nsomniacs might remember the television ads during the late, late, late show a few years ago: Internet kiosk, ATM and POS equipment placement businesses bragged of limitless opportunity and revenue for those with $12,000 to invest and quick enough to hop on the bandwagon.

The ads perked up a few drowsy ISOs/merchant level salespeople (MLSs) who happened to be watching; in 2003 and 2004 they posted several inquiries on GS Online's MLS Forum about the legitimacy of the businesses and products advertised (search the Forum at www.greensheet.com/forum for "AmeriPOS"). Their instincts were correct.

Promises of prime locations, abundant leads and $2,000 or more in monthly income per machine sounded, and were, too good to be true. Now the federal government is pursuing action against several kiosk and POS terminal companies for unethical business practices.

On Feb. 15, 2005, based on a federal grand jury indictment, the U.S. Attorney's office filed a criminal complaint in U.S. District Court, Southern District of Florida, against Hallandale, Fla.-based AmeriPOS Inc. and its three principals, Harris Cohen, Alex Moncayo and Michael Borzillo (aka "Michael Chiello" and "Michael Brazil").

This recent action is not the first time AmeriPOS, which ceased operations in July 2004, has been called on the carpet for its business practices. These include a 1998 suit and subsequent order filed by the Federal Trade Commission (FTC) against Cohen and a December 2003 Stop Order issued by the state of Connecticut.

The latest complaint alleges interstate mail and wire fraud, conspiracy to misappropriate funds from potential investors, false claims, and factual omissions and concealments of expected profits. The complaint also details charges of questionable sales techniques.

AmeriPOS advertised opportunities for POS terminal distributorships on TV and on the Web; it also sent glossy brochures to potential purchasers via FedEx and solicited customers, often repeatedly, by phone and mail. When salespeople contacted potential buyers, they made false claims about revenue, terminal performance, sales leads, profitable locations and territory exclusivity. They also directed potential buyers to defendant Michael Borzillo, portraying him as a satisfied and successful AmeriPOS customer with several high-profit locations.

On Feb. 14, the FTC referred four new civil penalty cases to the Department of Justice (DOJ) for alleged violations of the Franchise and Business Opportunity Rule. This rule requires franchise and business opportunity sellers to provide specific information allowing consumers to make informed decisions about investing in the businesses.

One of the referred companies, Miami-based American Merchant Technologies, and its principal, Lawrence Albano, sells public access Internet kiosk and ATM business ventures.

Greg Swistak, Executive Director of the Kiosk.org Association (KOA), a trade group representing the interests of self-service providers, said the problem is not with the machines, but rather with a few of the people who sell them and create industry-wide image problems.

Because the kiosk industry is an emerging market, as it grows, so do scams involving public Internet access, prepaid products including phone time and debit cards, ATMs and POS equipment, Swistak said. "I must say the first time I saw one of the late night commercials, I was excited too," he said.

"Maybe our business was really going mainstream and was being accepted by the masses." He cited actions against several other companies, including Nationwide Cyber Systems (now operating as Transnet Wireless Corp.), a Canadian company called Teleking Communications Corp. and Debit Corp. of America Inc.

In another case, the Securities and Exchange Commission filed an emergency action in Texas in July 2004 to freeze the assets of Cash Link Systems Inc. and its principal Alan Levine, charging securities fraud and alleging that the company had raised more than $10 million from 680 investors nationwide.

Swistak said 19 people have agreed to participate in a Racketeer Influenced and Corrupt Organizations Act, or RICO, suit against AmeriPOS and Cash Link Systems Inc.

Following the corporate ownership of these companies is like a shell game, he said; AmeriPOS principals also operated other companies including Tele2net and SuccessPOS.

To his knowledge, none of the companies named in any of the lawsuits have been members of KOA. Swistak thinks eliminating the bad eggs strengthens the value that KOA advocacy provides its members.

"Many people have been seriously hurt by folks selling kiosks using unethical business practices," Swistak said. However, "There are a lot of great companies in this business and many ethical people offering kiosks that provide pay-for-use Internet services."