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Small Business Scams on the Rise

Originally published: 04.01.09 by Mike Coyne


Watch your accounts payable and establish internal controls to protect your business from falling victim.    

Iwonder if the author of the old English proverb, "an idle mind is the devil's workshop," had just been the victim of a small business scam? The current recession seems to have given rise to a new group of business scam "entrepreneurs." Most of the small business scams that we see are not particularly clever. They are, however, designed to be sufficiently subtle so as to avoid the attention of a busy business owner.

One of the latest small business scams to hit Ohio involves a form, purportedly from the Secretary of State of Ohio, entitled "Annual Shareholder, Director and Officer Report." The form, which was mailed to numerous businesses throughout the state, was quite official looking and requested the business owner to list officers, directors, and shareholders of the business. It required filing with a $150 filing fee. The mailing was timed to be delivered to businesses around the same time that businesses were receiving various tax reporting forms from the state. The information that was requested could reasonably be assumed


to be the type the state would want to collect. A business owner who was not paying attention, or tended to delegate reporting functions to someone in the office, could easily have fallen prey to this scam.

Similar scams have existed for decades. For example, a common scam involves billing for Yellow Pages advertisements. Since the Yellow Pages typically renews contracts at a particular time of the year, a fraudulent bill may sometimes avoid detection. Similarly, a client recently reported receiving a fraudulent bill, purportedly from a well-known charitable organization, for advertisements purchased for one of its event programs. In this case, the scammer had the audacity to call and complain to the business for failing to make a timely payment!

Other scams that have become common involve reservation or renewal of Internet domain names, sales of qualified business leads, and deep discounts on office supplies.  For example, you might receive a renewal notice for a Web site domain name that is very similar to your own (yourbusinessname.net as opposed to yourbusinessname.com).  If you are not paying attention, it is easy to pay for the phony address.  Likewise the purchase of "qualified business leads" may result in the receipt of a publicly available mailing list, and the purchased office supplies may never arrive.

The best protection from this type of fraud is the establishment of good internal controls. You, as a business owner, need to have final review and approval of all invoices that are paid. Additionally, be aware that business scams do increase during bad financial times. If a government form is new or unfamiliar, check with an accountant, attorney or the state government to be sure it's legitimate. If you don't remember ordering something, don't pay for it. Don't be a scammer's next victim! 




About Mike Coyne

Mike Coyne

Michael P. Coyne is a founding partner of the law firm Waldheger Coyne, located in Cleveland, OH. For more information of the firm, visit: www.healthlaw.com or call 440.835.0600.




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