Schemes Against Business


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Every year, businesses lose millions of dollars to con artists through a host of different tricks and scams. As the workload for the average American employee increases, so does the likelihood of business scheme success.

A recent workplace survey revealed that, in today’s bustling business world, 9 out of 10 employees responsible for paying company bills have other major responsibilities in addition to handling accounts payable. Therefore, it’s understandable how busy employees can be easy prey for business schemes if they aren’t careful.

The best protection against business schemes is knowledge and vigilance.

During the holiday season or summer months, employees who are responsible for paying com-pany invoices sometimes take time off. As a result, con artists may step up their efforts to try to cheat a company during those periods.

Even when persons with financial accountability are present, such as accountants, bookkeepers, etc., nearly 4 out of every 10 companies do not require any second line of oversight; i.e., no other employee is required to provide a second look at or approval of invoices before bills are paid.

Business scheme crooks and shysters owe their success to companies that have careless bookkeeping practices, inattentive or ill-equipped employees, and faulty corporate communications that blind each division of a company to the important responsibilities of another division. By educating your employees to identify common business scams, you can help them to defend your business against swindlers.

To protect your organization, learn to recognize the most common business scams.

Advance Fee Loan Brokers:
Businesses in need of commercial loans to expand or even stay afloat may be vulnerable to pitches by loan broker sharks. In a typical advance fee loan scheme, a business will answer an advertisement regarding the availability of money to lend. During a subsequent phone conversation with the loan broker, the client is assured that he qualifies for a loan but is asked to submit an advance fee for the finding of this risk capital or loan. The advance fee is characterized as payment to the broker to prepare a business plan and present it to prospective investors. However, the disreputable "broker" all too often makes no effort to find funds as promised. The business never receives the promised loan, and loses all advance fees paid to the broker.

The Gift-Horse:
This scam tries to create mistrust within an organization. It starts when the caller tricks an employee into accepting a gift—a free promotional item—with a passing reference to merchandise or services. Overpriced, unordered merchandise is received, followed by an invoice with the employee’s name. If the business questions whether it must pay the invoice, the employee comes under suspicion. The scheme works if the company believes that the employee blundered into ordering something that must now be paid for.

Phony Invoices:
Schemers know that a business sometimes makes mistakes or can be careless in its accounting, so they prey on these weaknesses. Lifting names from mailing lists, business registers, the Yellow Pages or published advertisements, swindlers send "pro-forma" invoices for directory listings or advertising in various publications, journals or directories. The invoice may seem genuine to the company's accounting department, and may even include the name of a company executive as the "authorizing agent." However, the invoice may be a solicitation in disguise and in very fine print contain the following disclaimer: "This is a solicitation. You are under no obligation to pay unless you accept this offer." Although the law states that it is illegal to send such a solicitation without the disclaimer being conspicuous and in large print, there are those who flout the regulations and send disguised solicitations. These phony invoicers are often persistent and may send a company two or more advertising invoices in the hope that the "bill" will be paid twice.

Office Supply & Paper Pirates:
This scheme covers a wide range of office goods such as photocopying paper, copying supplies or ballpoint pens. The supplier makes a pitch by telephone, fax, or e-mail or a salesperson may just show up on the premises. Usually, the supplier tries to target an employee who is unfamiliar with purchasing procedures. A common approach is for the salesperson to claim "liquidation of stock" or "going out of business." The merchandise, if delivered at all, is often of inferior quality, greatly overpriced, or may come in twice the amount ordered.

The Brush Off:
When a business or organization complains that it didn’t order merchandise or services or that prices are too high, a scam seller reacts in predictable ways:

Bullying: If you express any uncertainty about whether the supplies or services were ever ordered, the seller argues: "They were ordered. We have a recording of Mr. Jones. If you don’t pay, we can take you to court."

Negotiating: The seller agrees to accept a lower price. The goods and services are so grossly overpriced that almost anything the seller gets is profit. If you complain about price, the seller may say, "You were charged what? They must not have given you the discount for . . . " The seller then tries to negotiate "a better deal." Sometimes, the seller appeals for sympathy: "We really need the business. I’ll let you have it for . . ."

