One in a series of occasional reports about the U.S. unemployment crisis.
A weak labor market is hurting the U.S. recovery, but it's been lucrative for scammers, who are bilking unemployed workers out of millions of dollars in fees to steer clients to jobs that never materialize, watchdogs say.
Many of these schemes have been around for years, promising people who send money a chance to work as bartenders, home inspectors or "secret shoppers" for retail chains. But with nearly 15 million Americans out of work, consumer groups and law enforcement agencies say these scams are multiplying as con artists capitalize on the misery of the unemployed.
"It's an epidemic. It's opportunity time for fraud artists, and people are so desperate to earn a living that they easily fall for the scam," said Ellyn Lindsay, an assistant U.S. attorney in Los Angeles who has prosecuted several of these swindlers.
Although federal authorities don't keep statistics on employment-related fraud incidents, the Better Business Bureau says such cases are on the rise.
The bureau received nearly 3,000 complaints about work-from-home scams in the first eight months of this year. That's more than double the 1,200 it received in the same period in 2007, just before the recession began, said Alison Southwick, spokeswoman for the Council of Better Business Bureaus.
Ida Jimenez, an unemployed mother of four from Fontana, said her attempt to work from home cost her $200 she couldn't afford to lose. It all started with an unsolicited e-mail: "If you have 60 minutes a day, here's a certified, proven and guaranteed way to make $225 and more every day, the easy way — from home!"
There was just one catch: She had to pay $197 for a guide before she could start processing manufacturer rebates from home. It seemed like such a good opportunity. After all, somebody has to do the paperwork on those things, she figured. Jimenez cut back on grocery purchases until she'd saved enough money to get started.
The guide never arrived. Jimenez spent weeks pursuing a refund, then gave up.
Crooks are counting on it. In contrast to investment fraudsters, who often seek big money from a small number of victims, job scammers aim to fleece large numbers of people for small amounts. Their hope is that victims won't squawk over modest sums, allowing the schemes to grow, undetected by authorities. The unemployed are particularly inviting targets because they have few resources to fight back.
The scammers "don't think they can possibly get caught because the victims they target generally don't have a voice: poor people, old people, people who don't speak English so well," said Lindsay, the federal prosecutor. "It's really nasty. These are not people who can afford this in the first place."
Stevan P. Todorovic siphoned $6.1 million from 80,000 job seekers — that's about $75 a head — before being busted by federal law enforcement in 2008. The U.S. attorney's office in Los Angeles accused the Santa Ynez resident of promising nonexistent bartending and secret-shopper jobs to customers who paid for unnecessary certification. A federal jury in Los Angeles convicted Todorovic in July on seven counts of wire fraud and three counts of mail fraud.
He's scheduled to be sentenced March 21. The charges carry a maximum sentence of 200 years in prison.
But such criminal prosecutions are rare. The Federal Trade Commission filed a civil lawsuit against Michael Allen Brooks and his Irvine-based company, Penbrook Productions, in 2009, accusing him of operating the rebate-processing scam that duped Jimenez out of $197.
The FTC obtained a judgment against Brooks for $7.6 million. He settled by paying a $125,000 fine and agreeing to give the FTC all proceeds from the sale of another company he owned. He also agreed to never again operate a work-from-home business.
That punishment hardly seemed fair to Yadira Briseno, a mother of two from Baldwin Park who also paid $197 for the rebate-processing opportunity. She and her husband, Albert, spent weeks attempting to get a refund. Instead of making some extra cash to pay for accounting classes, Briseno and her husband ended up victims.
"I don't buy anything online anymore from a company I don't know. There's a lot of people that take advantage of you," she said. "They shouldn't let those people get away with paying a little settlement."
Con artists are quick to adapt to the times. Debt restructuring and mortgage modification scams have flourished in the economic downturn. Former Lakers player Jay Vincent capitalized on high levels of unemployment and foreclosures to rip off job seekers in his home state of Michigan and across the country.
An indictment in August accused Vincent and a partner of scamming 20,000 people out of more than $2 million; the pair used newspaper and online ads to lure job seekers with offers of work inspecting foreclosed homes for banks. Federal prosecutors said Vincent and his partner charged applicants fees for background checks that were never conducted. None of the applicants received jobs, prosecutors alleged. Vincent pleaded guilty Sept. 28 to mail fraud and filing a false tax returns. He's scheduled to be sentenced Feb. 7.
In Los Angeles, the city attorney's office recently moved to protect actors from unscrupulous companies that charge them for auditions. Talent representatives are allowed to charge commissions if actors get a role, but they cannot charge upfront fees,
said Mark Lambert, a deputy city attorney assigned to the consumer protection unit.
"Nobody should be paying for an audition or job interview," Lambert said.
Southwick, of the Council of Better Business Bureaus, said job hunters should research potential employers online. "If you have the gut feeling this doesn't sound like it's on the up and up, try contacting the company on your own," she said.
And if an employer asks for money upfront, that's a good time to look somewhere else, authorities said.
"The things to watch out for are the job opportunities where you as the consumer or employee would have to pay money to get the job. That's a huge red flag," said Rozina Bhimani, an attorney with the FTC in Chicago, which obtained a judgment against Todorovic. "A lot of times a quick check with the Better Business Bureau, once consumers have a company name, will shed light on whether it's a legitimate job — or not."
Times researcher Scott Wilson contributed to this report.