United States. Congress. Senate. Committee on Gove.

At-home business opportunity scams : hearing before the Subcommittee on Regulation and Government Information of the Committee on Governmental Affairs, United States Senate, One Hundred Third Congress, first session, July 28, 1993 online

. (page 6 of 6)
Online LibraryUnited States. Congress. Senate. Committee on GoveAt-home business opportunity scams : hearing before the Subcommittee on Regulation and Government Information of the Committee on Governmental Affairs, United States Senate, One Hundred Third Congress, first session, July 28, 1993 → online text (page 6 of 6)
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Violators are subject to fines and imprisonment, and where the proceeds of the
crime are used to further it or are concealed, we have authority under the Money
Laundering Statutes (18 U.S.C. §§ 1956, 1957) to forfeit those proceeds or property
they were used to acquire.

The false representations statute edlows the Postal Service, after completing ad-
ministrative proceedings, to return to the senders all mail sent in response to any
false advertisement which seeks to obtain money or property by mail and to order
the promoter to cease and desist. FaUure to obey a cease and desist order can result
in fines of $10,000 per day (39 U.S.C. § 3012). Because these proceedings are time-
consuming, two Federal injunction statutes allow us to take prompt, interim action
against deceptive mail practices: one provides for a mail detention pending conclu-
sion of the Administrative Litigation (39 U.S.C. § 3007); the other allows the Federal
district courts to issue injunctions against the continuation of mail fraud schemes
(18 U.S.C. § 1345). The former is used in civU proceedings, while the latter is based
on reason to believe that criminal fraud is being, or about to be committed. In addi-
tion, two other statutes allow us to detain mail addressed to false or fictitious names
or addresses used to conduct mail fraud schemes untU the claimant identifies him-
self and proves his entitlement to the mail (39 U.S.C. §§ 3003, 3004).

Work-at-home promotions are among the most common and enduring forms of
mail-order schemes. In times of higher unemployment more individuals become vul-
nerable to these promotions. We pursue these schemes under our civil statutes, and,
when the circumstances of the case permit, we seek criminal prosecution as well.
We also obtain voluntary discontinuance agreements from a large number of pro-
moters. During the first half of this fiscal year we filed 24 civil complaints and ob-
tained 23 cease and desist orders against work-at-home schemes. We have also ob-
tained over 1,000 voluntary discontinuance agreements. We currently have 82 open
investigations of work-at-home promotions.

A typical work-at-home promotion begins with a classified advertisement offering
free information on how to earn hundreds or thousands of dollars weekly by work-
ing at home performing such duties as stuffing envelopes, assembling products,
reading books, or typing. Individuals who request the free information are sent a
circular, or given a telephone pitch, that describes the program in glowing terms,
promising high incomes regardless of experience, and giving the impression that, for
a fee, participants wUl receive all materials they need to immediately begin making
money. The fees generally range from $20 to $50, but some more sophisticated pro-
grams can cost hundreds.

What consumers receive in exchange for their money varies, but these work-at-
home programs are almost always a fraud: they do not generate the promised
income, and frequently they require participants to invest substantial amounts of
their own money, or to deceive others.

The most common work-at-home scheme is envelope stuffing. We are aware of no
envelope stuffing promotion that ever produces substantial income. In practically all
businesses, envelope stuffing has become a highly mechanized operation using so-
phisticated mass mailing techniques and equipment which eliminates any profit po-
tential for an individual doing this type of work at home.

Nevertheless, promoters of these schemes advertise that participants can earn
"hundreds weekly" stuffing envelopes, or $3.00 per envelope stuffed. They represent
that participants will be provided with aU materials they need to earn these
amounts; thus, most victims believe they will be sent envelopes to stuff and that
their income will be limited only by the amount of time they want to spend stuffing

Once victims have paid the $20 or $30 fee to participate, they receive no envelopes
or any other materials. Instead, they receive a pamphlet, usually entitled "the com-
plete home mailers program," which instructs them to place (and pay for) work-at-


home classified advertisements like the one that they responded to. The only way
these victims get envelopes to "stuff* is to generate responses to those advertise-
ments. Thus, the participant must essentially start his or her own business to obtain
envelopes. Moreover, the only material stuffed into these envelopes is the circular
describing the home mailers program. Thus, in most work-at-home schemes, there is
never any product being sold other than the work-at-home progrsun itself.

