ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, March 6, 1996 TAG: 9603060036
SECTION: BUSINESS PAGE: B8 EDITION: METRO
COLUMN: Marketplace
SOURCE: MEGAN SCHNABEL
You finished your tax returns early, only to realize that you owe Uncle Sam this year, instead of the other way around.
You need some extra cash fast. But before you get caught up in a get-rich-quick scheme, take a look at the Better Business Bureau's predictions for the biggest consumer scams of 1996.
Foreign lotteries
The solicitation comes through the mail or over the phone: A "licensed" company urges you to participate in a lottery in Canada or some other foreign country by sharing in a pool of lottery tickets.
The company offers high winnings and impossibly good odds - and all you have to do is send money to cover your tickets, plus a handling fee. Sometimes they'll ask you to give them your credit card number, to make it easier for you to take care of the payment.
Typically, the only thing that consumers ever get from these deals is a sinking feeling that they'll never see their money again, says Fran Stephanz, executive director of the Better Business Bureau of Western Virginia in Roanoke. Consumers who have reported these lottery schemes to the BBB have told tales of unauthorized credit card charges, misrepresentation of winnings, high-pressure sales tactics - even threats when they stopped playing the lotteries.
"The foreign lottery business is off the wall," says Holly Cherico, spokeswoman for the national Council of Better Business Bureaus in Arlington. Many of the schemes originate in Canada, she says; Canadian BBB offices have been inundated in recent months with calls from suspicious American consumers.
Remember: No matter how good the odds sound, or how legitimate the lottery company appears, it's illegal to sell foreign lottery products by mail in the United States. More importantly for consumers, it's also illegal to buy these tickets through the mail.
And so far there's no proof, says the BBB, that any foreign lottery tickets have ever been purchased on a consumer's behalf.
Scams in cyberspace
There are hundreds of legitimate businesses selling thousands of legitimate products and services on the Internet. But scams are as prevalent in the virtual marketplace as they are in the outside world.
Offers ranging from classic work-at-home scams - Earn $2,000 a Week Stuffing Envelopes! - to complex investment schemes are appearing on the Internet, Stephanz says. The scams' World Wide Web pages are high-tech, sophisticated creations, lending an appearance of legitimacy to the offers. But today's software lets anybody with a computer, some programming savvy and a scam to set up these Internet sites from a garage office.
The key to telling the frauds from the legal offers often is as simple as asking for a mailing address. Many of the on-line ads provide no information about the company other than an e-mail address, Cherico says, and they won't tell consumers anything else.
"Don't do business with a company that won't give you its address and phone number," Cherico says. You - or the BBB - can't check up on a company's record if you don't know where it's based.
Pyramid schemes
You want to earn some extra money, but you don't have much spare time. You go with a co-worker to an "opportunity meeting," where an enthusiastic pitchman talks about terrific money-making opportunities. All you have to do is invest a little money in the sales plan.
But he never really tells you just what the product or service is, or how you're supposed to sell it. The whole plan revolves around recruiting new participants rather than promoting a product.
Welcome to the world of pyramid schemes.
"One of the things that John Q. Public doesn't understand about pyramid schemes is that they're based on bodies," Stephanz says. "You make money because you have brought another person into the game."
These multilevel marketing scams have been around for decades, she says, but the BBB has noticed a resurgence in complaints as scam artists invent new twists for the old schemes.
The first thing to remember is that it's illegal both to operate and to participate in them.
It's also illogical. Think about it this way: One person recruits six new distributors, each of whom, in turn, recruits six others, and so on. After nine steps, more than 10 million people are involved. Soon, distributors have to begin recruiting each other.
Legitimate multilevel marketing programs - Amway, for instance - also rely on recruiting for their longevity, but the real emphasis of these companies is the merchandise. Members are encouraged to recruit new sellers, but their income depends on their sales.
But do these scams happen in Roanoke?
"Are you kidding?" asks Stephanz. "We get them every day." Right now, she says, federal investigators are checking out two Roanoke-area pyramid schemes.
If you remember one thing about these fast-money scams, Stephanz says, it should be this: Double-check any offer that looks too good before you send any money. Once the scam artists have your credit card number or your money order, you're out of luck. If you report the scheme after the fact, the BBB and federal agencies will investigate it, and the organizers may go to jail. But that won't get you your money back.
LENGTH: Long : 102 lines ILLUSTRATION: GRAPHIC: chart - Scams to look out for colorby CNB