Avoiding Office Scams - A FREE REPORT

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A Guide to Office Scams

INTRODUCTION

Churches, businesses, fraternal, and charitable organizations - even local, state and federal agencies - are being bilked out of millions of dollars through office supply scams. Any organization that has inadequate purchasing controls can be victimized. The best defense: know how these scams work and know your rights under the law.

OFFICE SUPPLIES SCAMS

Typically, office supply scams involve selling products that have to be replaced routinely, such as copier paper and toner or maintenance supplies. These scams can involve outright lies - for example, that the person on the phone is your "regular supplier" or that the offer is "special" or "good for a limited time." Or they can take advantage of holes in your organization's purchasing procedures or its reliance on employees or volunteers who may be unfamiliar with office procedures. Often, the office supplies peddled by scam artists are poor quality and overpriced.

You can protect your organization against potential losses from these scams by knowing your rights under the Federal Trade Commission's new Telemarketing Sales Rule. This law requires telemarketers to tell you what they are selling, how much it will cost and whether the goods can be returned for a refund. Any salesperson who doesn't disclose this information is breaking the law.

Office supply scams generally fall into one of three categories: the credible-invoice, the order-by-trick, or the wedge.

THE CREDIBLE INVOICE

The credible-invoice scam is based on an invoice that looks legitimate. Usually, it includes the name of an employee or volunteer who is supposed to have "authorized" the purchase. Scam operators use various gimmicks to get an employee's name. They may call and ask for "help" completing a preexisting order, claiming that "the accounting department lost the name of the person we should send these cleaning supplies to." Or they may ask for "whoever is in charge of maintenance."

The merchandise is shipped once the seller has the correct name and address of the appropriate contact. The invoice follows in a week or so. In the credible-invoice scam, the invoice rarely accompanies the merchandise for two reasons: first, the price charged for the merchandise often is inflated - as much as 10 times higher than the highest retail price for the same merchandise. This fact is less obvious if the invoice arrives after the merchandise has been received and put away.

Second, it is likely that the victim will have opened the package and used the contents before the invoice arrives. Many organizations incorrectly believe that they must pay for or return unordered merchandise. If they've used the merchandise and can't return it, they may feel obligated to pay for it.

THE ORDER BY TRICK

The order-by-trick scam is based on another kind of deception. The seller misleads the buyer the person with the authority to order - by having him or her agree to receive merchandise or to accept promotional items that are tied to the merchandise. Here's how this scam works:

The seller misrepresents him- or herself as a regular or previous supplier, as an "authorized" supplier, or as a replacement for the regular or previous supplier. The goal of these misrepresentations is to convince the buyer that the merchandise and prices being offered are consistent with previous orders, and that prices, quantities, and brand names need not be discussed.

If the buyer protests, or claims not to recall having dealt with the seller, the seller may use a line like, "We've supplied you in the past. It's been a while." When it comes to price, the seller may avoid discussing terms, but may reinforce the notion of an on-going relationship. For example, the seller may say, "The price is the same as last time. We haven't gone up in three years. I'll make sure to get it to you at that price." If the buyer insists on a price quotation, the seller may imply that the price of one unit is the price of the carton, saying something like, "19.95 in a carton of 30." In this case, the carton price would be 30 times $19.95. The seller misrepresents the quality, type, package size, price, or brand name of the merchandise. For example, the ribbons "for your I.B.M. typewriters" may not be I.B.M. brand ribbons, or the "toner for your Xerox copier" may not be Xerox brand toner. Some scams even package their products to imitate brand name products. Others will sell half a carton of merchandise for the price of a full carton.

The seller uses high pressure tactics to rush the buyer into a decision and keep the buyer from getting information about prices, quantities and brand names. For example, the seller may claim - falsely - that prices are going up shortly, that someone was forced out of business, that a warehouse is overstocked, or that a limited supply of government surplus is available. Or the seller may claim that because of a "computer foul-up," he or she could not notify the buyer about a price increase, and that an order has been reserved at the "regular" or "old" price.

The seller misrepresents the purpose of the call, claiming that he or she is calling to send a promotional item such as a cordless screwdriver, a heavy duty flashlight, free samples, or a catalog "so you'll think of us next time you order." Or the seller may suggest that the purpose of the call is to conduct a "survey" of office equipment to "update our records," implying that he or she is a regular or previous supplier. Toward the end of the call, the seller may refer abruptly to the merchandise, saying something like, "We'll send that screwdriver out to you right away ... and while we're at it, I'll throw a few deodorant blocks in the box to tide you over until I get out there."

THE WEDGE

The wedge scam combines elements of the credible-invoice and the order-by-trick scams. It attempts to establish mistrust between the organization and the employee or volunteer. The seller gets the name of an employee or volunteer who will be claimed to have "authorized" the purchase. Then, the seller contacts the employee to mislead him or her to agree to receive a promotional item. The seller elicits the correct name and address so the "gift" can be sent, and makes a passing reference to the merchandise.

When the organization receives a credible invoice and asks the employee whether he or she spoke with the seller, the scam is betting that the employee will feel nervous about having agreed to receive a gift. When the employee recalls talking to someone about supplies, the organization may doubt him when he truthfully denies ordering anything. Fortunately, most organizations know their employees or volunteers are reliable and truthful. However, when the wedge scam works, the organization may conclude that the employee blundered into ordering something that must be paid for, or that the employee should be disciplined.