In one envelope stufting case, the Postal Service worked with the United States
Attorney in Brooklyn to freeze the assets of William Savran, whose corporation was
bringing in $50,000 a month. Savran's promotion was called "successful systems,"
and he charged his victims $27 to participate. His solicitations offered a " 'revolu-
tionary' home-mailing program" pajdng "up to $100 per single order." He promised
"up to $300.00" per day in earnings, even to people with "no special skills or previ-
ous experience." The only "product" Savran truly offered was participation in his
work-at-home scheme — as in most envelope-stuffing schemes, the only way a partici-
pant could earn money was by deceiving others in the same manner that he or she
had been deceived.

The District Court enjoined Savran from sending out mailings or advertisements
in connection with the Successful Sjnstems business, directed the Postal Service to
return Savran's incoming mail to sender, and ultimately ordered that $400,000 of
Savran's assets be returned to Savran's victims. The Better Business Bureau of New
York has taken on the task of executing those refunds.

We took criminal action Eigainst Eric P. Raynor last year. He sent direct mail ad-
vertisements falsely representing that he ran a loan company that needed to expcmd
its business by reaching more potential borrowers. He offered to provide all supplies
a person would need to stuff envelopes for him, and promised 50 cents per envelope
stuffed, or an avereige of $500.00 per week. Like many shady promoters, he told his
customers, "this is not a get rich quick scheme, but an honest opportunity."

Mr. Rajmor began by charging a registration fee of $14, then, when his mail
volume skyrocketed, adjusted it to $49. when his incoming mail dropped he readjust-
ed the price to $24. We received over one thousand complfdnts; we estimate Mr.
Raynor victimized over 15,000 people.

Mr. Raynor was arrested and charged with mail fraud in April of 1992. In May of
this year he entered a guilty plea; sentencing is pending.

Other work-at-home schemes involve assembling or making products. We took
criminal and civil action against one such scheme, in which Peter Ingram, under
the name P & I Enterprises, induced people to send $29 to $80 for woodworking or
jewelry kits. Ingram promised that home workers would earn $216 to $256 per week
either assembling necklaces or carving wood blocks into cupids arrows. In fact, In-
gram's assembly instructions were difficult to follow. Persons who attempted to
follow them found that Ingram would reject the products they made, telling them
they were flawed or otherwise incorrectly assembled. None of his home workers
made money as promised.

The Postal Service law dep£ui;ment filed a civil administrative complsdnt against
Ingram, obtaining his agreement to cease and desist from the scheme. Ingram then
pled guilty to state criminal charges, made restitution of $57,300 to his victims, and
was put on probation for 2y2 years.

We recently put a halt to one of another breed of work-at-home schemes, run by
Steve and John Morrison under the names "read a book" and American Marketing
C!oncepts. Their inititil classified advertisement read: "earn $300 to $500 per week
reading books at home," and provided a long-distance number to call for informa-
tion. Upon calling the number, consumers heard a piteh from a telemarketer saying
that hundreds of publishing companies were hiring individuals to read and evaluate
the large number of manuscripts they received. Telemarketers assured callers that
American Marketing Concepts would help them get hired to work at home by these
companies, and that the caller could even choose the type of material he or she was
interested in reading. The fee for this service was $30.00.

In exchange for their payment, consumers received a directory consisting of a
brief description of the publishing business, tips on writing resumes and cover let-
ters, and instructions on how to contact publishing companies to request free Itmce
reading assignments. The bulk of the 40 page booklet contained names and address-
es of publishing companies. When contected, these companies told consumers and
the Inspection Service that they did not hire free lance readers. Some had asked the
Morrisons to remove their name from his directory, and they refused. And, while
the Morrisons' telemarketers promised a refund to persons who did not get work
reading books, they often abandoned this promise, insisting that dissatisfied custom-
ers had not invested enough effort in finding work.


^2 3 9999 05982 856 4

After we filed a civil complaint against the Morrisons, and obtained a Federal
Court injunction detaining their incoming maU, they agreed to discontinue their
scheme. They also agreed to return their incoming mail to senders, make refunds to
their victims, and to have a cease and desist order issued agsdnst them by the Postal
Service judicial officer.

