Monday, November 06, 2006

Another kiosk scam?

Craig at gokis caught an article about another possible kiosk scam, this time with DVD kiosks. The operation, based in Florida (why do they always seem to be based in Florida?), is accused of bilking investors out of $19M that was supposed to be invested in DVD kiosks placed in high-traffic venues. The article notes:
The company’s modus operandi was to advertise on infomercials, local newspapers and franchise industry publications. They sold the concept to consumers by promising them that they could work at home and the machines would generate $7,500 a month in income. If someone called in, they would overnight a sales presentation to them and would follow up in a day or two with a high pitched sale to close the deal.

When customers asked for references, they were given contact information of other sales people who were in on the scam. One rep testified that he would be paid an extra $200 for posing as a satified customer, while another BOE sales rep bragged that he had spent over $30,000 on voice distortion and satellite phones, so that it would be more difficult to track him down. In total there were 16 employees at the company, but from the legal filings it sounds like only 8 individuals may have been charged.

Once a fish was hooked, they would invite them to their office in Hollywood Florida where they would sign franchise paperwork and get the victim to wire money. The scam itself went on for about a year from 2004 - 2005 until the FTC shut down the business in their sting. In reading some of the first hand accounts on the RipOff Report, it’s heartbreaking to hear how much people lost and how important these savings were to them. While I certainly don’t blame consumers for falling for this scam, it is important to remember, for anyone considering investing in this industry, to know that it’s a high risk / high reward business and one that you shouldn’t bet the family farm on, regardless of the possibilities.
Sounds remarkably similar to a scam from a few years ago where pay-per-use Internet kiosks were advertised on late-night TV infomercials. The operators of that particular racket were guaranteeing a 12% rate of return for an initial investment that would supposedly pay for the deployment of one or more internet kiosks to public venues.

Tags: DVD kiosk, kiosk scam, consumer fraud, self-service, DVD rental kiosks

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