Federal/state Law Enforcers Sting Telemarketers

Actions Target Operators Of Bogus Business Supply Companies

For Release

Federal and state law enforcers are targeting bogus business operators who bilk charities, not-for-profit organizations and small businesses out of millions of dollars a year. The FTC and the Attorneys General of Illinois and Indiana, with the cooperation and assistance of the U.S. Postal Inspection Service, have brought four law enforcement actions against telemarketers in the south suburbs of Chicago. The cases allege that each of these companies ship unwanted and unordered cleaning and janitorial supplies to small organizations across the country. When the victims argued that they hadn't ordered the merchandise, they were assured that someone had authorized the purchase. When they said they wanted to return the orders, they were typically required to pay significant "restocking fees."

These are not sophisticated schemes," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "They're as simple as picking a pocket, and every bit as illegal," she said. "We hope that charities, non-profits and small businesses will assert the right that every company has: you don't have to pay for supplies you didn't order - you can treat unordered merchandise as a gift."

The schemes operate in the same way. The victims are nearly always small organizations, and the cleaning supplies are typically goods that office employees can purchase without going through rigorous billing procedures. The telemarketers call the organizations, asking for the name of the person responsible for ordering supplies. When they get the name, they may call the person, suggesting that they want to send a "free sample" of some office product -- light bulbs, pine cleaner, or the like. Instead of shipping a "free sample," the defendants send a quantity of goods -- followed closely by a bill charging for the supplies. Many victims conclude that they must be partially responsible for an honest misunderstanding, and sometimes pay for them. If victims insist on returning the merchandise, the operators tell them there will be a "restocking" charge. Frequently, the restocking charge equals the amount the merchandise would cost if purchased through a legitimate supplier.

The telemarketers named in the complaints today operate nationwide from boiler rooms located in suburban Chicago. In the FTC complaint filed in federal court in Chicago, Southern Maintenance Supplies, Inc., headquartered in Blue Island, Illinois, and its principal, Don Ashley, were charged with violating federal consumer protection laws. The FTC has asked for a permanent injunction to stop the deceptive practices and consumer redress or civil penalties.

Three other civil actions being filed today:

  • Illinois Attorney General Jim Ryan has announced two actions, both filed in federal court in Chicago. The first is against Richard K. Fields, doing business as Tri-State Chemical, and located in Oak Forest, IL. The second is against National Maintenance Supply and its president, Jack F. Nugent, operating in Orland Park, IL.
  • Indiana Attorney General Jeffrey A. Modisett has filed a case against National Maintenance Products, Inc, Reliable Maintenance, Inc., Laura G. Perry and Gene Simmons, operating in Hammond, IN.

The FTC has published a free Facts for Business brochure, "Avoiding Office Supply Scams," that provides tips for recognizing office supply scams and suggestions on how to avoid them. The brochure says:

  • Know your rights. If you receive supplies or bills for services you didn't order, don't pay and don't return the unordered merchandise. You may treat unordered merchandise as a gift.
  • Assign designated buyers and document your purchases.
  • Check your documentation before paying bills.
  • Train your staff.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

The Commission vote to file the complaint 4-0.

Copies of "Avoiding Office Supply Scams" are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Contact Information

Media Contact:
Claudia Bourne Farrell,
Office of Public Affairs
202-326-2181
Staff Contact:
C. Steven Baker, Director,
Chicago Regional Office
312/960-5634