THE LAST WORD
''Biz op'' fraud here to stay:
How to make big bucks
and never go to jail
by Mike Shaw
In recent months we have spent much of our time
at Play Meter tracking down what we have come to
know as "blue sky" firms-business opportunity
companies whose modus operandi are so similar that
you would think they all attended " biz op" school
together.
We have not been the only reporters stalking these
peddlers of video fraud . Television crews in Washing-
ton , D . C. ; Saginaw, Michigan ; and New O rleans,
Louisiana have staged series about transient video
"biz op" companies. Even NBC News Magazine has
televised a segment on one of the principal offenders.
But, of course , video " blue sky" sales is of particular
interest to us because it is the popularity our industry
has worked so hard and innovatively to earn that they
are capitalizing on. And , in the process , they are
contributing significantly to the degradation of our
national image.
The fact that our industry has enjoyed great popu-
larity is the draw for these "biz op" firms, but the
reason for their proliferation is quite anot her matter.
Leisure Time Electronics, Reliance Capital Corpora-
tion , Marketing Associates, Entertainment Industries,
Quorum Industries, Potomac Games, American
Game Exchange, Fun & Games, Counter Top
Amusements-all are " biz op" companies selling
video games, all have been brought to our attention
within the last few months.
These companies have reproduced at a rabbit's
pace because there is virtually no deterrent for them
not to . Even if a laborious and expensive legal pro-
cedure is carried out against them , the worst they will
suffer is a slap on the hand and a scolding-hardly
sufficient deterrents to keep the " biz op " folks from
shifting gears and starting down a different path
riding the same profitable endeavor.
" I would agree that r.ot much is done," says
Kathleen Radinsky, attorney for the Federal Trade
Commission. "There are no criminal sa nctions for
violating FTC rules. About the most that can happen is
that we order them not to do it anymore."
The extent to which it is possib le to p u rsue these
white collar criminals is to drag them thro ugh federal
courts, says Radinsky. But she is quick to add that the
process takes years, is prohibitively expensive , and
" has never actually happened."
In some instances, out-of-court settle m ents have
been reached and companies have agreed to pay
back a certain amount of the monies they have bilked
from unwary investors, but again this is hardly a
74
deterrent .
Now, of course, there are state regulations which
affect these peddlers of putrid products. But,
Radinsky says, "few states have proper sanctions, and
even if they do, they have limited funds for use in
prosecuting."
..
And even well-meaning state and mun1crpal
officials are virtually helpless in preventing fraudulent
"biz op" companies from going their merry way.
When Quorum Industries set up shop in New
Orleans' plush Marriot Hotel, Play Meter discovered
they had failed to post the required state and city
bonds and had not acquired the prescribed licenses
to do business in the city. But even though the
Secretary of State and the New Orleans District
Attorney's office were alerted to Quorum 's viola-
tions, the company got out of town uninhibited from
walking off with-according to Quorum officials-
more than $1 ,000,000 in sales of machines that, if the
com p any's previous history is repeated, will never be
seen by their buyers.
" Even if we had arrested them," said Lisette May at
the Orleans Parish District Attorney's office, " we
couldn't have done much. Their offense is only a
misdemeanor. "
So we are likely to see a continuation of rampant
" biz op" fraud within our industry. The video " biz
op" pitch is just too good to deny-booming indus-
try , cash business, limited investment, etc.-and there
is nothing in our judicial system that is prepared to
deal severely with this brand of white collar crime.
The amazing realization is that a sincere business
opportunity venture in this industry (Potomac Games
is currently making such an effort) could also be a
profitable venture . A company could secure a good
supplier contract with a quality manufacturing firm ,
sell the games to investors based on honest state-
ments about profit potential, deliver the games when
they are promised , help arrange for capable servicing,
and even provide a dependable locating service. It
might seem heretical to operators who are currently
struggling to stay afloat amidst existing competition,
but the fact stands that a "biz op" firm run honestly
and properly could offer a viable product.
But, again, the reality is that there is just no
incentive to operate honestly. It is less expensive and
more profitable to operate unscrupulously. Until laws
are formulated and the means to enforce them made
affordable, " biz ops" of the most fraudulent kind will
flourish.
PLAY METER, May 1, 1982