>From:    Judy <[log in to unmask]>
>Subject: Re: Online Fraud Sites:
>
>Hi All:
>
>Seems to me a couple of days ago someone posted several web sites to
>this list in conjunction with online fraud.  Well I really wanted that
>list because I'm just starting to work on a big related project.  If

I will sent you the complete article. This is an excerpt from a daily
newsletter I put out. It is free to folks on the list. The Internet
News covers new, interesting sites, plus news and issues from the
Net.

This article is a bit long but because of the questions asked on the
list I will copy it there also.

If you wish to subscribe just e-mail me with

SUBSCRIBE INTERNET NEWS in the subject line.

From:             "John S. Walker" <[log in to unmask]>
Organization:     Central Supply & Services
To:               [log in to unmask]
Date sent:        Wed, 4 Dec 1996 20:16:40 +0000
Subject:          Internet News, Guide to Avoid Scams & Frauds
Priority:         normal

A GUIDE TO AVOIDING SCAMS AND FRAUDS, BEFORE YOU BECOME A VICTIM OF
THEM

   by
  Chuck Vanderheen

   INTRODUCTION

The information in this document is intended to help you  avoid the
scams and rip-offs that can be found in direct mail and on the
internet. My hope is this  information  will  also  help you find a
legitimate business opportunity that will benefit you and those you
sponsor in that opportunity. If you feel that an  opportunity is a
scam  or you have been ripped off by one,  contact a lawyer or one of
the agencies that are listed  at the end of this article.

Scams, Rip-offs, Frauds, by whatever name you use,  all  have one
thing in common that separates them from legitimate  business
opportunities. Any legitimate business opportunity  should represent a
win-win situation for everyone involved,  producers, sellers and
consumers. In scams, somebody (usually you) loses.

  TYPES OF FRAUDS, SCAMS AND CHEATS

Below is a listing of common types of frauds and scams. The  basic
descriptions describe clearly illegal scams. There are  similar
programs which may or may not be illegal based on  their clearly
having a product (thought not that is worth what is paid for it). The
basic rule to remember is that  you're trying to succeed in business,
not prosecute felons. For your purposes, barely legal isn't much
better than illegal because you'll still probably lose. If it looks
like a duck,  quacks like a duck, etc, treat it like a duck no matter
how  much they try to tell you that it is technically something else
because...... I'll go into a little more detail with each of the
descriptions below.

   THE CHAIN LETTER

This is one of the easiest to start and most difficult to stop of the
illegal schemes that you'll find. Basically this is an offer  to let
you send money to one or  all of a  list  of  names  on  the  document
you're looking  at. In exchange for sending this  money, you get to
replace one of the names with yours and  send out lots of letters to
get people to send the money  to you. This is absolutely illegal. Even
if it is done via  e-mail and or internet news groups, if at  any
point  the money  is mailed  through
 the  U.S. Postal Service they will gladly  and strongly prosecute it
 for
what it is, an illegal chain letter.

Sometimes you will see "products" attached to these in  order to make
them "legal". One example I have seen was each person having a cookie
recipe along  with their name and  saying that your money to each
person was to buy their  recipe . Put this to the duck test.   Would
you really pay $5 each for four  or  five cookie recipes that aren't
exclusive  and aren't something you could use to start a specialty
cookie shop. If you wouldn't be willing to pay this much for  just the
recipes, would any reasonable person do so (maybe  you don't like
cookies). If not, treat this like a duck..er scam and whether the law
can stop them or not isn't your  problem. Your problem is to avoid
this scam and look for  another opportunity.

   THE PYRAMID SCHEME

Basically this is selling people membership in your  organization,
which entitles them to sell other people  memberships. The clearly
illegal version of this sells  nothing but the memberships. State
Attorneys do pursue these and prosecute those they feel clearly fail
the duck test (no other reasonable value given with the membership).

