FTC: Company tricked business & non-profits in fake directory scheme

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On Tuesday, the Federal Trade Commission announced a settlement with a Slovakia-based company and two of its executives who took million of  dollars from small businesses and non-profits in the United States and other countries.

According to its complaint, FTC alleged Fair Trade tricked retailers, home-based businesses, local associations and others into paying close to $2,000 annually for a nonexistent business directory. Fair Trade would contact the business through direct mail falsely suggest that consumers had to return a form confirming or updating their contact information for a trade show they had attended or planned to attend.

The only problem was that there was never a trade show.

In December 2014, Fair Trade executive Wolfgang Valvoda  was indicted on mail fraud charges by the U.S. Attorney for the Southern District of Illinois.

Under the settlement, the company and its two executives are banned from entering the business directory business. They also are prohibited from misrepresenting any product or service, attempting to collect payment for their business directory listings, profiting from consumers’ personal information, or failing to dispose of consumers’ personal information properly.

Here are some steps you can take in order to keep your business safe:

  • Train your staff to spot this scam.  Educate your employees about how this scam works. In addition to your regular receptionist, talk to everyone who may pick up the phone. Put a copy of this alert in employee mailboxes. Mention it in a staff meeting. Post it on the break room bulletin board or where employees clock in and out.
  • Inspect your invoices.  Depending on the size and nature of your business, consider implementing a purchase order system to make sure you’re paying only legitimate expenses. At a minimum, designate a small group of employees with authority to approve purchases and pay the bills. Train your team to send all inquiries to them. Compile a list of the companies you typically use for directory services, office supplies, and other recurring expenses. Encourage the people who pay the bills to develop a “show me” attitude when it comes to unexpected invoices from companies they’re not familiar with. Don’t pay for products or services you’re not sure you ordered.
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