Paying for returned merchandise: The seller claims you can return merchandise if you pay a "restocking fee." In fact, the fee is often more than the goods are worth. Similarly, the seller may try to get you to pay shipping charges to return the items.

The Vanity Pitch:
"Dear Business Executive" begins the letter. "We would like to include you in our next edition of 'Who's Who in the (fill in the blank).'" All too frequently, such pitches for "Who's Who" type publications, biographies of successful people, or nominations for awards or special memberships have a catch to them. The executive who is flattered into providing the details of his or her career may be stuck with a subscription fee, a charge for the listing, or an inflated price for buying a publication that does not receive the widespread distribution implied in the initial offer.

Here are some ways you can protect your business from paying for unsolicited or unordered goods and services:

  1. Know your rights. If you receive supplies or bills for services you didn’t order, don’t pay, and don’t return the unordered merchandise. You may treat unordered merchandise as a gift. By law, it’s illegal for a seller to send you bills or dunning notices for unordered merchandise, or ask you to return it—even if the seller offers to pay for shipping.

  2. Assign designated buyers and document your purchases. For each order, the designated employee should issue a purchase order—electronic or written—to the supplier with an authorized signature and a purchase order number. The order form should instruct the supplier to note the purchase order number on the invoice and bill of lading. The buyer should send a copy of purchase orders to the accounts payable department. Keep blank order forms secure.

  3. Check your documentation before paying bills. When merchandise arrives, an em-ployee should verify that it matches the shipper’s bill of lading and your purchase order. Pay close attention to brand and quantity. Refuse merchandise that doesn’t match internal documentation.

  4. Train your staff. Train everyone how to respond to unsolicited phone, fax or email offers for office supplies and services. Advise employees who are not authorized to order supplies and services to refer all such sales pitches to the employee who is authorized to make these purchases. The authorized employee should then properly document any purchase orders.

Quick Check List
Before accepting any business proposition, you should do the following:

  • Get everything in writing. Require that all in-person, Internet or telephone sales pitches, advertising and charity appeals, or requests for your personal information be made in writing;
  • Refuse to make commitments with the unknown. Train employees to refuse to make deals with un-known sellers, especially over the phone, without first verifying the reliability and complaint history of the seller’s business with your local Better Business Bureau and other consumer protection agencies;
  • Institute strict accounting controls. The handling of invoices, etc. should be centralized and authorization closely checked;
  • Comparison Shop. Compare product prices, quality, and company service with other suppliers when offered a deal from an unknown salesperson or company;
  • Keep a list of regularly used publications or vendors. Protect your business against schemers who try to take your money by claiming that your company previously used a publication or service.

Each year, businesses fall prey to phony mail invoices bearing the familiar “walking fingers” and the name “Yellow Pages.”

Unscrupulous promoters are soliciting advertising in alternative or nonexistent business directories from unsuspecting businesses. Although these directories are portrayed as legitimate Yellow Pages publications, they are not distributed to the general public; and worse yet, they might not even be published at all.

The Yellow Pages Publishers Association estimates that over $500 million is collected annually by con artists.

The solicitation to buy ad space in a bogus Yellow Pages directory may look like an invoice and bear the “walking fingers” logo and the Yellow Pages name. Neither the name nor logo is protected by federal copyright or trademark registration. Consequently, con artists can fool businesses into believing that they are dealing with a local, affiliate telephone directory.

The United States Postal Service requires that all solicitations, that are not invoices, conspicuously carry the following notice:


Before buying advertising space through a mail solicitation or paying a “Yellow Pages” invoice, do the following:

  • Check out the company and its publication. Call your local Yellow Pages publisher to discover if it is affiliated with the soliciting company.
  • Ask the publisher for a copy of a previous directory edition. If one is provided, contact a sampling of previously listed businesses to find out if the directory was helpful to them.
  • Ask the publisher to provide all information in writing. This includes: where the directory is distributed; the way it is distributed (does each local telephone customer receive it?); how often it is published; and total distribution or circulation figures.
  • Check out the company and its publication. Call your local Better Business Bureau and other state and local consumer protection agencies to determine if any complaints have been filed against the publisher.

To learn more about schemes against business issues, contact the following:

* If you find any of the web sites listed above to be offline, please contact the respective organization. Also, be aware that the above phone numbers may be subject to change without notice.

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