A not-so-simple plan

Tired of the daily grind – or worried that your job just might go away?

Many people have legitimately traded rush-hour commutes for work they can do from the comfort of home. According to the National Association of Home-Based Businesses, about 20 million entrepreneurs this year will earn their income from enterprises run from basement offices and kitchen tables nationwide.

But millions of others will fall victim to work-at-home scams that are spread through classified ads, direct mailings, and, increasingly, the Internet and e-mail. The advertisements are enticing: "Work at Home, Earn Up to $40,000 a Year!"; "Easy Work for Excellent Pay!"; "Be Your Own Boss, Work Your Own Hours!"

Experts say that perpetrators of fraudulent business promotions – including envelope-stuffing, craft assembly, and medical-billing schemes – prey on stay-at-home mothers, the elderly, and other home-bound individuals yearning to make some extra income, especially in a sluggish economy.

Last year, Andrea Trimble, a widow from Baltimore, fell for a scam she saw advertised on one of the many work-at-home websites. After exchanging a few e-mails with the company owners who, Ms. Trimble says, "beefed it up to make it definitely sound like a legitimate work-at-home job," she sent $54 for a software package that she thought would allow her to launch a data-entry business.

"They made it sound like I would log onto my computer, they would e-mail me the information, and I would type the orders into their database," explains Trimble, adding she was promised $10 per entry.

But when she installed the software, the only directions that popped onto her screen told her to place ads in local newspapers to get others to purchase the software. "And if, by chance, any other sucker bought the software, like I did, then I would get paid $7," Trimble recalls. "I can't even begin to tell you how upset I was. That $54 dollars [could have been used for] paying a bill."

Work-at-home scams are an "age-old consumer-fraud problem," notes Michael Mora, an attorney with the Bureau of Consumer Protection at the Federal Trade Commission (FTC) in Washington. "The only thing new about this is the use of the Internet," he says, noting it has allowed scam artists to extend their reach dramatically.

Typical scams set back victims by $40 to $50, Mr. Mora explains. More serious ones can cost tens of thousands of dollars, including those in a category known as "business opportunity" schemes, which lure victims to buy the rights to such things as vending machines, pay phones, and greeting-card displays (see story, left).

While the government doesn't track the prevalence of such scams, Mora says work-at-home schemes consistently rank among the Top 10 consumer complaints received by the FTC. Furthermore, the Council of Better Business Bureaus reported that in 2000 it received more inquiries into work-at-home propositions than any other type of business, including plumbers, home contractors, and auto repair shops.

Others say their numbers are increasing as the economy falters. "There has been an uptick in interest. A lot more people are unemployed and really in need of supplementing their income," says Ellen Parlapiano, coauthor of the book "Mompreneurs Online: Using the Internet to Build Work@Home Success." "Mothers are particularly vulnerable because they are so desperate to make money from home," she adds.

Still, plenty of legitimate home-business opportunities are out there, Ms. Parlapiano says, including such venerable direct-sales companies as Avon and Tupperware.

"You definitely can be successful working from home, but you have got to do it by tapping your own talents and passions, rather than by trying to look for some opportunity that's in the back of a magazine," Parlapiano says.

That's the lesson stay-at-home mother Donna Werbos learned several years ago after spending $20 on a envelope-stuffing business kit – a common scam found in the classifieds of mother-oriented magazines.

The former secretary quickly rejected the idea, however, after discovering it would require her to spend more money placing ads in local newspapers and around the neighborhood. "I'd rather be my own boss," says Werbos, of Nottingham, Pa. She found her entrepreneurial calling in her hobby: making scented candles as gifts for friends and family.

Now two years into the enterprise, Werbos says her business, Delightful Scents by Donna, "mostly pays for itself." And while the job requires some late nights and early mornings, Werbos says she prefers it to her former job as a secretary. "It is my choice. It doesn't feel like work."

If a budding entrepreneur hopes to have any chance of success in a home business, he or she must follow some fundamental business practices, says Rudy Lewis, president of the National Association of Home-Based Businesses, based in Baltimore. This includes finding one's niche, developing a sound business plan, and defining the target market.

The increasing availability of advanced business tools over the past 10 years – including the Internet, fax machines, and e-mail systems – has allowed more and more people to launch home businesses, Mr. Lewis says. At the same time, the stigma of working at home also has declined.

"These are no longer frivolous businesses of mothers working on the side. You can start a real venture," he says of such businesses as importing and exporting. "In the old days, you couldn't make it, because the only thing you really had to work with was the telephone."

The computer has allowed Charlie Burns to reach a national market for his four-year-old walking-stick venture.

The Milford, N.H., resident started his business, The Cane Guy, after he was disabled 10 years ago while swimming in the ocean.

