One classified ad guarantees that by stuffing
envelopes at home, you can easily earn thousands of dollars.
Another promises $50,000 a year for doing medical billing from your
own computer. A third claims you can take in $10,000 monthly by
owning and operating pay phones.
But consumers are actually losing millions of dollars a year
responding to such phony business opportunities touted in published
ads and on the Internet, said government authorities, who are
filing a wave of cases against those behind the scams.
The Federal Trade Commission, the Justice Department, several
state attorneys general and securities officials are announcing
today they have filed complaints against 68 operations they accuse
of deceiving consumers about work-at-home and other business
ventures, such as vending machine chains.
More than 100 newspapers have agreed to include their own
classified ads informing consumers of what to look for in a
legitimate business promotion, officials said. Additionally, more
than 85 of the papers have agreed to screen out deceptive ads, such
as those that make earnings claims without any disclosure of how
much consumers have actually made.
The promoters targeted consumers with short teaser ads that
promised the chance to make money in various business plans from
working at home to buying vending machines. Consumers who called
for more information received a deceptive pitch about how much help
they would get in setting up their business and how much money they
would make, said Steve Gurwitz, assistant director in the Division
of Marketing Practices at the FTC.
Rich Torland of San Antonio, a full-time college student, wanted
to earn some money while working his own hours, when he responded
to an ad offering him just that for doing medical billing from his
"The idea of being able to come home and work on my own time
and make some money, it was worth checking out," said Torland.
"At first the way the ad was worded I thought I would actually be
working for a business."
But after he paid $350 for the software to do the billing,
Torland learned that the promoter was not going to provide him with
any clients. He asked for a refund, but was put off time and again.
When Torland set up a Web site detailing his experience, he
received e-mails from others with similar tales. He eventually
lodged his complaint with regulators, but said he is still waiting
to get his money back.
In other cases, consumers paid as much as $5,000 to $7,000 to
buy vending machines or pay phones they were told they could
operate for profit. But the companies advertising these ventures
often furnished people with old equipment and could not secure them
the kinds of locations that would actually bring them any money,
Typically, big, established companies that place many vending
machines are given the prime spots, leaving a limited number of
lucrative locations for individuals. And in at least a few
instances, consumers never even got the phones or machines for
which they had paid thousands of dollars.
Federal rules require companies selling franchises and other
business ventures to provide potential customers with disclosure
information that includes the identities of current and former
franchises. The rules also require that claims about potential
earnings be substantiated.
The complaints filed today would force the targeted promoters to
change their business practices and provide consumers with the
The FTC filed 13 cases in federal court, nine of which resulted
in a temporary restraining order with the business' assets frozen
to provide monetary refunds to consumers. The Justice Department
filed another 22 complaints for the FTC in federal court, seeking
civil penalties. State officials filed the remaining 33 actions.