THE DOLLAR SIGN
Scam I Am: Helping Library Users Avoid Business Scams and Fraud
by Marydee Ojala
With the amount of media attention being given to online scams, frauds, and swindles, it’s tempting to think that these criminal activities didn’t exist before the internet. This, of course, is ridiculous. History is replete with tales of con artists, crooks, deceivers, flimflammers, hustlers, mountebanks, and other nefarious persons. Some of those titles are old-fashioned, but they indicate that the desire to trick people into giving up their money predates the internet by centuries. The techniques may differ—we now have phishing emails, spoofed websites, identify theft, and deepfakes—but the intent to steal money remains a constant.
Viewed through the lens of business research, it’s fake companies, not romance or Nigerian prince scams, that resonate. Two categories cry out for attention to help library users avoid being scammed. The first is the local small business defrauding customers, and the second is nonexistent companies soliciting investors’ cash. Both require the company research skills of information professionals.
TAKE THE MONEY AND RUN
On the local level, consider the fictional Joe Handyman. A homeowner posts on NextDoor about needing a small repair. Joe answers immediately, providing glowing references. He arrives at the home, takes an advance payment in cash, and vanishes. Those glowing references? Fake. Joe? Probably not his real name. Or, how about the equally fictional SellerIsGreat, who advertises merchandise for sale on Facebook’s Marketplace. Buy from that individual and have a not-so-great experience. The merchandise is not as advertised and doesn’t resemble the posted photo. Refunds are not available.
The investment scam can be a classic pump-and-dump scheme, in which the price of a stock, often a very low-priced penny stock whose price is under $5 a share, is artificially inflated with numerous false and misleading statements. This pumps up the stock price so that the fraudster can dump the stock to make a huge profit. Granted, the internet has provided many more avenues for those false and misleading statements, but the scam basics haven’t changed.
In 2017, the FBI published an article about a penny stock fraud that details how Zirk de Maison, calling himself a merchant banker, created a few small public shell companies (fbi.gov/news/stories/penny-stock-fraud-nets-millions). These companies had no assets, nor did they actually do any business, although they claimed to be in a variety of industries, such as copper and gold mining, diamond trading, and social media platforms. Using fake names, he then issued shares to himself and to financial brokers. The brokers, getting kickbacks from de Maison, used their clients’ money to buy more shares, inflating their value. The FBI maintains explanations about common frauds and scams (fbi.gov/how-we-can-help-you/scams-and-safety/common-frauds-and-scams) that expand on the topic.
Investment scams can also involve persuading people to invest in a company that doesn’t yet exist as a publicly traded entity. Sometimes, discerning a fake company is easy. Your brother-in-law tells you about a super investment opportunity he’s been offered. Much as you love your sister, her husband has a track record of financial gullibility, so you politely pass on the opportunity. Maybe you do some additional research and warn your sister to steer him away from this investment. That same research should be applied even when it’s not obvious that a company in which a library user expresses interest is fraudulent.
KEEP A FIRM HOLD ON YOUR WALLET
Basic company research comes into play when teaching people to avoid scams. To gain people’s trust in your research abilities, it helps to start with a bit of humor. Point out that fake companies are not the same as fictional companies. The latter appear in movies, video games, books, and television shows. The names are very well-known. If you were asked to invest your hard-earned cash in Acme Corporation, Dunder Mifflin, Stark Industries, or Wayne Enterprises, you’d know immediately to keep a firm hold on your wallet.
Not everything is so obvious. A first step is to see if the company has a website. Even the fictional companies present a few conundrums. Dundermifflin.com redirects to NBC Peacock, but Wayne Enterprises, Inc. (wayne-ent.com/index.html) is a real company in Houston that makes uniforms. From its website, it does not appear to have any Batman gear.
Now that obtaining a website is relatively easy and often inexpensive, simply having a website is no guarantee of a company’s actual existence. Some danger signs are a site’s lack of contact information, a privacy policy, location data, or About Us information. Even when those are present, checking the address and phone numbers can reveal a questionable company. A large multinational with thousands of employees headquartered in a small suburban house? Hmmm.
Beyond that, the absence of a website is no guarantee of a fraudulent company. Owners of one-person businesses may feel no compunction to create a website. Judy Handywoman is content with word of mouth to gain new customers—and she’s legit. A high-tech startup company without a website, conversely, is suspect. Other website questions concern who owns the domain name. When a Whois search on companyname.com shows the owner as bogusname, it’s a clear indication that this is a scam company.
