Rewards for Reporting Fraud

Business Fraud (and Examples of Fraud)

Examples of Fraud schemes:

Dance Instructors
Earn at Home
Envelope Stuffing
Franchises
Home Improvements
Land Investment
Nigerian and Foreign Scams
Pyramids of Ponzi Schemes
Vanity Press (Publishing Books) 

Dance Instructors

If you want to learn to dance, there are many respected dance instructors. The fraud to watch out for, however, is high pressure tactics to make you believe that if you just keep taking lessons you will win a legitimate dance contest, become a star, or gain a great testimonial. Advice: Learn to dance, but don’t be taken for a ride.

Earn at Home

The newspaper advertisements and signs on the side of busy roads promise high profits for making or selling products at home, including costume jewelry, artificial flowers, pillows, or toys. These companies promise that they will buy the finished products if the work is up to its standards. Sadly, the company rejects the finished product, claiming it is not up to its standards. Other times, the company is simply nowhere to be found when the time comes to pay you. If you are tempted to respond to an earn-at-home advertisement, please keep in mind that the promoters of these schemes usually ask for money for instructions or merchandise before they tell you how the plan woks. They may entice you with promises of high profits or big part-time earnings, and even assure you of a high demand for your efforts. But, remember that there is no easy way to earn money at home. In fact, the vast majority of these schemes are fraudulent.

Envelope Stuffing

You have seen the ad: “We will pay you 25 cents for each envelope you stuff and return to us” or perhaps “Earn 250 dollars for stuffing 1,000 envelopes.” These advertisements are deceptive or misleading and you should stay clear of them. If you do call, you will be given a nice sounding pitch how you can make money by folding and stuff brochures into envelopes, and then seal and return them to the company, all for 25 cents each. But that is not how the fraud works. Just to receive information you will have to send them a non-fundable payment, usually between 10 dollars and 25 dollars. In the mail, you might receive some information together with an agreement to sign. Sadly, what they tell you to do is basically to cheat others by engaging in an old fashioned pyramid scheme. You must take out your own ad in the newspaper at your cost, which reads:

 Franchises

The newspapers are filled with franchise fraud schemes. They promise the independence of owning your own small business, together with the promise of help from an experienced company. Most are simply scams, stealing your investment or providing no real assets or training. Be wary of franchise opportunities.

Home Improvements

Sometimes people will go door-to-door promising driveway sealing, paint your house, or do some low cost home repairs. They tell you they have material left over from another job and offer an unbeatable price. They often demand money up front. The problem is that either the final cost will be much more than the market prices for the repairs or the work is never done. They claim to go to get more workers or material, but never return. Sometimes, even when work is performed, the materials are useless, such as a mixture that looks like sealant or paint, but washes off in two weeks. Worse yet, they may ask to come into your home, such as to use the bathroom, and use the opportunity to steal cash, checks, credit cards and jewelry.

Always contact the Better Business Bureau before hiring a door to door serviceman.

Land Investment

In most newspapers, there are advertisements for land or related investments, either locally of in far parts of the country. In many instances, the so-called development company does not even own the land. Even if they print out sales brochures, they usually are pictures of a resort not owned by them.

Nigerian and Foreign Scams

For some reason, there are many scams originating in Nigeria. You might get a letter or an email from someone overseas either asking for your help in transferring assets to a bank, or promising a get rich quick scheme. Others claim to be a non-profit entity in need of resources. Many have been sent to me, claiming I am a long lost relative and inherited millions of dollars, which will only cost me a few thousand dollars to receive. Sometimes, the fraud can be hard to detect, because they use official looking stationary. To participate, you must give certain information such as our bank account number, credit card numbers, or personal information. Once this information is divulged, the accounts are plundered or your identity stolen. If you get any emails from overseas, put it in the trash.

Pyramids of Ponzi Schemes

Ponzi schemes are an illegal pyramid named after Charles Ponzi. In 1920, Mr. Ponzi swindled thousands of New England residents by asking them to invest in a postage stamp speculation scheme. He claimed that he could take advantage of the differences between U.S and foreign currencies by buying and selling international mail coupons. He promised investors that they could earn a 40% return in just 90 days. Thousands rushed to sign up, paying him 1,000,000 dollars. To make the scheme appear legitimate, he paid a few early investors a few payment. But, the rest of the people lost their money.

Today, there are many pyramid schemes involving many products or services, where one must “rob-Peter-to-pay-Paul.” This means you must use a part of the money from future investors to pay initial investors (to gain testimonials to convince others to sign up). However, once the person has collected a set amount of money, they disappear.

The chain letters work the same way. Send one dollar to the top ten names on a sheet of paper then remove that person and add your name at the bottom and mail it to ten people. In theory, by the time your name gets to the top, hundreds of thousands of people will be sending you one dollar. Not only is this illegal, but your name never reaches the top. The top ten people are all in the scheme together and use you to bilk your friends.

Vanity Press (Publishing Books) 

The term vanity press is used to describe a book publisher that agrees to publish your book for a set price. Sometimes, the price is very large, especially from elderly consumers who want a book printed that was written by a spouse or a deceased relative. A book that is not edited by a professional editor stands no chance of selling.  Even if a book is well written, many stores refuse to stock books that are printed by a vanity publisher, and the legitimate distributors know who they are. In addition, no book will sell without large investments in publicity. That is not included in the price of a vanity publisher. In the end, you will spend thousands of dollars just to give away a few books to a few friends.

When you receive a response, you keep the quarter and then if you “stuff” into another envelope the self-addressed envelopes your victims send to you and mail them to the company, they will pay you 25 cents for each one you send. That company will then use that person’s name and envelope for yet another scam, victimizing them again. Apart from the fraud aspects, for you to make any money yourself you must pay for classified ads and bilk more consumers out of a quarter, a stamp and the time they spent responding to your advertisement. Envelope stuffing schemes are detestable pyramid schemes or illegal chain letters.