For many elderly, moneymaking schemes turn sour
The ad was enticing to the retirement-age couple: ''Would you like an extra $1,000 per month? Part time. Will help you start home print shop. . . . Everything you need for $5,500. Training included.''Skip to next paragraph
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Anxious to supplement their income, they plunked down $1,250, agreed to pay the rest in installments, and made plans to start their own business. But three months after the equipment arrived, the couple had earned only $142 and felt the investment was wasted.
An official with the Denver district attorney's office says the training the couple received from the seller was ''insufficient.'' But, under a settlement negotiated by that office, they recently got more training. Often the ending to such stories is not so happy.
''While the incidence of fraud is increasing, the resources (both federal and state efforts to combat the problem) seem to be diminishing,'' says Bill Halamandaris, a staff member for the Senate Committee on Aging.
Money-making plans that have turned sour for some, as cited in the December report by the House Select Committee on Aging, include: home envelope stuffing; telephone solicitations; home assembly of products; marketing assistance to inventors; raising chinchillas or worms for sale; and distributing cheap video games.
For many, work-at-home schemes end with no response to initial fees, or products not bought back as promised. Securities are purchased that turn out to be worthless. Franchises are purchased in markets that turn out to be saturated, and profit claims are often found to have been exaggerated. Would-be distributors find themselves trying to sell products at inflated prices with no assistance in setting up locations for display.
This is a ''very serious problem . . . on a very large scale . . . (involving) a broad range'' of methods, Rep. Claude Pepper (D) of Florida says.
Sometimes the loss is only an initial $10-$15 ''fee''; sometimes people lose homes that they have remortgaged to make a down payment on a scheme.
Most business and investment offers are legitimate, federal and state investigators say. But since many Americans are feeling increased financial pressure and concern about their retirement income, the number of fraudulent schemes is on the rise, according to congressional and US Postal Service investigators.
The elderly are not the only victims, but often they are the most vulnerable, investigators add. Often the victims are too embarrassed to complain to authorities.
Some efforts to combat such frauds are being stepped up; others are being cut back:
* Legislation to strengthen the hand of postal inspectors in stopping use of the mails in such frauds has just been introduced in Congress.
* The number of states with laws requiring promoters to register with the state and provide a financial history of their companies has increased to 15 in the past several years.
* Stiffer penalties are being handed down in some mail fraud cases, says Wayne Kidd, chief fraud investigator for the Postal Service.
* Efforts by consumer-affairs officials and prosecutors in state and local government to warn the public about such frauds are on the increase, says Nancy Burd, now the sole employee of the Economic Crime Project of the National District Attorneys Association. (Her office has shrunk because its federal funds have been eliminated.)
* But the number of Justice Department investigators of white-collar crime (which includes such frauds) has been cut ''enough that it makes a difference,'' she says.
* The Reagan administration is proposing to eliminate four of the six district offices of the Federal Trade Commission, which plays a major role in investigation of such frauds. The cutback plan is running into some congressional opposition.
''The great majority of mail-order people out there are legitimate,'' postal investigator Kidd says. But the illegitimate schemes ''are on the rise.''
He urges would-be investors to: (1) not be pressured into commiting funds before becoming familiar with the business investment; (2) seek the advice of someone already in that business, or the help of an attorney; (3) not buy any medicines without a doctor's advice; (4) report alleged frauds.
Two free pamphlets - ''Pyramid Schemes: Not What they Seem'' (just published) and ''Promises: Check 'Em Out'' - are available from the Economic Crime Project, 1300 Chestnut Street, Philadelphia, Pa. 19107.