Three U.S. agencies and a group of state attorneys general have filed more than 70 civil and criminal cases against defendants offering allegedly bogus business opportunities, with some of the defendants offering to help customers set up online businesses.
The U.S. Federal Trade Commission, the U.S. Department of Justice, the U.S. Postal Inspection Service and attorneys general from five states announced the crackdown, called Operation Lost Opportunity, on Thursday. The businesses targeted in the operation preyed on people who are out of work or underemployed by demanding money up front for business opportunities, then underdelivering, said David Vladeck, director of the FTC's Bureau of Consumer Protection.
"The frauds we've targeted injure our family members, friends, neighbors -- people like so many Americans who are trying to jump-start their income and rebalance their budgets," Vladeck said during a news conference. "Whether they are facing pressure to make ends meet or following their dream of running their own business, these people risked money on the promise of a job, an income, or a profitable home-based business."
Instead of extra income, "the promise of profitable earnings were lies," Vladeck added.
Vladeck said he was unable to estimate the number of victims in all the cases announced Thursday. The Postal Inspection Service investigated 26 cases involving more than 81,000 victims and more than US$12.8 million in losses, said Shawn Tiller, deputy chief inspector of the agency.
The defendants "promise high incomes, low investments and fast returns," Tiller said. "When they break their promises, they also break the victims' bank accounts, cloud their dreams and compromise their trust."
Among the actions taken by the FTC in recent weeks:
-- The Online Entrepreneur, also doing business as the Six Figure Program and Ben and Dave's Program, offered a $27 "no-risk" program in which customers set up websites that would earn commissions by affiliating with large retailers.
Customers of the program had to pay extra for the website, the FTC said, and some could not get their websites to function. While the Online Entrepreneur promised income of up to $15,000 a month, customers did not see that level of profits, the FTC alleged.
"Consumers haven't earned anywhere close to the amounts that the Online Entrepreneur promised," Vladeck said.
Customers also found it difficult to reach the company for assistance, and refund requests were often ignored, the FTC alleged.
Company co-owner Benjamin Moskel, reached through his LinkedIn profile, did not immediately respond to a request for comment on the FTC action. The U.S. District Court for the Middle District of Florida halted the operation and froze its assets earlier this month.
-- Shopper Systems advertised mystery shopper opportunities through text messages, websites, phone calls and other methods, the FTC said. The company said customers could earn $50 per mystery shopping assignment, but the opportunities "remained a mystery" even after customers paid Shopper Systems, Vladeck said.
Customers who agreed to pay Shopper Systems were "lured" into another business opportunity, operating a Web store, that resulted in monthly charges on their credit cards, the FTC said.
Shopper Systems offered training for $2.95 and a seven-day trial period for the mystery shopping program, and then charged $49.95 per month for a list of interested merchants, with an option to cancel at any time without further obligation.Â The defendants charged $3.95 for the Web store opportunity, with a 14-day trial period and a cost of $49.95 per month, and often enrolled consumers without their awareness, the FTC alleged.Â
Consumers who canceled the mystery shopper membership were still billed monthly $49.95 charges and were later told they had to cancel both programs, the FTC alleged.
In late October, the U.S. District Court for the Southern District of Florida issued a temporary restraining order halting the mystery shopper program and froze the company's assets. Shopper Systems, contacted through its Facebook page, did not immediately respond to a request for comment.
-- Rebate Data Processor and Christopher Andrew Sterling, doing business as Rebatedataprocessor.com, Sterlingvisa.com, and Creditcardworker.com, told customers they could earn $200 to $1,000 a day by processing applications for rebates or credit cards. Instead, the company provided information on how to become an affiliate marketer by creating their own Internet ads for credit card offers, the FTC alleged.
Sterling charged about $50 for the program, the FTC said. The company said its customers could earn "$15,526 in 29 days," but few, if any, customers were likely to achieve the promised levels of income, the FTC said. The company misrepresented the nature of the business opportunity, and sold an opportunity in the complicated and highly competitive field of affiliate marketing, the agency said.
Sterling sometimes failed to provide any information in return for a purchase, the FTC added. The company, contacted at Rebatedataprocessor.com, did not immediately return a message seeking comment.
The FTC referred the case to the DOJ, which filed a complaint in the U.S. District Court for the Southern District of California.