While work-at-home programs are as old as the hills, occasionally a new variation
of the scheme enters the meirketplace. Recently, we have begun to see more and
more progrcmM promising huge incomes from the "simple forms program." Adver-
tisements promise earnings of $25,000 a month for sitting at "your own kitchen
table processing simple forms." The advertisement alludes to nothing more than
clerical work, and gives the impression that the $25 fee to participate in the pro-
gram will pay for all necessary materials. However, instead of receiving instructions
on processing simple forms, victims receive a booklet instructing them to produce
(or reproduce) and package information on a marketable topic such as exercise or
weight loss, euid to market this information to the public. Processing forms is the
sm^est part of the program, and it occurs only after the participant spends sub-
stantial time, effort and money producing and marketing the information. The bulk
of the "simple forms" booklet consists of questionable marketing techniques.

The Postal Service had proceeded against a number of promoters of the "simple
forms program" under the false representations statute. Eivery case has resulted in
an agreement in which the promoter agrees to discontinue the scheme.

A more sophisticated type of home employment scheme involves the sale of mail
order business franchises. Last yeeir we took action against Illinois promoter Larry
Organ, who ran two simultaneous operations: in one, he offered computerized infor-
mation matching college students to potential sources of scholarships, and in the
other he induced individuals to pay $489.00 to become licensed to msu-ket the schol-
arship information for him. He violated the false representation law in both
schemes. His scholarship information was not what he had promised, and, in addi-
tion, he falsely represented to his licensees the amount of money they would earn,
that he would limit the number of licensees who could sell in a given geographicfd
area, and that he would refund the license fee to licensees who were not successful.
The Postal Service filed an administrative action against Organ and his companies,
and ultimately Organ agreed to stop falsely representing his programs. When he
breached that agreement early this year, we filed an action and forced him to make
refunds. Since that action, he has gone bankrupt and, as far £is we know, ceased his
business entirely.

Emplo5mient schemes other than work-at-home schemes are also commonly car-
ried out through the mail, and are frequently the subject of postal false representa-
tion actions. Promoters of these schemes advertise jobs with the airlines, the Feder-
al Government, the Postal Service or overseas companies. Frequently they word
their advertisements to appear that they were placed by an actual employer. In-
stead of providing legitimate job applications for existing jobs, they send booklets of
information listing potential employers and giving application, resume, job exam
and cover letter advice. In many cases, the employers listed are not hiring at all, or
do not have jobs in the locations promised in the advertisements. Job scheme opera-
tors charge $20 to $50 for this information, and their victims eire those who can
least afforid it.

Mr. Chairman, I appreciate your concern about consumer fraud and your interest
in legislative initiatives that could bolster our efforts to attack work-at-home and
other employment schemes. To enable us to improve the use of our civil misrepre-
sentation statute, we have recommended that we be given the authority to issue
civil investigative demands for documents and testimony. The lack of such authority
seriously hampers our abUity to deal with some types of fraud schemes and delays
our ability to obtain injunctions in many of our cases.

We have also sought an expansion of the false representation statute in a number
of areas, for example:

• to permit us to seek inmiediate detention of mail administratively rather than
going to District Court with the assistance of the U.S. Attorneys Office;

• to permit civil actions within three years of when a false representation
scheme occurred;

• to permit District Courts to immediately enjoin all activity in furtherance of a
false representation scheme, in addition to detention of incoming mail; and

• to expand jurisdiction of the statute to expressly authorize civil actions when
credit cards or 900-numbers are used to obtain payment, as long as the mail is
used in furtherance of the scheme.


S. 3376, introduced in the last Congress by Senator Pryor, contains these l^isla-
tive changes, and others. That bill also strengthens provisions relating to advance
fee loan schemes conducted through the mail, and to some extent overlaps with S.
279 the Advance Fee Loan bill that you have introduced. We appreciate your sup-
port for stronger laws against advance fee loan schemes.

