Business Opportunities: Not All That Glitters is Golden

We are all looking for it, the one great business that will give us a good income, all the free time we could want and allow us to be our own bosses. Oh yeah, training and support would be great as well and if we have to pony up a nominal investment to get rolling, well, that’s just the price of doing business, isn’t it?

No. It isn’t. As a number of lawsuits and the Federal Trade Commission’s (FTC) recent settlement with several work-at-home business opportunity scammers proved, it is really the price of an education.

In this most recent case, the defendants are accused of misrepresentation and violations of the FTC’s franchise rules. According to the FTC, “in mass mailings to consumers throughout the nation, the defendants offered a business opportunity – electronically processing health care providers’ medical claims for insurance reimbursement – and that they would help consumers find their first medical billing client and provide them with lists of providers in their area. Consumers were told that they could earn $1,200 per month with one client, and they were promised software training and upgrades, review of all claims processed, and marketing and technical support.”

Sounds great, doesn’t it? I see these kinds of come-ons in my e-mail spam folder every day. Sometimes the fee is small—a couple of hundred dollars—or more substantial. The defendants in this case, Mazzoni and Son, Inc, were a bit more ambitious with their pricing structure. According to the complaint, consumers “were provided with names and telephone numbers of references represented as current licensees, some of whom were the defendants’ officers and directors. After consumers paid a “licensing fee” of $4,985 to $5,985, the defendants never provided a franchise disclosure statement, an earnings claim document, or any other information substantiating their earnings claims. At their own expense, the complaint notes, consumers attended a training session where they learned that the representations were false, and that they would have to make cold calls and personal visits in order to get clients. Once back home, they learned that obtaining clients was extremely difficult, if not impossible, because the market was saturated, most processors already functioned electronically, and the few who processed manually had little interest in entrusting their billing to inexperienced or unknown persons.”

Doesn’t exactly sound like the story told in the sales pitch, does it? The FTC didn’t think so, either. In the proposed final order, the defendants are enjoined from any further violations and have a $17,660,000 judgment against them. This fine, however, will be suspended upon payment of $50,000 by the corporate defendants and their providing information necessary to collect and report any delinquent taxes. If, however, they are found to have misrepresented their financial condition, the full judgment will be imposed. Also, any money remaining from their assets, which were frozen in 2006, is forfeit. What is disturbing to me is that while the government gets its cut through the taxes and the fines, and Mazzoni and company have to be good from now on, nothing is said about the victims of this scam. According to this, there are no plans to offer restitution and to me, that is a crime in and of itself.

Scam Detection

The best way to avoid being scammed is the spam/ad test: Did this just show up on my computer or in my e-mail, unasked for and unwanted? If the answer is “Yes,” throw it away without looking at it (such things often have spyware or other malware attached to them). If you have to check it out, the old saw: “If it sounds too good to be true, it probably is,” is as true today as ever. You have to approach any “opportunity” with that firmly in mind. Here are some things to remember:

  • Listen, ask questions and ask for documentation and proof.
  • Do some research into the field you are considering and ask yourself if there is room for another such business in your area or if the market is saturated already.
  • Check out Web forums related to these businesses and read what others have to say about them.
  • Ask if the deal is pay-to-play, like that medical billing scam mentioned above.

If you can answer “Yes” to these questions, alarms should start ringing. If you have paid into the scheme already, then try to get your money back. The odds of a refund are not good, but maybe that is all part of the lesson.

So What’s The Lesson?

It is all on you. That is the lesson. You are responsible for keeping your wits about you and not getting scammed by a so-called “business opportunity.” Sometimes it’s difficult. These predators count on your financial needs, your guilt over not spending enough time with the kids, your desire to be your own boss and start your own small business. They make it seem so easy and the return on investment so attractive. Yet the reality is so very different, so much darker.

There are many legitimate small businesses that you can find, some you build yourself and others you buy into through franchising. They all take long hours and hard work but they are real and the rewards they offer are real as well.

Isn’t that better than hollow promises?

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