Magazine article Editor & Publisher

Fraud Using Classified Ads on the Rise

Magazine article Editor & Publisher

Fraud Using Classified Ads on the Rise

Article excerpt

A FORM OF fraud involving classified advertising is increasing, and news, papers are growing more concerned about it.

Gary H. Bugge, vice president of operations at Media Advertising Credit Services, a subsidiary of the International Newspaper Financial Executives, recently described the practice of "bogus invoicing" to a House subcommittee.

Bugge, who testified on behalf of MACS, INFE and the Newspaper Association of America, told the House Post Office and Civil Service Committee's Subcommittee on Postal Operations and Services that at least 16, maybe 17, companies operate such schemes.

Here's how they work: Without permission, individuals or companies reprint newspapers' classified ads, usually employment ads, in publications that look legitimate but have little or no circulation. They then contact the advertiser, usually by mailing a solicitation form to its accounts-payable department.

"This solicitation form, however, looks like an invoice that a newspaper would send an advertiser who has placed a classified ad," Bugge said.

Because the advertiser's accounts-payable department often is unaware of where an ad was placed, it pays the solicitation in addition to or instead of the newspaper invoice.

"The deceptive schemes that these publications practice threaten a newspaper's integrity, injure its goodwill with advertisers and reek havoc on well-planned advertising efforts," Bugge noted.

"Bogus invoicing causes scarce advertising dollars to pay for services that were neither solicited nor requested, causing budget problems for the advertisers and depriving a newspaper of potential revenue."

These solicitations, which often include disclaimers printed in yellow ink so they do not reproduce when a copy is made and sent to another department for payment, ask from $138 to $166 per column inch.

"One tearsheet I was able to examine had 250 column inches and the publication apparently contained at least 188 pages," Bugge told subcommittee members. …

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