We have supported congressional efforts to enact a private courier fraud statute
separate from the mail fraud statute. Such legislation would prohibit the use of pri-
vate courier services to avoid violations of the mail fraud statute, but it would not
address that issue as part of 18 U.S.C. § 1341. We feel a separate statute addressing
private courier service would best maintain the integrity of mail fraud precedents
which are based on the Postal Service's government identity, while still making the
substantive provisions of the Mail Fraud Law applicable to private couriers.

The Inspection Service and other law enforcement agencies could take action
more quickly against fraudulent schemes if we were authorized direct access to tele-
phone subscriber information from telephone companies and 800- and 900-number
service bureaus. This would provide access comparable to that available under
postal regulations, which grant public access to information on Post Office box ap-
plications when the applicant is doing business with the public. Currently, we need
a subpoena to obtain this information from a telephone company. While subpoenas
may be available in some cases, in civil investigations they are not; moreover, com-
panies do not always comply with subix)enas.

Congress could also bolster the maU fraud statutes by requiring businesses using
commercial mail receiving agencies to identify their addresses £is boxes, and not as
"suites" or "offices."

Mr. Chairman, this concludes my testimony. I would be happy to answer any
questions you may have.


Earn up to $1000 per week part time from home

Homeworkers needed nationwide

Big money weekly mailing circulars...

0«ar Fnwtd.

How wDMid you Ow to aam up to S1000 mmmk i f or mora bjr simpfy touring anvolopca, stuffbig tham %nth off«n
and raurrang tham tor pxymai«7

Our firm spaciaAzas in tfia bomawork Industry- Wa kaap carafut track of companias aiound tha cDuraiy wtw.
bacausa of timing, fuiga damAnd or mauVa nwKating faquiraniarn. And thamsalvM bohind on gatdng thav attars
10 tha pubfic Thasa compantas could go out and hira a ttafl to do tfib fob. Tha poim b ttai many compania* m»M
raxtxmt uva monay. •spacuDy now. Thay would ratftar *FARM OUT Iha work by piaca to rasponsfala paopia. Both
in« cximpany in naad and tha ndividuat banaf JL

NOW YOU CAN EARN EXTHA MONEY IN YOUR SPARE TIME doing lin^ito.plaaaafM work maMr
consmmg of stuffing anvakipas ai homal Finns pay you $1 PQt anvatopa you socura, stuflad with drculars and
sutimiaad according to instnctions. Submit 20 anvakipaa and racaiva (20. Submit 100 anvatopaa and racawa
S100. andonandoni


'Guida To InmaduM FuU-runa
Incoma Ai A Pan-Tuna Rionc
Contullani: Parannng. Fvnilv
Pmona. Eduonna & euaiess-
(NOT 1 900 a| Proftt (ran yoi UFJ
op. naorg ocisa. Pnr Conunng
and ea na rgd. GUARANIEB5
S45 (N» Res »dd SllS T»l To-
ConsUUrt 1007 Qm SL Sua C
POB 60596. BoJcSa (jty. NV 89006


NEVER BEFORE ANYTHING QUrTE LIKE THIS! Ba ut-amployad. fal hava our guidanca and
BiTininlnnt No axparianca naadad. WaH show you how to Stan and csniinua day aftaf day. YOUR nama navar
SfipMn on any of tha pnnad drculara. You wl nava< sttjM anything objaaionaljU or pomognphai,

NOW YOU ARE IN LUCXI Wa ara ona of Iha only mai ontar Anns in Oia honia»ui > (laid that tnily otlais
individuali Ota yoursal tha ooponunily to sndf anvatopaa and gat paid lor aach anvalopa you stufll Not soma kM
at commnsen basad on whathar ix not you faCMva onjara - but sifnpty $1 lor aach and avary anvatopa you sactira
stuKad with drcUafa and ititwiinad a um i Ua ig to instnictlonai


raouiiad to buy any anvatopaa or postaga axamps (or maSng ctacutafs. By (oOowing instnicdons you inH racaiva
pra-a<idr«ts*d anvatopaa with tha ponaga atanps aJraady afltaad. As you can saa, tha biggaat pan at your worit
wil ba uudlng anvatop aa with cimSafa and a a nj lii g tham badl tor paymanL Wa wnat you 10 worit widl usi Wa also
want you to tia happy and ramain actfva (or ntany yaaiv in thia tarnficpragraml

