mentioned through several presentations and it is becoming so critical to protect your personal information. as was just mentioned on the previous panel, even having someone in your home you need to be careful what you have laying around. the irs is taking a very proactive look at identity theft. we're sending notices to taxpayers which is sometimes their first notice that their identity has been compromised when we see more than one return being filed and/or we see that a w-2 has been filed in that person's name that has an unknown employer. in january the irs announced where we did a coordinated sweeps week trying to attack this identity theft issue. now anyone that believes that

their identity has been compromised, there is an irs protection unit and that can be accessed on irs.0.gov and look for identity theft. mr. barat out of the u.s. attorney's office in los angeles mentioned identity theft and he also mentioned phishing as well. that's when someone uses e-mail or some other electronic media to try and solicit someone to respond either giving personal identification, giving account information, and for irs it can appear that it is coming from either a legitimate irs inquiry or some related entity. irs will generally not send an initial solicitation or request for personal information to a

taxpayer. so that to be a warning sign if you get an e-mail from someone that appears it's irs or appears that it's related to irs, be concerned and don't respond. either call irs. go to the irs.gov and look for steps to take. once they get your information, again, they can use that for all times of scams. they can use it to file false tax returns. they can use it to obtain mortgage loans. they can use it for all types of things and it's very hard to correct once that happens. >> let me just add with the phishing, the attempts to get personal information from consumers and then what happens is generally these scammers turn around and file some sort of false refund claim. and often, as sallie mentioned, the first notification a victim will have that somebody else has

stolen their identity, has gotten their personal information be a filed a bogus claim, when they file their own return and it gets bounced because the irs has already received what appears to be a legitimate tax return under that individual's social security number. these scammers file tax returns very, very early in the tax season. in fact, most of them are on vacation by now. and, if you're like me, you're just thinking about, oh, yeah, pretty soon i think i need to file my tax return. so, you know, the legitimate folks tend to get really surprised by this late day. we prosecute at justice, the irs has been referring a lot of these refund crimes to the justice department. and we participated in the january push that sallie mentioned.

we have since even since november when our deputy attorney general testified before a house committee, since november we've had a ton of very, very strong sentences that for refund crimes that include an aggravated identity theft count and a lot of these were able to get a restitution component. it's restitution hopefully to victims and sometimes they are not -- not everybody that is involved in a refund crime is necessarily a victim but there's res restitution for innocent victims as well as to the u.s. treasury. collecting that, that's another story. the courts have been pretty receptive to giving res titutio to both categories of victims, both the individuals and the united states. >> thanks, carol. and you made a good point that all taxpayers who are subject to a scam may or may not be

victims. the first two, the phishing and the i.d. theft probably there are more victims than part of the scheme. when you're talking about questionable return preparers and you go to a return preparer and you give them your information, you're ultimately still responsible for what's on that return. and so in 2012 every return preparer needs to have a preparer tax identification number and when they sign that return, they need to enter that return or that number on the return. and let me just say we're focused on consumer fraud but most of the return preparers out there are honest and decent. we're focusing on those ones that are taking advantage of individuals. some of the things you need to watch out for or consumers need to watch out for when they are choosing a return preparer is, one, does the return preparer sign the return and enter their tax identification number? do they give you a copy of the

return? because you should always see what has been filed with irs before it is filed. and you should get a copy to sign. are they promising you a larger refund than you thought you would get? and it goes back to the old adage and somebody mentioned it earlier, if it sounds too good to be true, it probably is. do they base their fee on a percentage of your refund? that's also a clue because that probably means they're inflating your refund in order to increase their fee. do they require you to split the refund with them? and do not ever sign a blank return and then let them fill it in and then mail it in because, again, remember, if you are going to a return preparer to have your return prepared, you are ultimately responsible for what's on that return. and this, too, carol mentioned

some injunction earlier and that's one of the mechanisms that are used against fraudulent return preparers. >> right. one of the things we have to keep in mind is that something like 60% of u.s. taxpayers use a paid return preparer and as sallie mentioned most of them are good. they've gone through continuing education programs. they have their preparer tax i.d. thumb, and they do a decent job. but it is the ones that are perpetuating fraud and taking advantage of consumers that are the real problem and we can deal with that in the federal government two ways. number one is prosecuting them because it is a crime to file a false return. it's a crime to assist people in filing a false statement with the united states, but the other thing we do and can often do much more quickly is get a civil

