Protect Yourself from Fraud in the Business World

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By James R. Lint, Faculty Member, School of Business, American Public University and Charvet D. Young, HR Manager, The Lint Center for National Security Studies

There are many examples of fraud in the workplace. If you’re moving into the workforce as a recent college graduate or as a service member transitioning out of military service, you must be alert to various scams to avoid becoming a victim.

Two of the best-known scams involve doing legitimate contractor work without receiving compensation and fake businesses. By using common sense and good judgment, you’re less likely to become a victim and lose your money.

Avoid Intellectual Property Theft — Don’t Work for Free

A lot of business owners fall for this one when they begin learning how to start a business. They setup a business, and completely infringe upon other peoples intellectual rights and copyrights. One scam involves independent contractors and recruiters who work for legal staffing firms. In this type of scam, a legal staffing firm that appears reputable requires the contractor to pay for all advertising, candidate screening, background checks and employment verification checks. The contractor must also write detailed submissions for attorneys specializing in very complex areas of the law.

In turn, the staffing firm promises a commission to the contractor, based on a percentage of the attorney’s yearly salary if the contractor is hired. However, the legal staffing firm submits the contractor’s work as its own to the law firm, stealing the contractor’s compensation.

In one particular case, the scamming company had several entities that allowed them to submit the work of others under various business names. The company avoided their contractual obligation with the contractor and excluded the contractor from proper follow-up. Their scam was a clever and despicable method of stealing the work of other people and benefitting from it.

How to Protect Yourself

Counter the original contract with a new contract that allows personal contact or personal submission of your work. Also, make sure that the new contract contains a clause that indicates that your work is your intellectual property. By protecting your work in this way, it cannot be submitted to anyone or by anyone other than what is stated in the original contract — the company where you actually e-mail your work and the law firm indicated on the contract.

Be sure to include an intellectual property disclosure on the bottom of your e-mail. While this may not be full proof of your copyright to the work, the company would have to agree to those terms. You could also seek legal recourse more easily if necessary.

This type of fraud also appears in the writing world when companies sell books across multiple lines. Some companies take your intellectual property and pay you a small price for a small circulation that is not the book’s true circulation. There have been cases in the news media business where advertising circulation and readership circulation is not the same and authors have been underpaid.

The Fake Business Scam

Another method used to create fraud is the use of rented “air space,” which involves creating the appearance of a building’s corporate tenant without that tenant ever physically occupying any office in the building. To start the fraud, a fraudulent company will rent an address from someone else.

When a potential contractor or employee conducts Web research on the company, Google delivers a very impressive company site. The site appears legitimate, prompting the searcher to believe that the corporation is both reputable and successful.

Appearances are deceiving. Sometimes, what appears to be the address of a corporate suite may only be a post office box from a company that rents out mailroom space.

You can determine if a company’s address is legitimate by reviewing the address and looking up the building in Google Street View. For example, if a company address involves a “Wing B” or a “Suite 1203” (implying a large building with multiple stories), but the structure that Google Street View shows at the same place is a tiny building with one story, the address is most likely fraudulent.

Recognizing these discrepancies helps you avoid fraudulent companies. However, some employment scams reach far and beyond these methods and now span across the virtual spectrum.

“Virtual Office Providers” also provide access to conference rooms for an additional fee when it is necessary for the “air space” tenant to meet and impress clients. These fake tenants often use multiple locations across numerous states to broaden their appearance of success and further the illusion of their legitimacy.

How to Protect Yourself

There are several ways to research a company without paying a fee. For example, conduct a search on Corporation Wiki. If the company is registered as doing business within a particular state, this service informs the user of the state where the business was incorporated and generally provides the name of the officer.

Corporation Wiki shows whether or not the business is still registered as active with the Secretary of State and reveals additional businesses registered at the same address. The dates of when the additional businesses were at the location help you determine if the company runs multiple business out of the same address. In addition, Corporation Wiki reveals similar companies, their owners and multiple entities within that group.

Since not all businesses are incorporated, you may not find a particular business on Corporation Wiki. In that case, you can conduct a business search on the Secretary of State’s website to learn whether a company is registered in the state in which it claims to conduct business.

If that search fails, it is important to also check the Delaware, Nevada and Florida Secretary of State websites. These states are popular states in which businesses file, while they conduct their business elsewhere.

Another way to check a company’s legitimacy is to conduct a reverse search using the “WHOIS” website. You’ll be able to access a great deal of information, such as when the company website was created, the location of the business, and the actual owner of the company (unless it is marked “private”).

A third way to research a company is by conducting a court case index search. You can learn if the company has been a party to any type of lawsuit that would indicate fraud. Some court case indexes allow the user to view civil documents associated with any given case, which can reveal a great deal about a company or an individual.

These methods are not always foolproof in finding indicators of fraud, as some companies go to great lengths to portray themselves as legitimate businesses. The renting of “virtual air space,” the ability of unscrupulous people to conduct business using any name they choose and no appearance in a searchable database make actionable legal recourse nearly impossible.

Check for Fraud Before Paying Any Expenses

If you’re paying upfront costs and other people aren’t, that is often an indication of a fraud. When you get guarantees that are too good to believe, they probably are too good to believe.

Fraud knows no age limits. Con artists target the young, people new to a business field or senior citizens. Frauds that initially appeal to consumers may involve franchising opportunities, Medicare and the medical supplies.

Fraud is an equal-opportunity activity. While all businesses aren’t frauds – there are great franchises and great companies – it is wise to be alert and do your research on a company before conducting business with them. By being smart and thorough, you’ll decrease your risk of becoming a victim.

About the Authors

James R. Lint recently retired as the (GG-15) civilian director for intelligence and security, G2, U.S. Army Communications Electronics Command. He is an adjunct professor at AMU. Additionally, James started the Lint Center for National Security Studies, a nonprofit charity that recently awarded the 40th scholarship for national security students and professionals. He has 38 years of experience in military intelligence within the U.S. Marine Corps, U.S. Army, contractor and civil service.

James was also elected as the 2015 national vice president for the Military Intelligence Corps Association. In 2016, he was selected to be an associate member of the Military Writers Guild. He has served in the DHS Office of Intelligence and Analysis and at the Department of Energy’s S&S Security Office. James had an active military career in the Marine Corps for seven years and also served 14 years in the Army. His military assignments include South Korea, Germany and Cuba in addition to numerous CONUS locations. James has authored a book published in 2013, “Leadership and Management Lessons Learned,” and a new book in 2016 “8 Eyes on Korea, A Travel Perspective of Seoul, Korea.”

Charvet D. Young is a graduate of Kaplan University, where she earned her associate degree summa cum laude in paralegal studies. Charvet continued her educational journey by earning a bachelor’s degree in legal studies and again graduated summa cum laude. Charvet is a member of the Golden Key International Honour Society and the National Society of Collegiate Scholars. Currently, she is the Human Resources Manager for The Lint Center for National Security Studies.