Byline: Rick Karlin Staff writer
Deborah Richeson of Colonie thought she was getting a free fishing boat, but ended up high and dry after being reeled in by what consumer advocates say may be the latest twist in a timeworn telemarketing scam.
It's called a 'reload' or 'recovery service' scheme and it works like this: You get a letter from a company - let's call it XYZ Promotions - saying you have won a valuable prize like a boat or vacation in Maui. All you need to do is call XYZ's toll-free number. When you call, you get a high-pressure sales pitch for some overpriced merchandise.
Eventually, you may receive the merchandise, but no prize. Or you may get a worthless prize. Or you may get nothing at all.
Soon after, you get a phone call from another firm. The salesman tells you that XYZ has gone out of business, and you won't be receiving your prize, but he wants to make it up to you. If you buy some of his merchandise, you will be eligible to win another prize, such as a stereo or television set.
This is called a reload scheme, since the same deceptive sales pitch is said to be 'reloaded' or recycled for a second time.
Cleo Manuel, spokeswoman for the National Consumers League, said her group has learned of this scheme in the last month or so. While it is not known how many companies are engaged in reload schemes, she said their existence is an indication that boiler room operators are developing novel ways of netting their victims.
The need to come up with fresh schemes, she said, also suggests that the public is getting wise to the dubious telemarketing sales pitches blanketing the nation during the past few years.
'These guys are really quick. They are learning fast,' Manuel said of those who operate reload schemes.
'This is a big business,' added Eileen Harrington, associate director of the Federal Trade Commission's Bureau of Consumer Protection. Her agency estimates that telemarketing fraud costs the public between $3 billion and $40 billion a year.
A recent survey conducted by Louis Harris and Associates for the National Consumers League found that 92 percent of all Americans have been contacted by at least one 'guaranteed prize' mail scheme.
Some of the schemes are directed to consumers, while others aim at businesses.
Richeson got a taste of how these schemers target small businesses when she encountered the now-defunct Consumers Choice Marketing Inc., also known as C.C.M.I., of Fountain Hills, Ariz.
Her dealings with the firm started last winter when she responded to a letter informing her that she had won a 'sport fishing boat and outboard motor' and should call C.C.M.I.'s toll-free number to claim her prize. 'This test marketing evaluation is being offered to business owners only,' stated the letter.
When Richeson, who is starting an apparel sales business, called the toll-free number, she learned that she would have to pay a $99.50 shipping and delivery charge to get the boat.
Then came the pitch.
C.C.M.I., she was told, would waive the shipping charge if she ordered 100 pens monogrammed with the name of the her fledgling company. Cost of the pens was $200.
Richeson sent her money via an air courier, as the company requested, but that didn't speed things up. Three months later, Richeson got her pens but no boat.
Shortly after that, Richeson received a suspicious sounding call from a Florida salesman who told her that C.C.M.I. had gone out of business and he was sorry to hear that Richeson never received her boat. But he wanted to make good on the prize by offering her either a 25-inch TV, a VCR, or a vacation. He then launched into a sales pitch for promotional items at which point Richeson slammed down the phone in anger.
Richeson then called the Arizona Attorney General's office and learned she probably will never see the boat she was promised.
C.C.M.I., she was told, filed for Chapter 7 bankruptcy which essentially allows a company to close down while leaving unsecured creditors such as Richeson out in the cold.
'It's almost impossible to get money out of them now,' said Lisa Columbia, a spokeswoman for the Arizona Attorney General's Office, who added that C.C.M.I.'s file was since been closed. The Arizona AG's office has received at least 35 complaints regarding C.C.M.I., said Steve Tseffos, another spokesman for the office.
C.C.M.I. President Todd Dohm, whose phone number was listed in Phoenix, did not return repeated phone calls left on an answering machine.
The company's bankruptcy lawyer, Dennis Wortman, also failed to return calls to his Phoenix office.
The entire affair, including the call from Florida, sounds like a typical reload scheme, in which either the original salesperson, or a different company makes a sales pitch to the same victim for the second time in a row, said Manuel.
Harrington said the Federal Trade Commission does not say if the agency is investigating a particular company for possible fraud or unfair trade practices. But she said the entire C.C.M.I. affair sounded like a classic reload scheme. 'From our perspective,' said Harrington, 'we've never seen that kind of solicitation sent out by a legitimate business.'
Lothar Goernitz, the Phoenix-based trustee who was appointed by the court to oversee C.C.M.I.'s bankruptcy, said that about 1,000 customers have money in their dealings with the company. Some thought they were receiving boats while others were told they were getting vacations. 'They sent in their $99.50 and they want to know where their boat is or where their Hawaiian vacation is,' said Goernitz.
C.C.M.I. appeared to do most of its business in California, Ohio, Maryland, Vermont and upstate New York, he said, although he was unsure how many of the more than 1,000 creditors were in the Empire State.
He said a former C.C.M.I. employee said the company found its targets by scouring local chamber of commerce lists of new businesses.
In an effort to secure whatever assets the bankrupt company might have, Goernitz went to C.C.M.I.'s headquarters in the small town of Fountain Hills, about an hour outside of Phoenix. When he arrived at the company's office, all that was left were 21 telephones, an answering machine, three personal computers and a letter printer. 'It was kind of like one of those little sweatshops,' Goernitz said. 'It was a boiler room.'
In retrospect, Harrington said the circumstances surrounding Richeson's encounter with C.C.M.I. was full of 'red flags.'
Among the danger signals:
The offer sounded too good to be true. 'We call them rubber dinghy solicitations,' Harrington said of mail or phone solicitations offering fishing boats for remarkably low prices. 'Who can afford to give you a fishing boat for buying pens?' asked Harrington, who noted that promotional pens are always popular items for small businesses.
The company's request that Richeson pay via a courier service rather than through the mail or by credit card.
That could mean a number of things. One may be that banks issuing credit cards are reluctant to deal with the firm. Or, it could mean the company is trying to avoid scrutiny by the U.S. Postal Service, which has been cracking down lately on fraudulent business practices conducted by mail, said the National Consumers League's Manuel.
Goernitz said he was struck by how simple it was for this firm to go unscrutinized.
Among the ranks of unhappy customers were doctors, lawyers, architects and small business owners such as Richeson. Of the many victims he has spoken with, Goernitz said, most said that the idea of getting a boat for $99.50 sounded fishy. Many of the people called the Arizona AG's office or the Phoenix Better Business Bureau to see if there had been complaints against the company. Neither agency had any record of the firm at the time.'These people all told me that they were sharp enough to inquire,' said Goernitz. 'There ought to be some things in place to prevent this from happening.'
Even Richeson took some precautions. She paid for her $200 worth of pens by a money order rather than a check, since she was concerned about an out-of-state company getting her checking account number.
Now, she has chalked the affair up to experience, made even more bitter when she learned that she could have purchased the same promotional pens locally for about 40 to 50 cents each, rather than the $2-a-piece price she paid C.C.M.I.
'At least I got something,' said Richeson said, referring to her costly pens. 'Lots of people sent in $99.50 for the boat and never got that.'