injunction against a bad return preparer. people will get a referral from the internal revenue service on a bad return preparer, we will talk to several clients, maybe people who have worked with the preparer. get a preliminary injunction, issue a press release right away, and then the community knows we have a bad return preparer or at least a potentially bad return preparer in the community and then seek a permanent injunction. a number of these bad return preparers very quickly say, you know, we give up. we will stop preparing returns. we get a lot of these injunctions by consent. in fact, the u.s. attorney's office in los angeles is doing a fabulous job getting consent injunctions from bad tax return

preparers often as part of a plea agreement in a criminal prosecution so they are sort of killing two birds with one stone, and what you do with that is you have an incredible deterrent of fact, you clean out of bad preparers and that really is the power of both the criminal and the civil injunctions. one of the typical provisions in a civil injunction against the tax return preparer is that, that return preparer note fay all their clients that they have been prohibited from preparing returns and that tax returns they did prepare were false or fraudulent and also provide the internal revenue service with a list of all the clients for whom they prepared bad returns. now what that means is the internal revenue service will go out and find the clients and try to make up the tax law from the original clients. a lot of them are very upset by

that but, remember, the goal is to collect the right amount of tax from everyone and a lot of these people are either victims of a bad return preparer or, as sallie mentioned, a lot of them actually participate in the filing of a bogus return through a bad return preparer. it is a balance there. we do try to collect the right amount of tax through the civil and the criminal proceedings. >> the last one i'll touch on today is what we term free money where people put up fliers and they tied that, hey, come in to us and you can get free money from irs. and this typically targets some of the lower income individuals and the elderly as we just heard about. they charge people for filing their returns and sometimes the returns don't go through but they already have their fees and they're gone with that money.

and we have a number of tools and criminal investigation that we use to go out and, "a," identify these taxpayers, "b," to do investigationses, and our goal is to enforce those laws and ultimately put people in jail that are committing this fraud against the taxpayers and the government to deter that from happening in the future. but just like we're meeting here today and people have been working all day, one of the best preventive measurements is awareness so that we do outreach, go and talk to people so they are aware these scams are going on and hopefully when someone approaches them with something that does appear too good to be true they think twice about it before they commit or turn over money or turn over their identifying information even when you're going out to do your own personal health care or

other items the form will ask you for your social security number and other identifying things and i found that because generally my husband is the primary and i never have it, they never come back and ask me for it. they are always able to process it without that information. so as much as we can give out, as little information you put out in a public venue, the better. any personal information that gets out is vulnerable for someone of a bad purpose to get it and use it for misdeeds whether it's filing a tax return or the other scams you heard about ultimately they're all to make money for somebody who is getting it that it doesn't belong to. as far as irs, if you have any questions or any doubts of any information that you receive especially that is unsolicited, please go to the www.irs.gov website and they have all the official information that has

been put out and that would be used by irs for official business. >> and also just a little reminder on the table outside sal yae has sallie has put out the press release of today's dirty dozen. if you want a little light reading, you can read about all the other scams we deal with if you can't get access to the internet this afternoon. >> thank you very much. our next panel is on business opportunity fraud schemes. the moderator is charles harwood. he's the deputy director of the bureau of consumer protection with the federal trade commission. the panelists are lois greisman, associate director at ftc, andre birotte, the united states attorney for the central district of goldberg the assistant director of the consumer brancof h in tj

program director with the united states public interest research group, known as pirg, and peggy shanks is a ore maryland attorn. with that i turn it over to chuck. >>ke. as my panelists take their seats here, i'll begin with an observation. who among us hasn't at one time or another thought, gee, wouldn't it be great if i could go out and start my own job? maybe it was a fleeting thought but i suspect if if we tack a poll of consumers many of them think they have within them some place the ability to make it on their own, to start their own business. to at the very least go out and do something that will make them extra money. in many instances it stops right there. consumers think it would be nice

if i had my own business, but they pretty much stop at that point. and in times of financial anxiety when people are feeling anxious, feeling uncertain, i suspect at times, for example, when people are thinking that their job is at stake, they think they need a little extra income because they aren't getting as many hours as they used to be getting, they are facing extra education costs because they have kids in college. they're worried about medical bills they may be facing, or they're realizing, for example, their retirement just doesn't go quite as far as they thought it would. they're feeling financial anxiety. frankly, that's the kind of situation consumers find th themselves in right now. when they find themselves in that situation i think it makes them more likely to decide to take that next step, to go out and actually try to make money on their own, to sign up for a business opportunity or to try to find a work at home scheme. and when they go out in the marketplace and begin to look around, what they find is, guess what, there are many, many companies and individuals who are happy to help them start