AFTER THE MERCHANDISE AND INVOICE ARRIVE

If the organization does not respond to the invoice, it will be sent additional invoices, often marked "Past Due." Office supply scams dedicate considerable resources to collection efforts.

In extreme cases, they resort to real or bogus collection agencies and threats of legal action.

Although many organizations suspect that they did not order merchandise, too often, they pay for it. Unfortunately, paying identifies an organization as a potential "reloading" victim. The scam sends a second shipment of "back ordered" merchandise and another bill. More shipments and invoices follow as long as the organization continues to pay. In addition, the organization's name may be sold or taken to other fraudulent telemarketers by an itinerant sales force.

Occasionally, organizations return the merchandise to the seller. The scam simply recycles it to another organization.

Some organizations contact the seller and complain that the merchandise is unordered or that the price is too high. In these cases, scam sellers usually resort to one of three ploys:

* Bullying. The seller contradicts you if you express any uncertainty about the merchandise that was ordered. "It was ordered. We have a recording of Mr. Jones. He ordered it all right. If you don't pay, we can take you to court."

* Negotiating. Because the merchandise often is overpriced, almost anything the seller can get from you profits the scam. "You were charged what? They must not have given you the discount for ...." Then, the seller tries to negotiate "a better deal." Sometimes, the seller will appeal for sympathy. "We really need the business. We'll let you have it for...."

* Accepting the return, if. The seller says that he or she can accept returns if they are accompanied by a "restocking fee." This fee often is more than the merchandise is worth.

Similarly, the seller may try to get the organization to return the merchandise at its own expense.

FIVE RULES FOR PROTECTING YOUR ORGANIZATION

Organizations can protect themselves from mistakenly paying for what they don't want - or haven't ordered. It's a matter of following five "good sense" rules:

1. Know and insist on your rights. If you receive merchandise you did not order, the FTC says you may keep it as a gift. According to a federal law commonly referred to as the "Unordered Merchandise Law," and principles established in FTC enforcement cases, it is illegal for the seller to send you bills or dunning notices for unordered merchandise and ask you to return it, even if the seller offers to pay the shipping expenses.

Further, if the seller sends you merchandise that differs from your order in brand name, type, quantity, size, or quality - without your prior express agreement - you may be able to treat the substitute merchandise as unordered merchandise. However, first consider the possibility that the seller has made an honest mistake.

In addition, certain provisions of the FTC's new Telemarketing Sales Rule offer consumer protections in business-to-business sales of office or cleaning supplies and most sales of goods or services to individuals, groups, or associations. The Rule requires telemarketers to tell you it's a sales call - and who's doing the selling - before they make their pitch. If it's a prize promotion, they must tell you that no purchase is necessary to enter or win. They must tell you the total cost of the products or services they're offering, any restrictions on getting or using them, and that a sale is final or non-refundable before you pay. And it makes it illegal for telemarketers to misrepresent any information, including facts about the goods or services being offered or the nature of a prize in a prize promotion scheme. If you suspect a violation of the Rule, report it to your state attorney general. The Rule gives local law enforcement officers the power to prosecute fraudulent telemarketers who operate across state lines.

2. Document orders. Designate specific individuals to be responsible for ordering all supplies. For each order, the designated buyer should issue to the supplier a written purchase order on a standard multiple-copy order form (available from most office stationery stores) with an authorized signature and a purchase order number. For electronic purchases, the designated buyer should use the functional equivalent of a written purchase order. The order form should instruct the supplier to put the purchase order number on its invoice and bill of lading. The buyer should send a copy of every purchase order to the person (or office) in the organization responsible for paying the bills. All blank order forms should be secured adequately.

3. Don't pay any bill unless it matches your documentation. When merchandise arrives, the receiving employee should check to see that it conforms to the shipper's bill of lading, especially with respect to items, brands, and quantities. Refuse any merchandise if it doesn't conform to the bill of lading or if the bill of lading doesn't conform to the purchase order. If the merchandise and the paperwork are in order - and as ordered - the receiving employee should send a copy of the bill of lading to the bill-paying person or department. No member of the bill-paying department should pay a supplier's invoice unless the invoice has the correct purchase order number, and the information on the bill, the purchase order, and the bill of lading match.

4. Train all employees or volunteers who answer the telephone or who provide maintenance or support services in how to answer the phone. If they are not familiar with certain callers, advise them to say, "I am not authorized to order anything. If you want to sell us something, you must speak to ______________ and get a purchase order." Often, employees who have ordering responsibility are telephoned by sellers they don't know, and may be pressured by the caller to make a quick decision on the telephone. In these situations, it is advisable to say, "This organization does not authorize any purchases by telephone. If you want to sell us something, send us a merchandise list or a catalog by mail, fax, or electronic mail. If we decide to order anything from you, we'll send you a purchase order."

5. Do not pay for - or return - unordered merchandise. If you are satisfied that you did not order the merchandise the seller has shipped - that is, if the seller cannot produce evidence that you ordered and you do not believe the seller is making an honest mistake - do not pay for or return the merchandise. You may keep and use unordered merchandise. Report the incident to the appropriate authorities immediately. Office supply scams will continue until organizations stop paying and stop enabling the scams to recycle returned merchandise to others.

SOME PORTIONS OF THIS REPORT ARE EXCERPTS FROM THE FTC "FACTS FOR BUSINESS" REPORTS.

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