# to test the phone. On many systems, this allows a third party to then make calls on your dime. Some variations include callers asking to be transferred to extension 90 or 900. Tell your employees: When a caller asks for 90#, hang up.

809 Scam: Beware of urgent letters or e-mails demanding you call a number in the 809 area code. Originating in the Caribbean, these 809 numbers are often "pay per call," much like 900 numbers in the United States, and may cost you up to $25 per minute. While some 809 numbers are legitimate, make sure to check the origin of any unfamiliar area code before you dial it. You can use the listings of U.S.-based area codes found in most telephone books, or call your long distance provider for information.

Voice-Mail Access Scams: The remote access features of Private Branch Exchange (PBX) systems can be cracked by hackers--who can then run up thousands of dollars in long-distance charges in a short period of time. Monitor phone bills closely and change the authorization numbers often.

Dummy Invoicing: According to Ron Berry, senior vice president of bureau affairs for the Council of Better Business Bureaus Inc. in Arlington, Virginia, fake invoices still rake in big bucks for scam artists. Your business may receive a "look alike" invoice for a product or service that it regularly orders, such as local media or Yellow Pages advertising. Thinking the bogus bill is valid, you may pay it. Berry reminds entrepreneurs to set up systems for invoice verification and approval.

Toner Phoners: An employee, usually an assistant or receptionist, gets a call from a company posing as your office supply provider. The scamster asks him or her to verify the make and model of your copier, then sends inferior and overpriced supplies that were never ordered, using the employee's name and the acquired copier information as proof of the order. Your company is billed an exorbitant price, and the scamster uses high-pressure tactics, such as the threat of legal action or a collection agency, to get paid. Rooker says this scam is rampant and that you should tell employees never to answer questions about your company's equipment over the phone.

Hot Opportunity--or Scam?
Before you write out a check to a seemingly lucrative franchise or business opportunity, make sure you've done your homework by fully researching the company. Read these how-to articles for more information:

• Entrepreneur's Guide to Franchising
• How to Research a Business Opportunity
• 10 Warning Signs of a Shady Opportunity

Government Document Dupes

In this scam, you receive an official-looking document thatleads you to believe you must purchase signage, such as minimumwage declarations, and display it by law. But in most cases,signage that's mandated by law is available for free from thegovernment. In another twist, the BBB confirms that a number ofAlabama-based restaurants received demands from the"Environmental Protection Enforcement Agency" to fill outa lengthy questionnaire and return it with a fee of $189 or riskbeing fined $5,000 per day. If you get an official-looking documentdemanding money, call the state or federal agency referenced in thedocument to verify the demand is valid.

Phony Customer Con: This isthe scam mentioned earlier in Sarris' story. Here, a scamstersends a letter posing as a disgruntled customer and demands arefund for a nominal amount. Because the amount is so small, manybusiness owners send it without question. To avoid being rippedoff, follow up on such requests with a call to verify that thecustomer is real or ask the customer to send a copy of thereceipt.

Business Identity Theft:Immediately following the World Trade Center disaster, hundreds ofthousands of confidential papers were strewn about the streets ofManhattan, many from brokerage firms and other places of businessthat house sensitive information. If this information were to getinto the wrong hands, some of it could be used in identity theftscams against both businesses and individuals.

Recently, Rooker met a pet shop owner who found suspiciouscharges on her company credit card. Soon, she realized that someonehad deceptively obtained credit cards and borrowed money in hercompany's name. You should closely monitor bills and watch forerroneous charges. On a daily basis, follow basic precautions toguard against identity theft, including destroying business creditoffers before discarding them. Safeguard important information suchas tax identification and bank account numbers, and watch forchange of address notices from credit companies or othervendors.

Energy Shocking: Similar tophone service "slamming," shocking is the practice ofswitching energy service without permission in states where energyderegulation allows for a variety of service providers. The BBBadvises that companies check their bills monthly for irregularitiesto safeguard their power sources.

Copier Service Scheme: Inthis brazen scam, the con artist poses as a service technician foryour office equipment. Once he gains access to your copier or otherexpensive machinery, he then substitutes an inferior machine orsteals the office equipment altogether. Always ask servicetechnicians for identification, and if they show up unannounced,call your provider to double-check identity.

"Cash a Check, Get a Bill"Con: In this scenario, businesses receive nominal checksin the mail resembling rebates or refunds. However, the check hasfine print that says cashing it authorizes the issuer to bill thebusiness for a product or service, change long-distance carriersand so on. Review all checks and their point of origin. If it seemssuspicious, don't cash it.

Fake Directory/CD-ROM Ruse

A telemarketer uses high-pressure tactics to get the business owner or employee to participate in, and then purchase, a directory or CD-ROM that never materializes. While there are a number of reputable directory publishers, always ask to see documentation of the company and the product in writing, and check with the BBB to see if any complaints have been filed against the publisher.

Invalid Insurance: Rooker cautions businesses that receive questionable insurance bills or phone solicitations to buy insurance to beware of con artists selling or billing for phony policies. Buy insurance only from reputable brokers or companies, and verify invoices before paying them.

Advance-Fee Loans: According to Berry, it's common for cash-strapped entrepreneurs to fall for the promise of a loan that's "guaranteed" once a processing fee or other fee is received. Once the business owner sends the fee, which can total up to several thousand dollars, the loan never materializes. Berry advises that businesses should conduct financial transactions only with trusted institutions and never to send an advance fee for a business loan.

Domain Registration Rooks: Scam artists try to sell new top-level domain names, such as .biz and .info, before the names are available for assignment, and usually at a highly inflated price. Be sure to register using a reputable service such as Network Solutions or Register.com.

Phony Web Site Scams: You're promised a free Web site and a month of free hosting. Once you give your credit card information, though, you never hear from the provider again. Protect yourself by doing business only with one of the many established and reputable companies that provide this service, asking for references and, if possible, using a credit card for payment to protect yourself from liability.

Hackers, Crackers and Thieves
Have an online business? Then a whole new world of fraud is waiting especially for you. Find out which scams to watch for in Scram, Scam!

Scam-Busting Tips

If you think it can't happen to you, you're wrong. Even seasoned entrepreneurs are suckered by scam artists. "Because small businesses often don't have those layers and layers of protective procedures, one person may be handling purchasing and invoices, and that person may not have much experience in implementing checks and double-checks," Berry explains.

Rooker points out that some businesses may be more at risk than others. Many con artists target companies that have recently moved or opened a new office. In addition, Berry adds that scams are more prevalent during the winter holidays or over the summer, when employees tend to be on vacation and someone other than the regular manager or bookkeeper may be handling orders or payments.

Overall, says Berry, the best offense is a good defense. He advises that no matter how small your business is, you should educate your employees--especially those who answer phones, order supplies and pay bills--about how to recognize common scams. It helps to discuss prevalent ruses and post them around your place of business. Institute a system of documenting orders and checking invoices against those orders. Never buy over the phone unless you've established a relationship with a particular vendor. And always check unknown parties with the BBB to see if any complaints have been filed. Says Berry, "It's awfully hard to get your money back once it's been lost."

Scam Patrol
If you've been victimized by a scam or need more information on preventing scams, these organizations can help:

• Better Business Bureau
• Call for Action Inc.
• FTC
• Imaging Supplies Coalition for International Intellectual Property Protection Inc.
• National Fraud Information Center
• ScamBusters.org

Contact Sources

• Preston Gates & Ellis LLP
  (206) 467-2839, www.prestongates.com
• The Fish Market Restaurant
  (205) 322-3330, www.thefishmarket.net