that business opportunity program or start that business opportunity or start that work at home program. and that's exactly what we're going to talk about here today, business opportunities at home and the problem we're going to see in a minute while three are legitimate opportunities out there, there are many instances where consumers end up being scammed and find themselves worse off than before. we have some panelists today who will talk about this. i'm going to start with lois greisman who is with the federal trade commission. and, lois, do you want to talk briefly about what we're seeing with regard to business opportunity fraud schemes? >> sure. >> thank you. >> thank you, chuck. it's a real problem and it's a problem that's not going away, as chuck highlighted, as others have is highlighted with the economic downturn. people are unemployed, under employed. for various reasons they need to supplement their income. i want to take a moment and say what is a business opportunity? it's a commercial arrangement. i will help set you up in business. you'll pay me to help you set up

and i will provide you something that may or may not be real. perhaps it's assistance securing an outlet, setting up a place, location assistance, or maybe i'll be willing to buy back your merchandise which often is the touch stone of the work at home scheme where you'll sit at home stuffing envelopes or building various pieces of crafts and i'll buy them back and i'll find a market for you. consistently a top complaint getter in the complaints the f it tc receives over the course of the year last year received 1.8 million complaints, business opportunities were in the top 20. >> thank you, lois. and next to lois is rich goldberg with the department of justice. i know you've done a lot of work in this area concerning prosecution. why don't you talk about one of the steeples you've seen and worked on and talk about how you did the investigation and what you found. >> sure. typically the business opportunity firms we investigate is the sale of vending machines, coffee machines, internet

kiosks, dvd kiosks, something that can be placed in a retail outlet and the locations are promised by the firm as well. these are supposed to be high-traffic, high-profit locations where the buyer of the machine is going to earn a large profit. if he c frequently they'll tell buyers they'll make their money back within a year or so. they'll send them to falsely th a successful opportunity. frequently they are the cousins or brothers or other salespeople who are posing as real customers but in reality are getting paid to lie to prospective buyers. cu customers will be referred to locators who will promise these high-traffic, high-profit locations when, in fact, they are part of the conspiracy. one of the scams our attorneys

in the office have uncovered is a particularly nefarious kind of scam. they did it in conjunction with the postal inspection service and this was a scam that appeared to be out of the u.s., various different cities where these scam artists purported to ord to sell is coffee machines or greeting card display racks from the u.s. but in reality they were in costa rica. all signs from the prospective buyers is they were in the cities in the u.s., used voice over ip to make it sound like they were using real numbers in the u.s., using drop boxes in the u.s. and other mechanisms to disguise the fact that they, the salespeople, the locators and the references were actually b jose, costa rica. and so they had various phones in the boiler-room that indicated the phone numbers, the

u.s. phone numbers that they were purportedly from. they had scripts saying, hi, i'm john doe and i'm a successful buyer of this business opportunity so that the telemarketer sitting in san jose knew what to say to the prospective buyers. working chosely with the costa rican government we were able to execute search warrants where ko costa rica was able it to execute search warrants on the business opportunity rooms in san jose. they were also able to do a number of arrests and extradite these folks back to the united states for prosecution, and they received very high sentences as a result of the prosecutions. these typically, the scams that we've prosecuted have been ones where it's not true that these consumers should have been aware that they were being scammed. this isn't the circumstance of if it looks too good to be true it probably is because these consumers are doing their due diligence. they're calling references. they're calling locators.

they're looking at the better business bureau, their website, to see are these businesses highly rated? but the problem is these scams will open up under one name, they'll run for nine or ten months, close down and resurface under a completely different name and location. so there's no way the consumers could know, there's no way that the better business bauer owe would know that this is actually a fraud that's been going on for years. so while in some context that advice is good for consumers, for consumers in the about business opportunity industry, they won't know. they need to be very aware, look at the advice the federal trade commission gives. otherwise they're going to fall for the scam. >> thank you, rich. sitting next to rich is peggy shanks who is with the attorney general's office in the state of maryland. peggy, do you want to talk about what we've seen in terms of this business opportunity? >> yes, sir, thank you. >> thank you. >> first, i would like to say anything i say may not

necessarily be the opinion of the maryland attorney general, the maryland securities commissioner and are based on my own knowledge, education and belief. having said that, today many of the scammers rely on the te technology to use the internet, websites and upselling. i can assure you that telemarketing and these cold calls are alive and well. recently we got four such cases. one of them involves an elderly woman. we described that case a little bit but it's atypical. caller "a" calls and says he has a business opportunity, it's a great investment where she would purchase an internet website for an online mall where she would sell travel packages will earn commission. caller "b" calls her, says he is going to be her account manager, help her set it up. if you buy three levels of packages you can earn $9,600 with one sale. he also told her she is going to get these travel binders. it will have all these discount

