Attorney General's Office Undertakes Initiative to Educate Consumers on Business and Work-at-Home Schemes
February 24, 2005
(Juneau) - Acting Attorney General Scott Nordstrand announced today Alaska's participation in a nationwide effort to crackdown on fraud involving the sale of business opportunities and work-at-home schemes. As part of this effort, the Department of Law has produced a brochure for consumers on the sale of business opportunities in Alaska.
Starting April 4, sellers of business opportunities that cost $250 or more will have to register with the Department of Law before conducting business in the state.
"Every day Alaskans are confronted with advertisements and other offers to start a business and supposedly make a lot of money. Unfortunately, fraudulent business opportunities are all too often mixed in with legitimate ventures," said Nordstrand. "With the registration program that will soon be in effect we have the tools to establish and enforce a new motto: Let the seller beware."
Business opportunities are prepackaged business deals aimed at novice entrepreneurs. The Alaska's Sale of Business Opportunity Act (ASBOA), helps potential buyers by requiring most sellers of business opportunities to provide information to the Department of Law and to buyers. In addition, the Act requires that sellers post a $75,000 bond, file a disclosure statement and use a written purchase contract.
Alaska's education effort comes at a time of a massive criminal and civil crackdown on promoters of illegal business opportunity and work-at-home programs. The Federal Trade Commission, the Department of Justice (DOJ), the U.S. Postal Inspection Service, and state law enforcement agencies from 14 states have charged more than 200 operations with violating consumer protection laws and/or engaging in fraud. Business opportunity and work-at-home fraud in particular causes substantial consumer injury. In the FTC's cases alone, the defendants caused tens of thousands of consumers to lose a total of more than $100 million.
The enforcement sweep, known as Project Biz Opp Flop, contains three key components: (1) criminal prosecutions against business opportunity fraud artists; (2) civil enforcement actions filed by the FTC and DOJ on behalf of the FTC; and (3) enforcement actions filed by state enforcement agencies.
The Department of Law and the FTC have the following tips for consumers before investing in any new business venture or work-at-home opportunity:
- Does the ad promise big money for little effort? Fraudulent ads use similar bait: Fast cash. Minimal work. No risk. And the advantage of being your own boss or working from home.
- Before promoters can accept money from potential investors, the law requires that they give investors important disclosure documents. If the promoter does not make the document readily available, find another opportunity.
- Talk to current investors, but beware of paid "shills." Visit other business sites in person. And get professional advice if you need it. Do not lose your life savings just because you did not spend a few hundred dollars to talk to a lawyer, an accountant, or another expert.
The Department of Law's brochure outlines some of the essential information in the ASBOA. It discusses the type of information sellers must disclose, what sellers have to include in a written contract, which sellers must register under the act, what buyers should do before they invest and what are the warning signs of a business opportunity scam. Alaskan consumers can request a copy of the brochure by calling 269-5200, or toll free from outside of Anchorage, at 1-888-576-2529. The brochure and additional information about business opportunities is also available at the Department of Law's Consumer Protection Sale of Business Opportunities page.
Consumers should visit the FTC's Web site for information in both English and Spanish to help spot and avoid business opportunity scams.
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