Officials Close Down 90 Outfits Fraudulently Luring Investors

WASHINGTON — Americans seeking extra incomes or hoping to become their own bosses are being victimized by an epidemic of fraudulent business offers, officials warned Tuesday.

Project Telesweep, a coalition of law enforcement and consumer groups, announced that legal action has been taken against 90 operations in the past two weeks.

“There is a vast amount of fraud--we think it’s an epidemic of fraud,” Federal Trade Commission Chairman Robert Pitofsky said.

Many of the offers involve vending machines, amusement games, pay phones and display racks for greeting cards, computer software and other items.

“The victims are middle-class Americans trying to pay the mortgage, send their children to school or just put food on the table,” added Deborah Bortner, administrator of the Washington State Securities Division.

The cases, both civil and criminal, were brought after federal and state investigators answered newspaper and television ads for business opportunities and tape recorded the often wildly exaggerated claims made in the sales pitches, Pitofsky said.

Recent FTC cases involved fraud of $64 million and authorities estimate overall losses at more than $100 million annually.

In the past, agencies generally took action after complaints from the public. Often victims are embarrassed to admit they have been cheated, added Maryland Atty. Gen. J. Joseph Curran Jr.

Larry Jensen, a retired police officer in Tigard, Ore., told of being embarrassed when he was victimized by a Maryland company promoting automobile burglar alarms. Jensen said he spent money to advertise the alarms, but when they arrived he learned they didn’t work in every car. The company promised that he would make 50 to 75 sales for every ad he ran, Jensen said. However, more than 30 ads produced just one sale, and that alarm was later returned when it didn’t work.

Curran advised people considering a business offer to “be careful, go slow, ask questions, don’t leap before you look.”

Officials say shoddy merchandise, unproven concepts, promises of instant riches and pressure to act quickly are hallmarks of fraud.

Other warning signs are suggestions that no experience is needed, promises of exclusive territories, reliance on the firm’s references and failure to provide disclosure documents.

Pitofsky said that not all business offers are fraudulent but urged consumers to be suspicious of big promises in ads that provide an 800 number. Often, he said, the calls go to a high-pressure sales force.

Investigators said people considering business opportunities need to be cautious, check with the FTC and state securities officials and get required disclosure documents before investing.

To avoid phony testimonials, get the names and addresses of others involved in a business and check them out, officials said.