If all you get is the right to market this and some tools to  help do
that, its just a more efficient, easier to use  pyramid scheme. If
there is clearly product value in what is sold and the membership fee
is reasonable (a one time fee to  cover the costs of manuals and
administrative costs relating  to your joining for example), then this
can be fine. If the only thing really being sold is the membership
(and this  isn't something people would pay to join by itself, say an
MLM health club) and the product seems secondary to membership then
whether it is technically legal or not, it will still have the same
kinds of problems for those who  join it (late joiners lose out,
people start to quit, company  folds).

   THE PONZI SCHEME

The basic version of this goes like this. You sell a bunch  of people
stock in your "company". You  sell a bunch more stock and use the
money to pay the first group "dividends".  You repeat this process
with your earlier investors telling  everyone how much money they're
making and encouraging everyone to join in. Eventually you can't  get
enough people  to join fast enough to pay the same level of dividends
to  your earlier investors and shortly the whole thing comes  apart.
The earliest investors make money, some  people  break  even, but most
people  lose  money  with nothing to show for it.

A Ponzi scheme that is set up to look like an MLM  business would have
the people who join being paid from  an income pool, with what they
receive based on something  like how many they have personally
sponsored, or how many shares in the pool they have purchased or
otherwise  earned. Once new members to the "business" fail to receive
the kinds of income they were expecting, things go  downhill in the
same way they do for a pyramid. Those not making money quit, which
makes the pool smaller for the restand as more quit.  As their income
disappears, the whole  thing falls apart. The same rules apply, if all
you really get of  value for  you membership fee is the right to sell
memberships, it fails the duck test.

 QUESTIONS YOU SHOULD ASK TO FIND OUT IF A
 BUSINESS  OPPORTUNITY IS A GOOD OPPORTUNITY

These questions are meant to help you avoid opportunities  that are
clearly bad or even illegal.  The fact that you get  the right answers
to these questions does not make an  opportunity the right one for
you. To get FREE information  that will help you choose the right
opportunity get Diane Hanson's doc "10 Questions You Should Ask Before
 Choosing a Company" by sending  an  e-mail to  10
[log in to unmask] and Colleen Mandato's ( A Master Networker
Subscriber) FREE  documents which relate to MLM businesses (there are
five of  them) by sending an e-mail to [log in to unmask]

You may not be able to get answers to all of these questions,  but the
answers you do get will help with your decision.

  WHAT IS THE PRODUCT?

This may seem like a foolish question, but I've seen a  number of
opportunities that left me asking this after I read their sales
letter. Chances are if there is so little emphasis on their product
that you can't readily identify it, it's best to treat it as a scam.

  IS THE PRODUCT WORTH THE PRICE
   THAT IS ASKED FOR IT?

OK, we're back to the $5 cookie recipes. Would a reasonable person pay
the price that is asked for the product as a customer, without looking
for future profit from this "business"? If yes, treat it like a
business. If no, treat it as a scam.

 HOW MUCH PRODUCT WILL YOU HAVE TO BUY ON
  A RECURRING BASIS?

Requiring you to buy more product each month than you can be expected
to personally use or sell is called "garaging". It's  called that
because all that excess product tends to wind up  where ever you can
find room for it all, usually the garage.  Requirements like this are
illegal. Some of the early MLM  companies practiced this and were
forced to stop it under court order. If the "opportunity" you're
considering does this, ask  yourself; "if they break this rule, what
other rules are they  breaking"?

 WHAT IS THE TURNOVER RATE FOR ISR's
  IN THIS COMPANY?

A company with a high turnover rate, probably isn't meeting  the goals
for many of the people who join it. If this number  seems high, check
extra carefully into how the compensation  system works.  Are there
too many requirements to qualify for  your commissions? These could be
sales volume minimums, a  minimum number of personally sponsored
representatives or a compensation plan that doesn't pay well until you
have a  very large organization (plans that pay large amounts for
levels well (4+) below.

 WHAT WILL YOU HAVE TO DO TO BREAK EVEN?

How large an organization will you have to have to break  even (earn
as much as you're required to spend to receive  your commissions)? How
long does it take on average to  build an organization that size)?
What percentage of active  representatives are earning enough to break
even.

 WHAT WILL YOU HAVE TO DO TO MEET YOUR
  INCOME GOALS?

