Filed under: Ripoffs and Scams

Despite the claims of many who are trying to recruit new victims into their Multi-Level Marketing (MLM) scheme, you are not going to find riches there. While there are often lofty claims about many millionaires originating in MLMs or a high percentage of women making six-figure incomes from MLMs… the reality is that the people profiting from MLMs are few and far between.

Have you ever asked someone pushing an MLM for support of their claims? Have you ever seen documentation that proved there were many making executive incomes? Have the MLMs ever voluntarily offered up statistics about the success and failure of distributors?

I can almost guarantee that your answer is “no.” Why is that? MLMs don’t release figures related to the number of participants involved during the year, the failure rates of participants, or even the success rates of participants because they’re beyond dismal.

Take Mary Kay Cosmetics, for example. In the United States alone, about 1.2 million women will be distributors at some time during this year. Of those 1.2 million women, only about 600 will earn a six-figure income after business expenses. That means that just this year, only 0.05% of women involved in Mary Kay will make that huge income. Only a little fraction of 1% of women involved in Mary Kay will achieve the high earnings. And Mary Kay is generally thought to be one of the “better” MLMs out there.

Do you want to waste your time and your family’s money on a losing proposition like this? If you were told before you signed up that you had far less than a 1% chance of making that “big money” in your MLM, would you have signed up? It sounds to me like you’re better off playing the lottery.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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Filed under: Ripoffs and Scams, Technology

One criminal who netted $750,000 from identity theft activities shows us exactly why it’s dangerous to use public personal terminals for your financial business. This guy checked into high-priced hotels and installed keystroke logging software on the computers in the business centers.

Business travelers would use the computers in the business centers, and the thief’s software would capture every single thing they typed. Credit card numbers? Logged. Passwords? Logged. PIN numbers? All logged thanks to this spyware. The guy did this in at least 25 hotels between 2004 and 2007. My guess is that he probably did it at more, but these hotels were just the ones that the police found out about.

Beware when using public computer terminals in libraries, airports, coffee shops, hotels, and the like. You have no idea what software could be installed on the personal, or how secure the internet connection is. Act as if the public at big is seeing exactly what you are doing, because someone really might be watching and waiting for you to type in your confidential information.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Bookkeeping, and is the author of Essentials of Corporate Fraud.

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Filed under: Ripoffs and Scams, Fraud

A former legal secretary in Massachusetts demonstrates for us what not to do: lie about being disabled. Teresa Brooks sued her employer, law firm Peabody & Arnold, saying they fired her because of her disability, a disabling spinal condition. The law firm stated she wasn’t disabled at all, and they fired her for lying about it.

The firm knew Brooks had back problems and had provided her with a special chair and with time off for physical therapy. But she claimed she was disabled and couldn’t work at all. Brooks had received some disciplinary notes in her personnel file, and her disability claim came shortly after that. The firm became suspicious after hearing rumors of a trip to Disney World, in spite of her claimed total disability.

So they sent out a private detective, and guess what they found? Brooks was videotaped doing physical things that contradicted her disability claims. She was doing yard work, driving forty minutes, and sitting for hours in front of slot machines, when she had claimed that she couldn’t work because she wasn’t able to sit at her desk. The firm swiftly fired Brooks.
A trial court judge dismissed the case Brooks brought against the firm and an appeals court concurred with the trial court. The law firm wins this one. Brooks wasn’t disabled and was wrong for lying about it.

What’s the moral of the story? Don’t lie about being disabled. There are plenty of ways to find out if you’re disabled or not. And if you know someone who is cheating their employer or insurance company about disability benefits, report them.

An insurance company is happy to send someone with a video camera to tape your neighbor raking his leaves, but they can’t do that unless they know he’s doing it. They’ve simply got too many people on claim to be able to follow each and each one of them. But if they get a reliable tip, they’re likely to follow up on it. Make sure you provide enough details so that the insurance company knows your tip is legitimate and so that they’ve enough information to start an investigation.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Bookkeeping, and is the author of Essentials of Corporate Fraud.