vouchers and things that will help her for the business. she buys the virtual office and gives them $300. on the same day after that, though, "b" says, well, you might need some national advertising because you're probably going to need to increase your sales and get people interested. she gives him the credit card number and pays another $1,500. he calls back and says you could earn $1,000 as a level one director package. she pays an additional $2,000. two weeks later "b" calls her to upgrade to level two director package. this time she's going to get leads and 6,500 targeted visitors to her website. she was a little concerned because she had a credit card with a really high interest rate but she put $4,000 on that credit card. two weeks later "c" calls her. says i think you should upgrade to a level three director package. now the elderly lady says all i have left is a savings bond for

my daughter's college education. they said, you're going to make so much you're going to pay for your daughter's college education with the money you're going to earn. she writes a check for another $ $7,900. "d" calls her and while they're at it i guess they thought she still had some money. for an additional $600 she could get a responder to help promote the website. months pass and cg is trying to get these voucher binders and she never receives any. she invested $18,300 and made zero money. in our state the commissioner does not have the authority to order money payback but even so there is no money. this arizona company after that filed for bankruptcy. now cg thinks as a creditor she is going to get her money back. we all know that's not true. anyway, maryland has issued a show cause order and they have not responded to it so i can't tell you the outcome of the

case. but in the order it alleges violation of the acts, fraud, and other misrepresentations and we're seeking for a permanent bar against the company and the president from offering selling business opportunities in maryland. the problem with all that have is just as rich i hsaid, many o these companies, it's not a sinking ship. they resurface as a new entity, a new company that i am or spouses or those sales reps. >> thank you, peggy. to my immediate left is andre birotte, the united states attorney in los angeles and, andre, we just heard from both rich and peggy about business opportunities and schemes they're aware of. peggy talked about an instance a consumer lost $18,000 and will never see that money. i wonder if you can talk about the fraud cases your office has prosecuted, what kind of relief or convictions you've been able to contain. >> i mentioned some of them earlier in my early remarks.

one of the advantages, if you will, is we try to devote our resources where we can get the biggest return impact, the biggest impact. when i'm being blunt, i'm talking about the sentence. we will typically take cases that have a high dollar amount anywhere -- i hate to say given our dwindling resources but we're usually talking fraud schemes that are anywhere from the $2 million to $5 million mark at a minimum and there are a number of reasons for it. we only have about 200 federal criminal prosecutors in our district to represent 18 million people and so as you can imagine we have to sort of pick and choose as it relates to the cases but, also, because when we do the cases we have sentencing guidelines that dictate or at least are a guideline to the court and oftentimes in these fraud schemes they're tied to the loss amount so we want to try to if we're going to proceed forward we get a sentence we can let the public know if you

commit these kinds of crimes you can go to presideison for a significant amount of time. as i mentioned earlier the individual that had defrauded 87,000 victims went to prison for six years in federal prison. we've had individuals go to prison for 12 years involving schemes that were in the $39 million, $6.9 million and we're really talking about high volume amounts with high sentences and, again, the purpose is because we want to be able to have the press and the public know that if you try to commit these schemes, the federal government is going to be watching and we're going to try to impose -- hold you accountable to the harshest sentence that we can. >> thank you, andre. let me turn to lois. andre has talked about some of the prosecution efforts that they've made but what other activities are you taking to protect consumers from the scams? are there regulatory activities or rules in place to help pr

protect them? after lois i'm going to come back to peggy and ask her vaus at the state level. >> the ftc has a wonderful new tool at its disposal. it's a regulatory requirement that requires the seller of a business opportunity to provide a one-page disclosure, scream lined, short and tidy as it can be, a series of disclosures about who is the seller, what's the nature of the business opportunity, prior litigation the sellers may have been involved in and perhaps most critically if any earnings claims are made, you'll recoup your investment in six months, start earning $10,000 a month, anything like that they have to provide written substantiation for those claims and the disclosure document also requires a list of references so the consumer has at his or her disposal who purchased this most recently and what was their experience. the disclosure requirement took effect just march 1. and i can assure you the ftc

along with our partners at the state and federal level will be vigorously enforcing it. >> peggy, how about at the state level, what source of resources for consumers who want to learn more about business opportunities at the state level and what can they turn to? >> we have the sales act where it covers -- i like the new business opportunity rule. it's expanded in scope. it now covers -- well, first of all it says they only have to make a payment before the threshold was a payment over $500. under our law a payment over $300 paid within the first six months. under the new federal law it covers the work at home schemes. so i think that's really a good thing. our law does not cover that but the business opportunities that have traditionally or starkly been covered will still continue to register and they will still be required to file a disclosure document required under our act.