A well-run, home-based business can be virtually indistinguishable from a larger corporation thanks to technology that performs tasks so efficiently a work-at-home business owner can compete on nearly equal footing.

Unfortunately, a growing number of fraudulent work-at-home scammers are banking on the get-rich-quick naivete that too often accompanies that technology-driven entrepreneurial spirit.

In recent years, work-at-home fraud has quickly risen to the tops of scam lists, but the Feds, along with state law enforcement agencies, are beginning to take them down a notch.

Coordinating with the U.S. Justice Department, the Federal Trade Commission and agencies from 16 states have launched sting operations using undercover agents and special computer tools that have netted 77 work-at-home and small business operations allegedly in violation of consumer protection laws. Participating states were Alaska, Arkansas, California, Florida, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, North Carolina, North Dakota, Ohio, Texas, Washington, Wyoming.

J. Howard Beales, II, director of the FTC's Bureau of Consumer Protection, said the law enforcement agencies launched "Project Busted Opportunity" to thwart frauds from stealing money and dreams.

"Business opportunity scams and work-at-home schemes are frauds that can cost consumers their life savings and destroy their dream of owning a successful small business," he said.

Undercover agents posed as prospective investors and listened to hyped sales pitches. They also investigated "references" that turned about to be alleged shills -- mouth pieces who claimed to be successful owners and operators of the offered business opportunity.

The FTC said if found that some of the references didn't own or operate any business and one reference worked for three of the defendants named last week. Another reference caught in the net testified "I was paid to lie," in a previous FTC case.

Along with fraudulent business opportunities for start-ups outside the home, law enforcement officials busted work-at-home come ons in booklet stapling, craft assembly, data entry, envelope stuffing, medical billing and paralegal work -- the type of work-at-home offers consumer advocates have long said hold questionable value.

As is typical with work-at-home fraud, opportunity sellers allegedly made unsubstantiated or deceptive earnings claims, they allegedly overstated the demand for the services and they allegedly misrepresented the amount of assistance the operators would provide the business owner, according to the FTC.

The FTC's complaints filed in U.S. District Court seek cease and desist orders, proper disclosures, civil penalties, and financial redress for consumers. In previously settled work-at-home fraud cases, defendants were prohibited from future activity without posting a $1 million bond.

The Feds say consumers can help the crack down by boning up on small business and work-at-home ripoffs through a new and extensive consumer education campaign available in both English and Spanish on the FTC's Web site.

Published: June 26, 2002

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