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Business Scam: Corporate Compliance
Posted on Mar 18, 2009 by Tom Fragala
If you own or manage a business watch out for scams around corporate compliance.
This is how they typically work. The scammers buy data about your corporation from the state in which you are incorporated, such as corporate ID, name, and address. Then they mail you phony, official looking documents designed to sound ominous if you ignore them. The purpose of the letters center around keeping your company compliant with state (or federal) regulations for things like "Annual Minutes Disclosure Statement" or employee compliance. The idea is to scare businesses into thinking they will jeoporize their business or themselves legally and send a fee to the scammers. The scammers will then either send you something you could get for free yourself (from a government website) or they'll never respond at all.
Many of the scams have a grain of truth in them, except it's trivial for you to file the compliance forms yourself, or the compliance simply doesn't apply to your business and is pointless. Others are outright fabrications about non-existent compliance requirements. In any case, you are defrauded and lose your money to the scammers.
Often, it's pretty easy to spot the scams, but some fraudsters are clever and make the documents appear similar to what the state (or federal) government send you. Look at the fine print (they often place disclaimers admitting the solicitation is worthless to avoid prosecution). Check the return address for whether it's going to a true government office. Do an internet search for the title of the document, the address and so on. Ask your CPA, corporate attorney, or local SCORE volunteers.
These scams are not innocent pranks, they are serious crimes. A fraudulent solicitation letter is mail fraud, a federal crime, and would also violate other state or federal fraud statutes. If they accept payment electronically, that's wire fraud which is a broad, draconian federal statute.
Update: here is a good detailed blog post with quite a bit more on these scams.
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