Fraudulent telemarketers target small business

At first glance, fraudulent telemarketing of toner cartridges may seem to be no big deal, but it is actually an extraordinarily widespread problem. The Senate Committee on Small Business has received estimates that this kind of fraud fleeces up to a quarter of a billion dollars per year from the business community.

I recently chaired a hearing titled "Swindling Small Businesses: Toner-Phoner Schemes and Other Office Supply Scams," which focused on fraudulent telemar-keting of office supplies, and particularly copier and printer toner.

The Federal Trade Commission is investigating several companies that deceptively call businesses to sell toner cartridges.

According to the FTC, the offers are rife with fraudulent statements and misrepresentations. The bottom line on these types of scams is that small businesses and nonprofit entities are shipped low-quality office supplies that they did not order at grossly-inflated prices sometimes up to 20 times conventional prices.

A St. Louis-based nonprofit group, Feed My People, has been swindled by this type of operation, according to the testimony of one witness, Mr. George Everding.

In many cases, the telemarketer will represent that it is associated with the business' regular supplier of photocopier toner or the photocopier manufacturer. Telemarketers may also represent that they are calling to confirm an order placed by an employee's predecessor when no order actually had been placed.

In addition, the companies may call a business to get the name of an employee and then ship unordered merchandise and an invoice containing that particular employee's name. It is not uncommon for telemarketers to send a free gift to employees with whom they have spoken so the employees feel obligated to pay the invoices they receive.

One of the most common practices is for telemarketers to falsely claim that prices have or are about to increase, but, as a courtesy, an order has been reserved for the business at the "regular" price.

Once a telemarketer has scammed a business into accepting the delivery of toner, it may use several other methods to coerce the business into paying. Typically, invoices are sent a week behind the unordered merchandise, as the inflated price is not as obvious after the merchandise has been stocked and there is a reasonable chance it has already been used.

Moreover, fraudulent telemarketers usually spend significant time and energy on collection efforts, including: drafting invoices containing unenforceable contract terms to coerce businesses into paying; stamping "Past Due" on first-time invoices; enlisting the services of bogus or real collection agencies; threatening lawsuits; negotiating lower prices; or claiming that if the items are returned, the company will be charged a "restocking fee."

Finally, if the telemarketer finds a business that is willing to pay for the overpriced toner, the business will continue to receive unordered merchandise and invoices as long as it continues to pay.

While the FTC and certain state attorneys general have been active in prosecuting businesses that engage in deceptive office supply sales, they have limited resources. To be successful in putting these scam artists out of business, it is imperative that the federal government act as an information clearinghouse. We must ensure that small businesses are aware of these scams and inform them how they can protect themselves.

I encourage any Missouri small business owner who believes he or she may have been victimized by telemarketing scam artists to contact the FTC for help at 877-FTC-HELP.

(U.S. Sen. Kit Bond is chairman of the Senate Committee on Small Business.)