Repeat all of the questions in the paragraph above only  replacing the
amount you need to break even with the amount  you hope to earn
($100/month, $1000/per month, whatever your  goal is).

  ADDITIONAL FEES

Is there a membership fee in addition to a monthly volume
requirement? Do these fees cost more than the product you receive? If
you're paying substantial fees and commissions are  paid on those
fees, how much is this starting to resemble a  pyramid scheme? This is
a classic example of the ones who  join early making money at the
expense of those who join later (which is why big paychecks in your
proposed upline are not, bythemselves, (a reason to join). The more it
looks like the  business is run by selling membership and the less
emphasis  there is on the product, the more it is prone to the
problems that  come from a pyramid scheme. If you're one of the last
to join,  you lose; if you join early and make money, the company may
fold once the growth slows (growth is the only way to keep things
going) and you'll have to start to build all over again, somewhere
else.

Are there other fees you have to pay or services you as an
Independent Sales Representative (ISR) are required to buy in
addition to the products you purchase? Put them to the product  test.
If they are worth what you pay for them, fine. If they aren't  worth
what you pay for them then they are in essence membership  fees and
should be judged by the standards in the paragraph above.



  OUTSIDE SOURCES OF INFORMATION
  (OUTSIDE THE COMPANY THAT IS).

Ask questions of others who have contact with this company,  but have
no financial interest in your joining it. These can  be: The Better
Business Bureau and similar organizations  (no complaints doesn't
guarantee they're good, they could just  be too new for complaints to
have been filed yet), The  Secretary of State or State Attorney
General of both your state and the state the company is based out of,
other MLM  marketers in discussion news groups or e-mail forums,
customers of the company who are not ISR's, anyone else you  can think
of who know of the company but have no personal interest in it. If the
company is so new that no one seems to  know anything about it, then
try to do a similar check on its founder(s) and the main leaders in
the upline group you are about to join.

  OTHER FRAUDS TO WATCH OUT FOR

In trying to start or work an MLM business you are still susceptible
to other kinds of fraud and misrepresentation that aren't specific to
MLM. 900 numbers. If you answer an ad to a 900 (or 500, 700, or
possibly 809) number, you could wind up paying a lot more than the
cost of a long distance call. Reputable companies  will tell you up
front what the call costs and how long you should expect it to last.

Up front fees to get information. An MLM business wants you to join
and be a part of that business. You should never be asked for any
money (unless you decide to try the product as a customer) until you
join. All the information you need to make your decision should be
free.

Large charges to give you the tools to build your business. In many
companies you can spend several times the amount you spend on products
getting tapes, information, attending seminars, etc. How reasonable
are the prices for these and is it reasonable to keep adding to your
initial outlay before  you see any clear profits.

Credit cards.  Be very careful who you give your credit card numbers
too. Be aware that if you haven't checked the company out before you
give them your credit card number, you may learn more about them than
you want to know when you see your bill.

  BUSINESS SUPPORT PRODUCTS

Before you try to use any of the tools (web page,  autoresponder,
fax-on- demand, etc.) that you can pay for to help build your
business, make sure you need them and that  you're getting them at a
reasonable price.

Realize that many ISP's allow you a small web page (1/2  meg) as part
of your account before you pay for more.  Check into anyone you
consider paying to write your web  page and ask for the href's for the
pages they've already done  so you can see what their work is like.
You may wonder why  I include this in a fraud article, but if you'd
seen some of the  prices I've seen for these services, you'd know why.

Watch out for web sites that try to charge high advertising  fees
based on the number of "hits" they get at that site. There is more
than one way to count hits and some of the more  common ones count
each access of a file on the page as a hit. If there are 20 files of
graphics and text that make up the page, then that's 20 hits each time
someone loads the page and  possibly 20 more each time they return to
the home page from the pages they link to from it. Ask how they count
hits and try to find out what level of results the business that are
already advertising with them are getting.

   SUMMARY

  WHAT DO YOU THINK OF THE PRODUCT?

