In a continuing effort to combat office supply scams, the Federal Trade Commission announced today that it has filed suits in federal district courts against three companies who are involved in office supply fraud. This type of fraud, which involves the deceptive sale of non-durable or consumable products that are used in the course of business and purchased on a regular basis, continues in part because the pool of potential victims grows each year. The cases announced today involve the typical "toner-phoner" scam, where the defendants called businesses or non-profit organizations, misrepresented their identity and the cost of the office supplies, and then shipped and demanded payment for grossly overpriced merchandise. In perpetrating this scam, the FTC alleges that the defendants violated the FTC Act and the Telemarketing Sales Rule (TSR).
Office supply scams typically target small businesses and non-profit groups, costing them an estimated $250 million each year. Fraudulent sellers also cost legitimate office supply companies about $125 million in lost revenues annually. The FTC has battled office supply fraud for many years in the courts and has undertaken substantial efforts to educate businesses on how to recognize and avoid the scam. In March of this year, Commission staff testified before the Senate Small Business Committee addressing the FTC's vigorous efforts and partnerships with state and government officials to combat office supply fraud.
The FTC's current sweep -- "Operation Copy Con"-- continues its law enforcement efforts to stop this fraud. To compliment its enforcement efforts, the FTC continues to promote Project BOSS (Banish Office Supply Scams), a multi-pronged joint education campaign to alert small businesses and non-profit organizations about office supply fraud.
The FTC filed complaints in federal district courts against the following defendants:
Pacific Office Systems, Inc., based in Canoga Park, California, and its owner, Suzette Oppenheim. Pacific sells toner cartridges for photocopiers. The FTC has obtained a temporary restraining order with asset freeze and the appointment of a receiver, and is seeking a preliminary injunction pending resolution of the case.
Corporate Supplies, Inc., based in Cumming, Georgia, and its president, Larry Sarchenko and vice president, Robert Henkel. Corporate Supplies primarily sells toner cartridges for laser printers, fax machines, and photocopiers to consumers throughout the U.S. The FTC has obtained a temporary restraining order with asset freeze, and is seeking a preliminary injunction pending resolution of this matter.
Allstate Business Distribution Center, Inc., based in Southern California, doing business as Primary Distribution Center, and its owner, Robert Matz. Primary Distribution sells photocopier toner and dry ink cartridges to businesses throughout the country. The FTC's complaint seeks a preliminary injunction pending resolution of the case.
The FTC alleges that the defendants in each of the three cases deceptively induced businesses and non-profit organizations (hereinafter, "consumers") to pay substantially higher prices for toner than they normally pay. In many instances, consumers were deceived into paying higher prices for toner they never ordered, and in some instances, paid for toner they never received. If the consumers paid the first bill, the defendants often sent and billed them for additional shipments that were not authorized.
The complaints allege that the defendants in these cases violated the FTC Act by:
- misrepresenting that they were the consumer's regular supplier or were associated with the manufacturer of the consumer's photocopier;
- misrepresenting that they would charge the consumer the same price the consumer had been paying or a lower price; and
- misrepresenting that the ordered the toner that defendants shipped or billed to the consumer.
The defendants also violated the TSR by making false and misleading statements to induce payment; and when making outbound telephone calls, they failed to disclose the identity of the seller. In addition, Pacific Office Systems and Corporate Supplies failed to disclose the sales purpose of their calls.
The Commission vote to authorize staff to file the complaints in the appropriate federal district court was 5-0. Pacific Office Systems was filed in the U.S. District Court for the Central District of California, in Los Angeles, on September 25. Corporate Supplies was filed in the U.S. District Court for the Northern District of Georgia, in Atlanta, on September 20. Allstate Business Distribution was filed in the U.S. District Court for the Central District of California, in Los Angeles, on September 26.
As part of its consumer education drive, the FTC has prepared some tips for small businesses to avoid being scammed by fraudulent office supply telemarketers and others:
- Know your rights. If you receive bills for goods and services you didn't order, don't pay. The law allows you to treat unordered goods and services as a gift. Double-check, however, to make sure than an honest mistake hasn't been made.
- Review your phone bills as soon as they arrive. Be on the lookout for charges for goods and services you haven't ordered or authorized. If you find an error on your bill, follow the instructions on your statement for filing a dispute.
- Assign purchasing to designated staff. And document all your purchases.
- Train your staff in how to respond to telemarketers. Advise employees who are not authorized to order goods and services to say, "I'm not authorized to place orders. If you want to offer or sell us something, you must speak to __________."
- Buy from people you know and trust. Authorized employees should be skeptical of "cold" or unsolicited calls and feel comfortable saying "no" to high-pressured sales tactics.
- Check out the organization with the Attorney General or Better Business Bureau in your state or the state where the organization is located before you send any money for any product or service. This is not foolproof: there may be no record of complaints if an organization is too new or has changed its name.
Visit www.ftc.gov/bcp/edu/microsites/supplies/ for more information about Project BOSS and other scams targeting small businesses.
Copies of the complaints will be available shortly. Copies of news releases and legal documents pertaining to other office supply scam cases 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; 877-FTC-HELP (877-382-4357); 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.
Office of Public Affairs
John Mendenhall or Jeffrey Klurfeld
Brinley Willaims or Brenda Doubrava
East Central Region - Cleveland
(Pacific Office Systems, Inc.)
Harold Kirtz or Cindy Liebes
Southeast Region - Atlanta
Theresa McGrew or William Hodor
Midwest Region - Chicago
(Allstate Business Distribution)
(Pacific Office - FTC File No. 002 3261; Civil Action No.: CV-00-10293 DDP (CTx))
(Corporate Supplies - FTC File No. 002 3240; Civil Action No.: 1-00-CV-2449)
(Allstate Business - FTC File No. 002 3269; Civil Action No: 00-10335 AHM (CTx))