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FTC
Continues Crackdown On Office Supply Scams
In a continuing effort to combat
office supply scams, the Federal Trade Commission announced that it has filed suits in federal district courts against
three companies who are involved in office supply fraud. This
type of fraud, which involves the deceptive sale of non-durable
or consumable products that are used in the course of business
and purchased on a regular basis, continues in part because the
pool of potential victims grows each year. The cases announced
today involve the typical "toner-phoner" scam, where
the defendants called businesses or non-profit organizations,
misrepresented their identity and the cost of the office
supplies, and then shipped and demanded payment for grossly
overpriced merchandise. In perpetrating this scam, the FTC
alleges that the defendants violated the FTC Act and the
Telemarketing Sales Rule (TSR).
Office supply scams typically
target small businesses and non-profit groups, costing them an
estimated $250 million each year. Fraudulent sellers also cost
legitimate office supply companies about $125 million in lost
revenues annually. The FTC has battled office supply fraud for
many years in the courts and has undertaken substantial efforts
to educate businesses on how to recognize and avoid the scam. In
March of this year, Commission staff testified before the Senate
Small Business Committee addressing the FTC's vigorous efforts
and partnerships with state and government officials to combat
office supply fraud.
The FTC's current sweep --
"Operation Copy Con"-- continues its law enforcement
efforts to stop this fraud. To compliment its enforcement
efforts, the FTC continues to promote Project BOSS (Banish
Office Supply Scams), a multi-pronged joint education campaign
to alert small businesses and non-profit organizations about
office supply fraud.
The FTC filed complaints in
federal district courts against the following defendants:
Pacific
Office Systems, Inc., based in Canoga Park, California,
and its owner, Suzette Oppenheim. Pacific sells toner cartridges
for photocopiers. The FTC has obtained a temporary restraining
order with asset freeze and the appointment of a receiver, and
is seeking a preliminary injunction pending resolution of the
case.
Corporate
Supplies, Inc.,
based in Cumming, Georgia, and its president, Larry Sarchenko
and vice president, Robert Henkel. Corporate Supplies primarily
sells toner cartridges for laser printers, fax machines, and
photocopiers to consumers throughout the U.S. The FTC has
obtained a temporary restraining order with asset freeze, and is
seeking a preliminary injunction pending resolution of this
matter.
Allstate
Business Distribution Center, Inc.,
based in Southern California, doing business as Primary
Distribution Center, and its owner, Robert Matz. Primary
Distribution sells photocopier toner and dry ink cartridges to
businesses throughout the country. The FTC's complaint seeks a
preliminary injunction pending resolution of the case.
The FTC alleges that the
defendants in each of the three cases deceptively induced
businesses and non-profit organizations (hereinafter,
"consumers") to pay substantially higher prices for
toner than they normally pay. In many instances, consumers were
deceived into paying higher prices for toner they never ordered,
and in some instances, paid for toner they never received. If
the consumers paid the first bill, the defendants often sent and
billed them for additional shipments that were not authorized.
The complaints allege that the
defendants in these cases violated the FTC Act by:
- misrepresenting
that they were the consumer's regular supplier or were
associated with the manufacturer of the consumer's
photocopier;
- misrepresenting
that they would charge the consumer the same price the
consumer had been paying or a lower price; and
- misrepresenting
that the ordered the toner that defendants shipped or billed
to the consumer.
The defendants also violated the
TSR by making false and misleading statements to induce payment;
and when making outbound telephone calls, they failed to
disclose the identity of the seller. In addition, Pacific Office
Systems and Corporate Supplies failed to disclose the sales
purpose of their calls.
The Commission vote to authorize
staff to file the complaints in the appropriate federal district
court was 5-0. Pacific Office Systems was filed in the U.S.
District Court for the Central District of California, in Los
Angeles, on September 25. Corporate Supplies was filed in the
U.S. District Court for the Northern District of Georgia, in
Atlanta, on September 20. Allstate Business Distribution was
filed in the U.S. District Court for the Central District of
California, in Los Angeles, on September 26.
As part of its consumer
education drive, the FTC has prepared some tips for small
businesses to avoid being scammed by fraudulent office supply
telemarketers and others:
- Know
your rights. If you receive bills for goods and
services you didn't order, don't pay. The law allows you to
treat unordered goods and services as a gift. Double-check,
however, to make sure than an honest mistake hasn't been
made.
- Review
your phone bills as soon as they arrive. Be on the
lookout for charges for goods and services you haven't
ordered or authorized. If you find an error on your bill,
follow the instructions on your statement for filing a
dispute.
- Assign
purchasing to designated staff. And document all
your purchases.
- Train
your staff in how to respond to telemarketers.
Advise employees who are not authorized to order goods and
services to say, "I'm not authorized to place orders.
If you want to offer or sell us something, you must speak to
__________."
- Buy
from people you know and trust. Authorized
employees should be skeptical of "cold" or
unsolicited calls and feel comfortable saying "no"
to high-pressured sales tactics.
- Check out the organization
with the Attorney General or Better Business Bureau
in your state or the state where the organization is located
before you send any money for any product or service. This
is not foolproof: there may be no record of complaints if an
organization is too new or has changed its name.
Visit www.ftc.gov/bcp/conline/edcams/supplies
for more information about Project BOSS and other scams
targeting small businesses.
Copies of the
complaints will be available shortly. Copies of news releases
and legal documents pertaining to other office supply scam cases
are available from the FTC's web site at http://www.ftc.gov
and also from the FTC's Consumer Response Center, Room 130, 600
Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP
(877-382-4357); TDD for the hearing impaired 202-326-2502. To
find out the latest news as it is announced, call the FTC
NewsPhone recording at 202-326-2710.
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