>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! ========================================================= _/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ _/ _/ _/ 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! _/ _/ _/ _/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/