$5M a year advertising racket

Press, 3 November 1984, Page 30

$5M a year advertising racket

PA Auckland Auckland fraud squad detectives are investigating a $5 million a year advertising racket. More than 200 complaints of shady magazines and bogus advertising will be investigated by a team of detectives.

Detective Senior-Sergeant Brian Kemp said hundreds of thousands of dollars were being turned over in Post Office boxes in Auckland every week. The most successful con involved invoices for “advertising” being sent to large companies, which paid without blinking an eyelid, he said.

This did not surprise him because the amounts were always small, between $5O and $5OO, and made little

impression on some companies’ million-dollar monthly turnovers. Detective Senior-Sergeant Kemp said all the companies involved advertised in many publications, and usually one or two invoices for relatively small amounts went by unnoticed.

There were more than 200 complaints from this one area of advertising rip-offs with his squad at the moment. Another con was the “lookalike magazines” — fake advertisers solicited companies placing advertisements in the real publication and asked if they would like to continue with it.

Usually, up to 50 copies of the lookalike magazine were published just in case

the companies raised queries. Up to $20,000 , worth of advertisements were placed in the lookalike magazines.

The newest con was a mock-up page of advertising shown to the company, but the advertisements were lifted from old publications and were years out of date. The advertising industry put an annual rip-off figure at $5 million, and this did not surprise him, said Detective Senior-Sergeant Kemp.

He gave one example of a company sending out four cheques for “advertising” valued between $250 to $350 to four different Post Office boxes.

The scam started some time ago with one fake company, but as employees

left they set up their own businesses. Up to 100 people in Auckland could be involved, the police believe. The squad’s first task was to try to trace the owners of hundreds of Post Office box numbers given in the complaints. ,

The president of the Auckland branch of the Advertising Institute, Mr Ron Young, said the rip-off was not an advertising problem. It was down to the internal financial control of companies.

He said it did not affect companies using advertising agencies exclusively because the agencies had a built-in system of checking and validating advertising expenditure.

He suggested that smaller firms which could not

afford agency services should check more thoroughly the magazine publisher, circulation, and previous business and get prior confirmation in writing. He said the $5 million figure was only 1 per cent of the advertising industry’s annual expenditure, according to the latest official statistics.

Mr Young said an identical problem had surfaced in Australia.

The head of the Christchurch fraud squad, Detective Senior-Sergeant Alan Dalzell, said he was not aware of any advertising rackets in Christchurch.

His squad was alert to the problem, although he agreed that the onus for detection rested on the internal financial control of companies.