“A once-in-a-lifetime opportunity.” “A part-time business that earns a full-time income.” “Call now! Don’t miss out!” Sound familiar? Approachthese types of promises with caution; they may be nothing more than a scam. One of the fraudulent opportunities these can be advertising is a vending-machine business. Vending-machine scams are everywhere you look. Don’t assume that the people who fall for them are not smart enough to suspect a scam. The more savvy consumers get, the more elaborate the scams become. It would seem like there must be some way to identify these criminals, but it gets harder and harder. They stay involved in the industry so they are able to create elaborate schemes to entice people. Some very smart people have fallen victim to vending machine scams, some have invested and lost significant amounts of money as shown in the following true examples presented here to help you recognize the characteristics of these types of fraud.

TDB Vending: James B. Spungin was arrested April 29, 2009, in Las Vegas,and charged with six counts of securities fraud against a person over 60 years old; seven other counts of securities fraud; 13 counts of offer or sale of unregistered securities; and 13 counts of theft. His crime? Convincing people to invest in a business that sold baby products through vending machines. Investigators said Spungin told his victims he had patent rights to a vending machine that would dispense infant care products at public locations like airports and bus stations, and that Procter and Gamble had agreed to purchase Spungin’s patent right for $35,000,000. Spungin’s sales pitch to his victims included a forged copy of a contract with Procter and Gamble. He offered potential investors the opportunity to buy shares of stock in TDB Vending, although neither the company nor the stock was registered with the Nevada Secretary of State. American Entertainment Distributers, Inc. (AED): Anthony Rocco Andreoni and Russell G. MacArthur, Jr. were indicted for their involvement in a DVD fraud scheme in South Florida. AED was located in Hollywood, Florida, and sold a business opportunity featuring a DVD vending machine, which they advertised widely on the Internet and through the mail. Authorities said they promised potential customers that AED would help them secure profitable locations for their new machines and that profits would be large for those participating in the DVD vending machine program. AED was accused of going so far as to refer potential buyers to so-called “references” who sold the machines. These “references” were actually on the AED payroll. The advertising was so convincing that over 400 consumers throughout the United States paid anywhere from $28,000 to $40,000 per DVD machine. Over $19 million was lost.

Custom Champion Vending: Michael Ferrara, 47, of Gladstone, Missouri, pleaded guilty on June 12, 2002, to devising a scheme to defraud others through a series of companies including Custom Champion Vending and Emily Vending that sold business opportunities to the public between 1993 and 2001 by placing classified advertisements in newspapers across the United States, which listed a toll-free number for consumers to call. More than 148 victims paid between $1,700 and $43,525 for vending machines or products and exclusive distributorships. Ferrara admitted to misrepresentations, false statements and omissions to encourage these sales. He promised many customers that they would earn a minimum profit or receive a refund of their investment. However, customers who invested in these schemes did not receive what Ferrara promised. Dozens of customers received nothing in return for their investment. Many customers who did receive the vending machines or products they purchased did not receive the promised locations for the machines. No customer made the promised minimum profits. Customers who became dissatisfied and demanded the guaranteed refund did not receive the refund.

Westbrook Marketing Associates, LLC: January 26, 2009, the Federal Trade Commission obtained a $250,000 settlement against Richard Guadagno in a vending machine scheme, concluding its case against the defendants in this operation, all of whom were charged in 2002 as part of the Project Busted Opportunity law enforcement sweep. These defendants sold business opportunities for vending machines that dispensed either medical supplies or various sodas and snacks. The complaint alleged that the defendants made profit projections and earnings claims without any reasonable basis in fact. Also, the defendants told investors they could cancel their purchases if the vending machines were not delivered in 30 days, but the cancellation requests were not honored, even if the vending machines never arrived, according to the complaint.

The people operating scams like those described above often try to back you into a corner. They want you to believe you have to commit to the offer right away or it will disappear forever. This is designed to get you motivated to give them money, sign the contract, and be on your way before you realize what has just taken place. Anyone that is rushing you to sign a contract or to make a purchase should be seen as someone to steer clear of. Don’t put any money down or sign any paperwork until you have done your own research. Stay firm with this decision even if they tell you they can’t offer you the same price later on. Your Family Financial Education Foundation counselor can recommend organizations like the Better Business Bureau that you can request references from about these business opportunities.