Government Grant Seekers Warned of Scams

In these tough economic times, some companies are being accused of using the bad economy to get rich at your expense.

As "Early Show" consumer correspondent Susan Koeppen reports, attorneys general in several states are now going after some companies accused of using the stimulus package and the offer of free government money to rip off consumers across the country.

It starts with an e-mail or a postcard in your mailbox - companies guaranteeing you a piece of the $700 billion government stimulus package. Just call the 1-800 number and you are on your way.

Jeffery Sadow was very interested in getting free government money.

"I wanted to raise some funds for possible scholarships for a summer camp that I co-direct and a small private school," he said.

When he received a postcard from a company called the Grant Writers Institute, he called. "They indicated that it would be fairly easy to get the grant money."

Sadow eventually gave them his credit card and was charged $1,100 for the company's help in securing the government money.

Red flags went up when Sadow received his packet of information from the company.

"The paperwork was hastily and sloppily prepared, misspelled words," he said. "It didn't make me feel comfortable that I was going to get involved with a company for grant writing and they didn't know how to spell the word tuition."

"There is absolutely no guarantee of any grant from the government and particularly with individual grants," according to North Carolina Attorney General Roy Cooper.

North Carolina, Kansas, Minnesota and the Federal Trade Commission, are suing Grant Writers Institute and several other companies, accusing them of deceptive business practices and misleading consumers.

"They take a thread of truth and they weave a blanket of deception," Cooper warned. "The thread of truth is that there is federal stimulus money out there. The deception is, is that very little of it goes to individuals and particularly not in the way that they describe it."

Cooper says government funding opportunities can be found online for free and there's no need to pay an outside source.

Sadow learned that the hard way.

"I suppose if anybody thought they had a chance to procure thousands of dollars for programs or things that are near and dear to their hearts, then they'd probably go after it. In hindsight… I would not do that again and especially without checking on that company more in depth."

An attorney for Grant Writers Institute says the company is in settlement talks with the FTC. And the government is working on getting restitution for victims.

If you think you've fallen victim to a stimulus package scam, contact the attorney general's office in your state and the attorney general's office in the state where the company is located.

If you paid for grant writing services on a credit card, dispute the charge with your credit card company.