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Filed under: Ripoffs and Scams

Like most personal finance writers, I don’t think gambling is something people should be doing — Studies have shown that those who play the lottery tend to be the people who can least afford it. But if you’ve an insatiable desire to blow money on games of chance where the odds are hopelessly stacked against you (and are too smart to try day trading), I would suggest bingo.

Why? Because it involves sitting there for a while and slows down the rate at which you can blow money. Playing the Lottery is like throwing a few dollars out the window — at least with bingo, it takes a while to lose your money. And if you can find a really gross bingo hall — filled with cigarette smoke and body odor — that’s even superior. You’ll be miserable and won’t be tempted to play for very long. Also, restrict yourself to one or two cards at a time.

A piece in the Wall Street Journal takes a pointless but amusing look (subscription required) at The Bingo Bugle, a newspaper of sorts distributed at bingo games. You’ve to think this is the kind of journalism that’ll be on the chopping block once Rupert gets around to shaking up the paper.

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Filed under: Entrepreneurship, Ripoffs and Scams

The post-holiday period is a huge time for multi-level marketing recruiting. People are feeling broke from their gift-giving extravagances and, with the housing crisis and general economic malaise, a lot of Americans are looking for additional sources of income.

As Tracy Coenen wrote in this excellent post, network marketing or multi-level marketing is frequently looked to as a potential income source by desperate people, but it’s very important that you state no thanks to anyone who tries to pitch you on it.

If you need more convincing, listen to this excellent interview with Consumer Awareness Institute founder Dr. John M. Taylor. And then visit his website MLM: The Truth, and view his list of red flags if you have any doubt about an opportunity you or someone you know is considering.

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Filed under: Ripoffs and Scams, Technology

The entertainment industry seems ready to admit defeat in its attempt to bludgeon the music and video-consuming public into giving up their file sharing habits. Despite thousands of lawsuits against students who download “free” content via sites such as Pirate Bay, the industry is still carping about lost revenue.

The alternative the industry proposes sounds draconian to me. According to the New York Times, NBC, Microsoft and others support putting the responsibility for screening for and stopping the sharing of copyrighted content on the back of world wide web networks. For example, this would require Time Warner Cable to peek into your world wide web traffic and block any content that falls within this category.

An analogy might be made to the postal process. In this analogy, the post office would be tasked with opening up each piece of your mail to make sure it doesn’t contain illegal materials.

The analogy is apt in other ways, I think. It adds a layer of complication, i.e. cost and time, to communications, and it forces us to pay to have ourselves policed for the benefit of the entertainment industry.

Why can’t they deal with this by the tried and true method? Since the NSA reads all of our mail, let them carry out the electronic strip searches. They many not be able to find Bin Laden with their billions of dollars of equipment, but I bet they could find an Arcade Fire download in a haystack.

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Filed under: Home, Ripoffs and Scams, Fraud

Foreclosures seem to be on the rise, but mortgage companies don’t always get a slam dunk when it comes to taking your home from you. In order to foreclose, they’ve got to have their paperwork in order, something that’s not always a given. With mortgages being sold over and over, sometimes companies don’t have adequate documentation to succeed with the foreclosure.

Countrywide Financial Corporation found a way to solve this problem, but it didn’t make a judge too happy. The company created false documentation in an effort to prove it had sent certain letters to a homeowner, when in fact Countrywide hadn’t sent her those letters.

After successfully completing a Chapter 13 bankruptcy period of 60 months, Countrywide accused the homeowner of having unpaid fees from that bankruptcy period. No dice. Countrywide didn’t bring it up during the bankruptcy, so it can’t now try to get extra money from her.

Countrywide’s solution was to create fake letters that made it look care about it did bring up those fees during the bankruptcy period. It got caught, and company attorneys ended up admitting that the letters they produced to the court were “recreated.” In plain terms, they were phony.