CASHING IN ON COMPANY REGISTERS
A more reliable way to determine if a company is fraudulent is checking corporate directories and public records. For business librarians, online directories are a standard resource, but library users may be unaware of them. D&B Hoovers, Mergent Intellect, and Privco are the best databases to search for privately held companies, but they tend to concentrate on the larger ones. For smaller entities in the U.S., check the Secretary of State’s records database if you know in which state the company operates.
If you don’t know the state, or if the company is based outside the U.S., corporate registration records are aggregated at OpenCorporates (opencorporates.com), which claims it has legal entity information for almost 223 million companies worldwide. You can limit your search to a particular country, Canadian province, or U.S. state. OpenCorporates lists both active and dormant companies and allows searching by both company name (the entire name or a portion of it) and officers’ names. Register for advanced search (registration is free) to expand your search options to include company names as exact phrase searches, field searching, and sorting options for search results.
This is not the database to search for financial data. Even when you take the next step and go to the website that sourced the information, financial data is generally not available. Its usefulness lies in ascertaining a company’s existence, not its financial status. Plus, not finding a company in OpenCorporates shouldn’t be interpreted to mean that it is a scam. It could be a legitimate company that hasn’t registered as a legal entity.
The next obvious step is whether the company shows up in the trade press or other news media. Databases from ProQuest Clarivate, EBSCO, LexisNexis, and Gale are the obvious places for these searches. For local businesses, check reviews and mentions on Yelp, NextDoor, Reddit, Quora, Facebook, and any local social media.
Investor scams
Company research skills can also uncover investor scams. The prevalence of penny stocks can frighten away investors who fear being the victim of a pump-and-dump scheme. As Fidelity Investments points out, the risk is real, but the opportunities are also real (fidelity.com/viewpoints/active-investor/trading-penny-stocks#). Advice on investing in penny stocks also comes from Bankrate (bankrate.com/investing/what-are-penny-stocks) and The Motley Fool (fool.com/investing/stock-market/types-of-stocks/penny-stocks). Whether or not it’s prudent to invest in them is a personal decision.
To guard against investor scams, the U.S. Securities and Exchange Commission, at its Investor.gov site, issues Investor Alerts and News Bulletins (investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins). One alert is for Investment Fraud and Scams. These tend to be general warning signs to look out for before investing in a scam. For example, on Oct. 22, 2024, the SEC issued an alert about natural disasters and investment scams, particularly urging people affected by hurricanes Helene and Milton to be wary. It said, “Fraudsters often seek to use disasters and other events, such as hurricanes, floods, oil spills, and wildfires, to lure victims into investment scams. These frauds may directly target individuals receiving money from insurance companies or other sources.”
HELP, I’VE BEEN SCAMMED
Suppose someone does get scammed. What to do next? Report it. Locally, the Better Business Bureau (BBB; bbb.org/file-a-complaint) wants to know. It has four categories for complaints:
- File a complaint against a business and have BBB help
get a resolution to the problem.
- Share an experience about a business.
- Warn others about a scam, imposter, fraud, or scheme.
- File a complaint about a warranty dispute for a vehicle.
The BBB also maintains a Scam Tracker (bbb.org/scamtracker) and has a place to leave reviews, both good and bad. The site is searchable by business name to see any complaints that have been filed.
On a national level, USA.gov offers advice on where to report scams (usa.gov/where-report-scams). To guide users to the best place, it asks for input on where the scam took place, the scam category, and any additional details. It also has information about how to distinguish between a legitimate business with which you had an issue and an actual scam. They are not the same thing.
FINANCIAL LITERACY
Librarians’ interest in information literacy has expanded into other forms of literacy—data literacy, media literacy, computer literacy, AI literacy, and now financial literacy. Helping library users recognize and avoid scams is part of financial literacy. EveryLibrary’s mission is to help “public, school, and college libraries win funding at the ballot box, ensuring stable funding and access to libraries for generations to come.” It also supports “grassroots groups across the country defend and support their local library against book banning, illicit political interference, and threats of closure.” EveryLibrary has also evinced interest in scam and fraud prevention as part of financial literacy initiatives (action.everylibrary.org/libraries_and_scam_fraud_prevention).
Noting that financial literacy is vital and that consumer scams are not only becoming more sophisticated but also affect people of all ages, EveryLibrary has examples of what libraries are doing to educate the public about scams and frauds. With media attention focused on the online nature of business scams and frauds, insinuating that the internet made this all possible, it would be good to publicize the role of libraries as crime fighters. Every-
Library has given us some ammunition for this type of publicity.
Along with the examples on the EveryLibrary site, touting the business research skills of information professionals to call out potential fraudulent companies and fake investment opportunities contributes to financial literacy and showcases the value of librarians.
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