Managing a Small Business
Mistakes to Avoid - Frauds, Scams and Rip-Offs

Frauds, Scams and Rip-Offs

The Classic "Customer" Fraud
Is your new customer a fraud? Years ago, I received an order for books from a library wholesaler in Michigan. Since he had limited credit and bank references, I shipped his first order on a COD basis. Then he placed a much larger order worth several thousand dollars. I again insisted on COD payment-but we never got paid. No-the check didn't bounce; he stopped payment on it-which made it more difficult for us to get legal authorities to help us. Eventually enough publishers were ripped off that he was prosecuted, convicted, and put in jail. I heard he had converted his assets to gold bars-but I never saw a penny.

This is a common pattern in fraud cases-when the criminal pays for a small quantity of merchandise to build your confidence and then later places an order and tries to disappear with a much larger amount.

What Number Did You Dial?
Does your business use an answering machine on its phone lines during off-hours? A couple of years ago, an operator of a phone-sex service reprogrammed our corporate answering machine to direct all of our off-hour incoming calls on our 800 telephone number to the sex service!

This is not an uncommon scam-often larger corporations with busier phone lines are targeted! Amazingly, all of the phone companies we contacted said that they had no recourse against the phone-sex operator. While this kind of scam may not cost you a lot of money, it certainly can be embarrassing!

The Biggest Rip-Off!
The World Wide Web is becoming the biggest business rip-off of the decade! A lot of corporations are spending huge amounts of money on Web access only to have many of their employees spend their time getting sports scores, playing games in cyberspace, and visiting sites sponsored by adult magazines.

But a lot more money is being lost by smaller companies and entrepreneurs who think that they can make a killing by selling products on the Web. For the foreseeable future, this is a pipe dream! Today, the only people making money on the Web are promoters selling "get-rich-quick seminars" and consultants who build the sites. On our main Web site (careercity.com), for example, even with traffic of 150,000-plus hits a day, some days we don't even get a single order for a book or software package.

Fraud Run Rampant!
If you're thinking of responding to a business opportunity ad-watch out! Fraud and rip-offs run rampant! If it sounds too good to be true-like "Make $35,000 a year part-time stuffing envelopes"-don't touch it!

Hot businesses today-including 900 telephone number services and computer-related businesses-are ones to be particularly careful of. I have heard of people investing $25,000 in a computer-related business and still having no idea how to go out and get customers!

Check to see if the Better Business Bureau or your state's consumer protection office knows anything about the business. But remember-government agencies are generally very slow to respond and shut down business opportunity scams. So take the matter into your own hands and visit plenty of current operators before you invest a penny!

Is It Really An Invoice?
As a manager, you're too astute to fall for most mail frauds, but do you open all the mail and okay all the payables?

More and more businesses are sending out marketing pieces designed at first glance to look either like invoices or official government correspondence.

And then there are the real scam artists. For example, my office received an invoice for a $425 subscription to a secretary's magazine, for a woman who no longer works at the company.

From time to time, I receive a copy of the infamous Nigerian letter that explains how I can make a fortune by helping some Nigerian business people avoid currency controls. All I have to do is give these people access to my bank account. Amazingly, hundreds of people have lost millions of dollars to this long-lived scheme.