And apparently this isn’t the only case that Countrywide is having trouble with. 300 bankruptcy cases in Pittsburgh involving Countrywide are currently being analyzed because of documentation the company lost or destroyed. I’ve no objection to mortgage companies foreclosing on those who don’t pay their mortgages. But the mortgage companies must play by the rules.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Record-keeping, and is the author of Essentials of Corporate Fraud.

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Filed under: Ripoffs and Scams, Technology

If I told you that you that I could sell you a device that would allow you to get 100 miles per gallon or more in your vehicle, you’d write me off as a con man, right? I sure hope so.

Unfortunately, Newsweek magazine, once the primary source of news for millions of Americans, has demeaned itself by accepting advertising from a company making such a fraudulent claim.

The company running the ad, Energy Empire, claims its pre-ignition catalytic converter can increase mileage nine-fold through the hocus-pocus of “Using magnetic and electrical reaction to break down the fuel molecules into their elemental state.”

What the magazine ad doesn’t tell you, but is revealed on Energy Empire’s web site, is that this Philosopher’s Stone of a converter is still in development. In the meantime, the company wants to sell you the “Hydro-assist fuel cell,” a different device that they claim will also improve mileage by burning water along with gasoline.

The signs of a con are obvious: scientific buzz words such as fuel cell, claims couched in paragraphs of wiggle words, bait and switch advertising. Most damning, though, is that this company is at least in part owned and operated by infamous con man/con evangelist Dennis Lee, who previously served jail time for his notorious “free energy” scheme.

Repeat after me, people: THERE IS NO SUCH THING AS A FREE LUNCH. 100 mpg automobiles are in our future, but our over eagerness for them is a flim-flam man’s dream. Shame on Newsweek for allowing such an ad to run in its magazine.

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Filed under: Ripoffs and Scams, Fraud

A British television star tried to prove that identity theft was no huge deal by having his bank account number printed in a newspaper. And then he was ripped off.

Jeremy Clarkson of the British show Top Gear stated that the loss of millions of records containing personal information was a “storm in a teacup.” He said identity theft was a sham, and he had a newspaper print his bank account details to prove it, along with information on himself, his address, and his car.

And then someone stole

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Filed under: Ripoffs and Scams, Technology, Transportation

If you’re not paying your tolls on the Illinois Tollway, watch out! And if you think you’re automatically paying them, you had superior make sure that you’re.

Leslie Boudreau found out the hard way what happens when you don’t pay. She thought she was paying with her I-PASS, the in-car gadget that is supposed to automatically pay your toll as you pass by each open road tolling facility. She had her pass linked to her credit card, and the system is set to automatically bill the credit card when the pass needs to be filled again.

Leslie’s pass wasn’t being refilled, and she ended up with $179.50 in unpaid tolls for the last year. She’s now gotten a notice that is demanding $4,619 in fines for non-payment of the tolls. If she doesn’t pay in two weeks, the amount could go up to $15,739 because of swiftly escalating fines that go along with the unpaid tolls.
Why did it take so long to catch up to her? Simply put, the tolling system was broken. A computer glitch meant that no one got notices for over a year. Now they’re getting massive bills from the state.

The system is supposed to send a driver a notice after three unpaid tolls. Except the system wasn’t sending anyone a notice for 13 months! Leslie and others who received big fines say if they would have gotten timely notices, they would have resolve the problems with their I-PASS devices right away. But the law says the state has the authority to fine drivers for up to two years’ worth of unpaid tolls.

The are so many problems with its “new and improved” tolling system, that the say has no idea how much money is owed or how many others are getting away with not paying tolls. Yet apparently the tollway officials say the system is just fine and has only minor problems.

Wonder what say officials think of tort laws? Bet the class action lawsuit system ain’t broken, either.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Record-keeping, and is the author of Essentials of Corporate Fraud.

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