WHY DO WE NEED YOUR IMMEDIATE HELP? Answar T)»a ara nOons of paopla in tha Unkad
Staias and Ca na da who (kma would ilta lo aand thair oflars lo. but coutd navar raich afl o( tham - avwi K-ihay
worttad around tha dbdt. Howavar, by you and many othara iMlping us Iraro homa by toea*y aaeuring |wa ilsiUMiil
and addraaaad anvatopaa liy mai tmm paopla in your own aiaa or al ovar tha country finna ara abiatocsnIMt
many thousanda e( piDspacts tvilMn a much shoitar tfena.

Ybu sign nothing. Ytau work only tha piaoaa or widi tha trim wMdi you choosa. You woik whsravar you chooaa.
Ybu quit anytima. Pan-tana or luimma. By falowing ^ a mp an y pofcy you wg ba gtiar ant aa<( paymant on racaaa o<

I Bittineas Opportunities
i WE PAY UP TO $300 '

IwaaUy woodtMiniing pictura lr«m«*..

I EvaryiMng luppHail. No axparianca or i
talUiig. Bay Frama. P.O. Box 1SBe.i
JadaoaTN 38302. >


SS2S par 152. At hoow. Ruali SASE:
Crallco-E. Box tSO. OtitMflafvllla. NV.


poaaaial Sun l i i wi odH wl y. L3ASE Ik;
IfcanrE. Bos M».Stiyii>OMr.W 47274. ■ ■


possiMa iiiifcltio IwMcy ti a tu i au um ui j
iaamt Ynt-nana a p pon ia il l y . No oapo- ■

rianea. Ruah SASE lo: HolMay,


and soma TV scripts. FB out
simple 'like/donl Ilka' tonn.
Easy! Fun, relaxing at homa,
beach, vacatfcma. Guaiantead
paycheck. FREE 24 hour
recording. 801-'379-292S ExL



STUi^nNa bmbjOpcs

Sw Nk — Ih e_a, tat («.

laooMk. 73*55!

i.ii.iip naM^^


•A Eiffl tm • CMt trpl«t It iMca
EiCflMiu'oppoflunltlti ttaBM*.

8*s£Cos\ ,'5 Er;n>^" .

P.O. B0( IM77. UloifMO 71208




GOOD WEEKLY •wonw proossmg
mad lor national cs(npa/ty< Fro sup-
pUes. postage) No sating! eoajses'
Stan nimeaaiaiy< Ganuna oppouMy
Rush stamped tnvalepa: GSECO.
1 1220 West Fknsam-CC FloiBsam
MO 63031

t1,J0a WEEKLY maAng our cmtes'
Bcgm now< Free packet!: MESA^ 1
EASY WORKl Eaeien p^l AssBKHe
pmoucs at heme. Td Im: i-(an «67
5566. Ea. 2607.

We pay up D MOOXn waMy. Ng epe-
rienca. Send saH^ddrassas anMDoe

Tecnnii. 4in Man Svaa. Sua3O0
Bnogepog CT 06606.

EARN UOOfa oar u »«>a. Goran-
teed! Pnxcssng OM. Fiaa oeoat Sci
aodresseo. stamped i nm op i. OJD
MaAeting. Oapi GL2. Box O30I19
Siaien Blana NY 1(001

MAKE HOUOAV deceiiMn s ak

We pay up » USajOO aaeXly. Year
rotato oppotuiey. no aipanance. f^jst
stamped enwMopa: Hokday. Boi
ixanng pBua tames, ^larytiig sup
pbao. No e ip awene a oitaMiig: Bai
Frame. PC Bos 1588. Jadoaa. T^

veioees'Fteeimaai iniiige'BTwii
es' Stan rnnataoieiyl tac napai
envelope: FooOiagsr-Cin'. GuatMs
NY 12027.




71-705 (48)

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Online LibraryUnited States. Congress. Senate. Committee on GoveAt-home business opportunity scams : hearing before the Subcommittee on Regulation and Government Information of the Committee on Governmental Affairs, United States Senate, One Hundred Third Congress, first session, July 28, 1993 → online text (page 6 of 6)