Work-at-home fraud schemes on rise

Thousands duped, few plans uncovered, authorities say

March 31, 2001|By Del Quentin Wilber | Del Quentin Wilber,SUN STAFF

The letter to Carolyn Green promised easy money - thousands of dollars - to stuff envelopes. The 80-year-old Pasadena retiree couldn't resist, so she sent off a $35 money order for a packet from Home Mailers Enterprise.

She never heard back.

That was just one of thousands of "easy money," work-at-home schemes operated by increasingly sophisticated fraud artists across the country, say federal law enforcement officials and consumer protection advocates. In most cases, authorities rarely uncover the schemes.

But in Green's case, federal postal inspectors arrested a 40-year-old Baltimore County woman, Donna Lynn Covington, who defrauded about 1,000 people of nearly $50,000. Covington pleaded guilty last month in U.S. District Court in Baltimore to a mail fraud charge. She probably faces between 12 and 18 months in prison at her sentencing in May.

No longer relying on roadside signs, fliers and newspaper advertisements, fraud artists such as Covington are producing slick solicitation letters in print shops or on home computers and then using direct-mail techniques to target people, often senior citizens, officials said.

"They are buying targeted lists, and they are marketing," said Thomas Boyle, a spokesman for the U.S. Postal Inspection Service. "They are studying marketing trends and targeting those trends."

The work-at-home schemes typically require money up front in exchange for information and materials to do a job - medical billing for physicians, stuffing envelopes, and making jewelry and other crafts. Customers often never receive anything in return.

The schemes are also appearing on the Internet, one of the cheapest ways to advertise and reach a large audience. The Federal Trade Commission recently filed a lawsuit to shut down a California telemarketing company that advertised work-at-home opportunities on its Web site.

The FTC alleged that the company took in 40,000 people who paid between $325 and $495 each to participate in a medical billing program.

In 1999, the last year statistics are available, the Better Business Bureau recorded 5,561 complaints nationwide about work-at-home schemes - a 40 percent increase over the 3,967 complaints lodged in 1997. The bureau also received in 1999 nearly 280,000 inquiries from consumers about potential work-at-home programs, making it the most asked-about business, outpacing auto repair shops and home builders. A nationwide study of 112 programs by the bureau last year found that only two might have been legitimate.

The schemes have proliferated enough that Maryland Attorney General J. Joseph Curran Jr. profiled the practice last month in his agency's newsletter, The Consumer's Edge. It is illegal under state law to advertise a work-at-home business and collect money up front from potential participants. Since January 2000, Curran's office has received 46 written complaints about work-at-home schemes, which he called "significant."

Curran said most people never report being swindled.

Officials attribute the increase in such schemes in part to a growing elderly population. Senior citizens often look to supplement a limited retirement income with relatively easy work from home.

Postal inspectors caught onto Covington after receiving several tips, said Patricia Giroux, a postal inspector who worked the case. Covington had bought a detailed mailing list from an undisclosed company. The list included many senior citizens, home-bound residents and people who apparently fell victim to similar schemes in the past, Giroux said.

Covington then created a detailed four-page, color letter that promised high profits and little work. She even put the Better Business Bureau stamp on the letter, Giroux said. The return address on one of Covington's letters led to a post office box in Baltimore, she said.

Giroux staked out the post office and followed Covington after one of her frequent mail runs to her apartment in the 8700 block of Loch Bend Road in Parkville, Giroux said.

This wasn't Covington's first work-at-home scheme. In 1996, postal inspectors barred Covington from using the mail to run a similar scheme. But within a year, she was operating Home Mailers Enterprise, Giroux said. Following up on tips, Giroux got a search warrant for Covington's apartment and eventually compiled a list of about 1,000 victims who paid Covington nearly $50,000 between 1997 and late last year.

One senior woman from another state saved money for three months to participate in Covington's business ventures, Giroux said. "For some of these people, the money was the difference between buying medicine and food that week," she said.

Though most of Covington's victims appeared to be senior citizens, others were also taken in by the scheme. Dwayne Gaskins, 38, of Washington received a letter last spring from Covington's Home Mailers Enterprise promising an end to his financial worries. All he had to do was stuff envelopes.

"Help solve your money problems," the letter read. "No more worries. ... No experience of special skills required. ... We welcome you to this program and extend to you our unconditional guarantee that everything we have said is true."

Gaskins dashed off a $90 money order to receive one of Covington's package deals. Gaskins said he was expecting packets, envelopes and address labels - all that he would need to reap riches from home. But Gaskins never received anything.

Gaskins has spent about $2,500 in the past 10 years on work-at-home programs. And although he has earned only about $20, Gaskins hasn't given up on them, including one that required him to use the Internet. But he doesn't have a computer. "I'm holding onto that one," said Gaskins. "I might need it one day."

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