Green Eggs & Scam

17 business scams--from telephone trickery to Web wrongdoing--to avoid at all costs

By Gwen Moran

Something smelled fishy to George Sarris. When the 49-year-old owner of the popular Birmingham, Ala. restaurant, The Fish Market, opened a letter from a disgruntled customer demanding a $6.89 refund, his gut told him to check it out. He couldn't recall the customer and, after a few phone calls, realized that the author of the letter was nowhere to be found. Then, Sarris started hearing that similar letters were popping up in eateries all over town. In fact, the same "customer" who had written to Sarris blanketed area restaurants with demands for refunds.

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

Sarris was one of the thousands of entrepreneurs targeted by scam artists each year. The Association of Certified Fraud Examiners, Austin, TX (www.cfenet.com) estimates that fraud, ranging from bogus billing to dishonest direct mail to sales scams, costs U.S. businesses more than $400 billion annually. Shirley Rooker, president of Call For Action (sic), a nonprofit scam-busting organization in Bethesda, MD, thinks more businesses need to take the problem seriously.

"I don't think businesses think in terms of being victims of fraud," she says. "Often, the weak point is the person answering the phone and unknowingly gives out information."

Rooker warns that scam artists are threatening businesses like yours, often preying on employees who may be less likely to question their smooth-as-ice approach. Tactics range from the tried and true to the technological.

SEPTEMBER 11 SCAMS:

Charity Fraud: Within 48 hours of the September 11 attacks, reports of bogus charities claiming to collect for relief efforts began to surface. Rooker warns businesses to check out any charity before sending money by visiting Web sites by watchdog groups such as the Better Business Bureau or the American Liberty Project (www.libertyunites.org), a cooperative effort between Amazon.com, AOL Time Warner, Cisco Systems, eBay, Microsoft, and Yahoo! If you wish to donate to a smaller, community-based organization, which may not be listed on these sites, Rooker advises that you get information in writing and request references. Another tactic: Look up the charity's web site domain through the WHOIS function at Network Solutions (www.networksolutions.com) and find out to whom it's registered and whether the name on the registration matches the name of the charity. If not, you should be cautious.

Business Identity Theft: After World Trade Center disaster, hundreds of thousands confidential papers were strewn about the streets of Manhattan, many from brokerage firms and other places of business that house sensitive information. Rooker advises businesses to be particularly careful in the coming months, as identity theft is an issue for businesses as well as individuals. Rooker recalls a pet shop owner who found suspicious charges on her company credit card. Soon, the entrepreneur realized that someone had obtained credit cards and borrowed money in her company's name.

Rooker advises small business owners to closely monitor bills and watch for erroneous charges. On a day-to-day basis, follow basic precautions to guard against identity theft, including destroying business credit offers before discarding them. Safeguard important business information such as tax identification and bank account numbers and watch for change of address notices from credit companies or other vendors.

PHONE SCAMS:

90# Scam: Beware of callers who claim to be telephone company representatives asking the receptionist to dial 9-0-# to test the phone. On many systems, this allows a third party to 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 9-0-#, hang up.

809 Scam: An urgent letter or e-mail demands that you call a number in the 809 area code. Originating in the Caribbean, 809 numbers may be "pay per call," much like 900 numbers in the U.S., costing you up to $25.00 per minute. While some 809 numbers are legitimate, be sure to check the origin of an unfamiliar area code before you dial. Most telephone books have listings of U.S.-based area codes or call your long distance provider for information.

Voicemail Access Scams: Private Branch Exchange (PBX) systems remote access features can be cracked by hackers who can run up thousands of dollars in long distance charges in a very short period of time. Call For Action advises that businesses monitor phone bills closely and change authorizations numbers frequently.

FALSE CHARGES

Dummy Invoicing: According to Ron Berry, senior vice president, Bureau Network Division of the Council of Better Business Bureaus (www.cbbb.org), fake invoices still rake in big bucks for scam artists. A business may receive a "look alike" invoice for a product or service that is regularly ordered, such as local media or yellow pages advertising. The unsuspecting bookkeeper or business owner thinks the bogus bill is valid and pays it. Berry reminds small business owners to set up systems for invoice verification and approval.

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

Government Document Dupe: Often based on existing federal and state laws, you receive an official-looking document leading you to believe that you must purchase signage that must be displayed by law, such as minimum wage declarations. In most cases, signage that is mandated by law is available free from the government. In another twist, the BBB confirms that a number of Alabama-based restaurants received demands from the "Environmental Protection Enforcement Agency" to fill out a lengthy questionnaire and return it with a fee of $189 or risk being fined $5,000 per day. If you see an official-looking document demanding money, call the state or federal agency referenced in the document to verify that the demand is valid.

Phony Customer Con: This is the scam that targeted Sarris. The scam-ster sends a letter posing as a disgruntled customer demanding a refund for a nominal amount. Because the amount is small, the business owner may send it without question. To avoid a rip-off, follow up on such requests with a phone call to verify that the customer is real or ask the customer to send a copy of the receipt.

Energy Shocking: Similar to "slamming" in phone service, shocking is the practice of switching energy service without permission in states where energy deregulation allows for a variety of service providers. The Better Business Bureau advises that businesses check bills monthly for irregularities to safeguard their power sources.

NOTHING FOR SOMETHING

Copier Service Scheme: In this brazen scam, the con artist poses as service technician for office equipment and gains access to your copier or other expensive machinery where he then substitutes an inferior machine or steals office equipment altogether. Always ask for identification and if a service technician shows up unannounced, call your provider to double-check identity.

Cash a Check Get a Bill Con: A business receives a nominal check in the mail, which looks like a rebate or refund. However, the check has fine print that says cashing authorizes the issuer to bill the business for a product or service, change long distance carriers, etc. Review all checks and their point of origin. If it seems suspicious, don't cash it.

Fake Directory/CD-ROM Ruse: A telemarketer uses high-pressure tactics to get the business to participate in and purchase a directory or CD-ROM, which often never materializes after it's been ordered - prepaid, of course. 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.

FINANCIAL SERVICES SCAMS

Invalid Insurance: Rooker cautions businesses that receive phone solicitations to buy insurance or who receive questionable insurance bills 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 or other fee is received. Once the business owner sends the fee, which can be up to several thousand dollars, the loan never materializes. Berry advises businesses to conduct financial transactions with institutions that they trust and to never send an advance fee for a business loan.

INTERNET SCAMS

Domain Registration Rooks: Scam artists try to sell new top-level domain names, such as .biz and . before the names are available for assignment, usually at a highly inflated price. Be sure register using a reputable service such as Network Solutions (www.networksolutions.com) 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. Look for one of the many established and reputable companies that provide this service, ask for references and, if possible, use a credit card for payment to protect yourself from liability.

SCAM-BUSTING

If you think it can't happen to you, says Berry, 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," he explains.

Rooker advises that some businesses may be more at risk than others. Many con artists target businesses 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 more 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, educate employees, especially those who answer phones, order supplies and pay bills, about recognizing common scams by both discussing them and posting 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 have an established relationship with a vendor and check unknown parties with the BBB to see if any complaints have been filed, Berry warns.

"It's awfully hard to get your money back once it's been lost," he says.