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Archive for Sunday, December 18, 2005

Beware of bogus ads touting high-paying jobs

December 18, 2005

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For consumers stuck in a minimum-wage job or faced with lots of holiday bills, ads promising high wages or requiring little work might seem appealing.

But before signing up, make sure you won't be the victim of a scam. In the past two months, the Federal Trade Commission has cracked down on several companies making bogus job offers, and history tells us that new ones will pop up as quickly as the old ones go away.

Whether tacked to a telephone pole, tucked away in the classified ads or trumpeted in an infomercial, bogus ads come in three basic categories - and you're the loser in each: They seek referral fees, they want you to invest money or they're part of a pyramid scheme.

The classic referral-fee scam was at the center of an FTC suit filed last month against three companies that made false promises about high-paying jobs with the U.S. Postal Service. The companies were based in Michigan, but they operated nationwide.

In its complaint, the FTC accused the companies of running misleading classified ads in employment guides and newspapers. The ads, adorned with American flags and bald eagles, led consumers to believe that the companies were hiring for postal jobs and were endorsed by or connected with the Postal Service.

That was not the case.

With promises of postal jobs paying $16.20 to $39 an hour, the ads were in fact selling a home study guide - for $129.90 or $139.90, plus $19.90 for shipping and handling - that promised to help applicants pass a postal exam.

But the exam required for many entry-level jobs is usually offered only every few years. And there are no job placement guarantees, as promised by the three companies, Success Express Inc., Exam Resource Center Inc. and Occupational Advancement Center Inc.

A U.S. District Court judge issued a restraining order against the companies and froze their assets, but you can be sure you'll continue seeing ads promising to ease your way to high-paying jobs.

And don't be fooled by ads for bogus business opportunities, such as vending machine franchises or envelope stuffing, two of the most popular work-at-home scams.

A lawsuit filed by the FTC in November was typical in many ways, but with a twist.








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So how do you tell a real job opportunity from a ripoff? Here are some tips from the FTC: ¢ Look at the ad carefully. If it claims buyers can earn a certain income, it must give the number and percentage of previous purchasers who did so. ¢ Always get earnings claims in writing. ¢ Interview previous purchasers in person, preferably where their businesses operate. ¢ Contact the Division of Consumer Affairs and the Better Business Bureau to see if others have had problems with the company. ¢ Consult with an attorney, accountant or other business adviser before paying any money or signing any papers. ¢ Take your time and resist high-pressure sales tactics. The FTC Web site offers advice on a variety of business opportunities. Go to ftc.gov/bcp/menu-fran.htm and pick from the list of topics.

The case involved USA Beverages Inc., which advertised franchises for coffee display racks. The cost was $18,000 to $85,000 for a franchise, and the company promised that investors would make no less than $1,055.60 per week with a 13-rack system.

The claim was untrue, and the references provided "were simply shills, paid by the company for endorsements," the FTC said.

What made this case unusual is that the company with the All-American name was actually operating out of Costa Rica, using Voice over Internet Protocol and shell corporations to con consumers.

Here, too, the federal court issued a temporary restraining order, effectively shutting the company down and freezing its assets.

The other favorite is multilevel marketing, which is a business school term for a pyramid scheme in which each participant's success is based on recruiting new investors.

One recent case involved a Maryland woman, who was a high-level distributor for Trek Alliance, a company that sold water filters, cleaning supplies, nutritional supplements and beauty aids.

In the settlement announced in October, the FTC said recruits were promised high-paying marketing jobs.

But few ever made the six-figure salaries featured in some ads because the main sales pitch was to recruit new salespeople, the FTC said.

Recruits would pay about $45 for a starter kit, and in many cases, shelled out at least $2,000 for Trek products.

In addition, many paid hundreds or thousands of dollars to attend training events that focused on recruiting new members. Selling products was secondary.

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