I am pleased that you could be with us today to announce a joint federal/state law enforcement initiative targeting get-rich-quick business opportunity schemes. We are also joined this morning by Mark Griffin, President of the North American Securities Administrators Association and by Steve Bellissimo and Robert M. Burke, Jr. Mr. Bellissimo and Mr. Burke are the unfortunate victims of two of the schemes we're announcing cases against today.
Operation Missed Fortune involved law enforcement officials in 25 states targeting more than 100 get-rich-quick, self-employment schemes, and we are announcing about 75 of these actions today. This is the broadest federal-state coordinated effort of its type. The size of this project reflects the size of the problem. It is enormous, and we see signs that as a result of business downsizing and the internet, it may be growing.
The cases we are announcing today fall into three different categories, but they share common characteristics: they all promise easy money. And whether they are modest little frauds that charge small up-front fees or sophisticated scams that bilk consumers out of tens of thousands, they all claim to be proven opportunities and "sure bets."
More than 20 of the cases we are announcing today are actions taken by state security law enforcement authorities. Here to address how state security officers are attacking the problem is Mark Griffin, President of the North American Securities Administrators Association.
One group of cases involves work-at-home scams. In a case that is typical, one firm ran ads promising that for a small up-front-fee of $38.95 consumers could earn hundreds of dollars a week assembling products at home. What consumers got for their $38.95 was a pamphlet directing them to other companies that purportedly offered work-at-home opportunities -- for additional fees, of course.
Some of these cases involve pyramid operations. One claimed that for an initial investment of $70 and a monthly fee of $50, consumers could contribute to charity and earn up to $89,700 a year, simply by signing up new members. Like all pyramids, it can't fail to collapse.
We also are seeing a wave of cases that involve more sophisticated and much more costly business opportunity scams, and Mr. Bellissimo and Mr. Burke will be talking about two of those types of cases shortly. In another FTC case of this type, a company offered franchises
for advertising space on directory boards placed in hotel lobbies. It promised investors who paid $30,000 that they could earn big money. They didn't.
Unfortunately, many of these schemes are difficult to detect. We say that when a business opportunity knocks, consumers have to take more than a quick look before opening the door and investing. But we know that it's not always easy to examine an offer thoroughly, especially when firms use phoney references and offer detailed charts showing likely earnings.
We have two guests, today, who will give you some idea how sophisticated the con artists are and how much diligence is needed to avoid them.
This is Steve Bellissimo.
And this is Robert M. Burke, Jr.
These two gentlemen have demonstrated how serious and complicated this problem is. And three factors are likely contributors to the exploding losses we're seeing today. The first is government and corporate downsizing that creates a pool of people searching for a safe place to invest; the second is the Internet, a new way for con artists to dress up pyramids and other old schemes in new lingo so they can victimize vast numbers of consumers. A third is the existence of computers in consumers' homes -- many of the scams capitalize on this fact. New or not, some old advice applies: the promise of substantial earnings with minimal effort or training is a sure warning sign of fraud.
We have some other advice, too. Consumers should:
This advice, and more, is contained in a consumer education package called, "Get Rich Quick," which you will find in your press packets.
But if there's one piece of advice consumers should take away, it's that they should be wary of any opportunity that sounds too easy or profitable; success generally requires hard work.