"The cane idea came about because I had such a hard time finding a decent cane to walk with," says Mr. Burns. Unhappy with "ugly canes" that looked like they came from an institution, he set out to develop line of stylish walking sticks, including one that comes with a built-in flashlight.

Although he didn't choose to launch a home business, the former electronics-industry executive says he now enjoys the lifestyle, especially being able stay home with his six-month-old son. "You can do a lot of the routine stuff at any hour of the day, and the other things can take priority. It's really neat to be there for my son all the time."

Still, Burns acknowledges that he, too, was initially tempted by the quick financial rewards promised in some home-business promotions, including the ubiquitous envelope-stuffing schemes. But, he says, true business success requires some basic rules: "The bottom line is, if it seems too good to be true, then it is. There is no substitute for hard work."

Don't miss this chance to get in on a "highly profitable $8 billion industry," says the friendly sales rep from the greeting-card company based in south Florida.

The job requires only about eight hours a week of easy labor restocking "top selling" musical cards in display racks that the company will provide, says the sales rep, Ted, who doesn't give his last name.

"It's not inconceivable, with 10 locations, to make between $25,000 and $27,000 profit," he says into the phone.

In fact, the company will even "guarantee the locations" of the racks, including in high-traffic establishments like supermarkets, drugstores, airports, hotels, and florist shops, he promises.

And all it will cost is $11,850 to get started.

"I know that's a chunk of change," Ted says, slipping into to a sincere voice.

"I don't want to beat around the bush," he continues. "But after six months of selling, you'll get your investment back. After a few months, you'll double the size of your route, and see clear profits."

Fat chance, says one law-enforcement official who specializes in fraudulent home-business propositions.

Unfortunately, hundreds of thousands of consumers lose millions of dollars every year in just such greeting-card schemes, says Jody Collins, Florida's senior assistant attorney general.

"They are the one type of case that people invest a lot of money in, because they think they are really going to earn money," Ms. Collins says of the phony promotions, part of a larger phenomenon known as "business opportunity" scams. "For a lot of people, they empty out 401(k)s, or take a loan from the bank, or a second mortgage."

But once the check clears, the problems begin.

Ms. Collins recalls one greeting-card case she prosecuted last year. "Either they didn't get their cards at all, or they would get the wrong cards," she says. Other times, the musical cards simply didn't work, or would arrive 11 months out of season – like a shipment of Christmas cards in January.

Then there are those promised locations. Scam artists often tell consumers they will guarantee rack placements in well-known drugstore chains. But after consumers receive the cards and racks, "they get turned over to separate locating companies who tell them 'we can't put you in those stores,' " Collins explains. Instead, the racks end up in "little mom-and-pop stores down the street, or some auto-repair shop, where there is hardly any foot traffic."

Periodically, Collins's agency does a sweep of fraudulent businesses, as do other enforcement agencies nationwide. But the impact is limited, she acknowledges.

"As many as you shut down, there are more that will open," Collins says. "They just try to stay ahead of law enforcement."

Indeed, it's up to consumers to guard themselves against such scams, experts agree.

Collins suggests that anyone considering buying into a greeting-card business first check with the Better Business Bureau to see if there are complaints lodged against the company.

They also should set up a personal visit with executives at company headquarters, and with any reference who claims to have had success selling the cards.

Unfortunately, too often consumers fail to do enough research before they put down their hard-earned cash, Collins says.

"If they asked as many questions before they spend their money as they do once they have bought into the business, then they wouldn't get taken," she says.

The Council of Better Business Bureaus urges the public to watch out for certain signs before spending a dime on a work-from-home opportunity. They include:

• Overstated claims of product effectiveness;

• Exaggerated claims of potential earnings and profits;

• Claims of "inside" information;

• Required fees for instructions or products;

• Claims of "no experience necessary."

Such tactics are often used in the following scams:

Assembling crafts

A consumer pays hundreds of dollars for instructions and materials to assemble crafts from home, such as dolls. When the person builds and returns the finished product, however, the company refuses payment, claiming the work doesn't meet "certain standards."

Stuffing envelopes

Consumer purchases a kit to start an envelope-stuffing business. The materials, however, simply ask the person to buy ads in local papers to perpetuate the scam. According to the US Postal Inspection Service, "envelope stuffing has become a highly mechanized operation ... which eliminates any profit potential for an individual doing this type of work at home."

Online-business opportunities

Consumer buys a computer disc that provides information on how to find work-at-home jobs on the Internet, many of which also are scams. The disc also may simply list free government websites that provide job-related information.

Processing medical claims

Consumer buys expensive software programs and training sessions for what he or she thinks will be a lucrative job processing insurance claims. The market for such services done out of the home, however, is very small or nonexistent and the promised work never materializes.

For more information about work-at-home schemes contact:

Better Business Bureau www.bbb.org/library/

Federal Trade Commission www.ftc.gov

National Fraud Information Center www.fraud.org