> 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.
Ot!
hers 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 te!
lemarketers 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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