Ripoff Report itself seems to be the real ripoff

Long ago I discovered the site Search Google for many common company names, and you'll often get a Ripoff Report page high in the list of results. At first I thought that it was simply a site that offered consumers a voice and had gained traction because of that. It seems, however, that there's much more to the story.

Yes, consumers are allowed and encouraged to post their complaints on the site. Yet the most obvious problem is that there are complaints and reports that are clearly false. Damaging false reports obviously make the site less credible, although the owner of the site, Ed Magedson, is committed to not removing any posted compliants. (Unless companies pay him.)

An in-depth story in the Phoenix New Times last year gives some interesting insights about Magedson and the website. The short version is this: Magedson lets anything be posted on the site without any real limits or rules. Companies and individuals are (usually) allowed to post rebuttals if they like. If a company objects to something posted about it on the site, Magedson offers the opportunity to participate in his "corporate advocacy program."

Translation: Pay Magedson enough money, and he might remove or edit the things posted about your company. Pay him even more, and he just might do an "endorsement" of your company. One such endorsement I've seen relates to Primerica, a multi-level marketing company selling insurance and investments. A search shows almost 600 entries related to Primerica, but Magedson offers his stamp of approval after the company pays money via the corporate advocacy program:

"Rip-off Report Investigation: Primerica pledges to resolve complaints & address any inquiries from the past, present and in the future. Commitment to Rip-off Report Corporate Advocacy Business Remediation & Customer Satisfaction Program. Primerica commitment to customer & agent satisfaction. After interviewing executives from Primerica, it is clear that they are dedicated to helping their agents and clients achieve complete satisfaction and will not allow a legitimate complaint to go unresolved. Duluth Georgia"

A company interested in buying their way into the good graces of Magedson must pay an up-front fee and a monthly retainer. The Phoenix New Times article says the initial fee to "join" the corporate advocacy program can be as high as $50,000. Magedson has also reportedly asked various companies for hundreds of thousands of dollars to settle various claims and threatened litigation.

It would seem that the owner of Ripoff Report is simply extorting companies that object to content posted about them. And this gets sticky. Because it's one thing to object about false claims, and it's another thing to object about true but negative claims. True or false, it seems that companies can get a resolution if they're willing to pay enough money. How much is enough?

Some companies have fought back and sued Magedson and the site. I'm interested to see where these lawsuits and complaints go. I'm in favor of free speech and the right of people to tell their stories and make complaints, so long as they're being truthful. While Ripoff Report seemed at one time to be a place to give consumers a voice, it seems that it has developed into an ugly tool used to line the pockets of the owner. I'm not saying that's what he intended when he started the site, but it seems to be where things have ended up, and it's not pretty.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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