A solid product, consider it and join or not, based on normal
business factors (does the product and business plan suit your
tastes).  No real value except the right to market products that a
reasonable person wouldn't buy for the price you'll be charging, RUN,
it's a duck (well maybe just a turkey, but run anyway).

 WHAT OTHER COSTS WILL YOU HAVE IN ADDITION
  TO BUYING YOUR PRODUCTS?

If they charge reasonable fees that reflect what they are  truly
paying to maintain administrative support for you,  treat it like a
business and make your decision accordingly.

If there are recurring fees and they add enough to the cost of the
product to make it unreasonably expensive, treat it like a duck (or
turkey)whether or not it is legally a pyramid  or ponzi scheme won't
matter if you lose your money, time  and effort in this "opportunity".

  WHAT'S IN IT FOR THE COMPANY?

If they are getting a fair price for a good product while keeping
their overhead down by not having to maintain in- house staffs for
sale and advertising, sounds like an MLM  company.

If they are paying far more out in commissions than they are keeping
for themselves. Well, if it looks like a get-rich- quick-scheme, the
key word for you is scheme, treat it as  such. If they are paying out
so much in commissions that you think there has to be a cheaper way to
do their marketing, why aren't they using one?

  KEEP YOURSELF SAFE

Guard your credit card numbers, avoid 900 and similar telephone
numbers (you don't even need a credit card to go broke with these),
and shop around to make sure you're not paying more than you should
for the services you use. ____________________________________________
Other resources to help you look out for fraudulent businesses (or
just plain bad ones).

The On-line Fraud Newsletter

This is edited by Mark Taylor.   You can subscribe by sending  him an
e-mail at [log in to unmask]

The following web sites have good Fraud related information.  This
list is taken from the On-line Fraud Newsletter.


  HELPFUL WEB SITES:

National Fraud Information Center

This center has been set up by a number of large  corporations to
combat fraud of any kind. They have an  excellent web site with links
to other places.  You can also  report suspected fraudulent programs
for them to investigate. http://Seamless.com/talf/ftc/natfraud.html

United States Postal Service

The USPS has a full service web site to look up zip codes  and answer
consumer questions.  It also has a link to the  U.S. Postal Inspector
web site so that you can look up the  latest in scams and frauds.
http://www usps.gov/consumer/

Better Business Bureau

Tells you about the BBB and addresses and phone numbers of  the
offices. Has a good section on consumer fraud. http://www.bbb.org/bbb/

MLM Credit Bureau

This organization really goes after the scams in mlm.  They
investigate many of the MLM's and also report on the ones  state or
federal authorities have launched an investigation.
http://www.calgraf.com/mlm/

OTHER HELPFUL SITES
______________________________________________
Netcheck

This organization is similar in purpose to the Better Business Bureau,
except that it only tracks businesses that work on the internet.
http://wwwnetcheck.com/

If you have any questions or comments regarding this  document please
send me an e-mail to [log in to unmask] or write to the following
address:

                        Chuck VanderVeen
                        4393 Trewhitt Rd., SE.
                        Cleveland, TN 37323
====================================================
My friend, Bob Frohlic, would like to share his beginning experience
with "what was called MLM or networking.  Perhaps you can learn from
what happened to him and what he is now doing about it.  E-mail Bob
Frohlic of MaxLife Marketing at:  [log in to unmask]
====================================================

*****************************************
Web Page of the Week
Netcheck - similar in purpose to the Better Business Bureau
except it only tracks businesses that work on the Internet.
http://www.netcheck.com
******************************************

This week's one liner ----------------------------------

Optimism is taking a camera along when you go fishing!
=========================================================
















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_/                                                        _/
_/        Central Supply & Services                       _/
_/        (Internet Training and Research)                _/
_/        PO Box 57247, Jackson Stn.,                     _/
_/        Hamilton, Ontario, Canada, L8P 4X1              _/
_/        John S. Walker                                  _/
_/  Email [log in to unmask]                          _/
_/                                                        _/
_/        "To Teach is to touch a life forever"           _/
_/         On the Web one touch can reach so far!         _/
_/                                                        _/
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