(FORTUNE Small Business) – Bo Corby couldn't believe his eyes: Looking through the telephone bills of his ten-person business, Simulator Training Inc. in Seattle, he found charges from a mysterious outfit in Minnesota called WebValley. Through a telemarketing firm, it had billed Corby's commercial-pilot training school $174.65 for creating and maintaining a Website. There was just one problem: Corby's firm didn't have a Website, and he had never asked WebValley to design one.

What gives? A new strain of fraud called Website cramming assailing small businesses, that's what. Corby's firm is one of thousands snared in the latest scam unleashed by high-tech grifters: billing firms for Websites they never order or that are never actually created. In recent years, crammers have victimized consumers with fake telephone charges. Complaints to the Federal Trade Commission (FTC) skyrocketed 23-fold between 1996 and 1998.

So why now target small firms? Jodie Bernstein, director of the FTC's Consumer Protection Bureau, says that in an era when myriad telecom and Net-based service providers have the legal right to place fees onto phone bills, it's easier for con artists to slip in extra charges. "Many small firms don't immediately notice these charges in their lengthy phone bills," says Bernstein. "When a small business does notice and complain, it is often met with a hostile response."

The scale of the crammers' handiwork is daunting: According to court filings, WebValley, based in Hopkins, Minn., crammed 50,000 "customers" for $9 million in specious services before a federal judge last summer enjoined it from continuing the practice and appointed a temporary receiver to oversee the company. "They even crammed a church in my hometown," says Sen. Christopher Bond (R-Mo.), chairman of the Committee on Small Business. Rick Rosenboom, a WebValley sales manager, says the company has terminated its site-design business but refuses to explain the company's ways.

Crammers have a wagonful of tricks to trap unwitting prey: They use phony, 30-day trial-or-your-money-back guarantees, or offer to send an information packet with no obligation and then count that as an order to start billing. Sometimes crammers scrap all pretext and find their victims in the Yellow Pages. When crammers get caught, many refuse to refund charges and even threaten to damage customers' credit ratings if they do not keep paying their bill. Some crammers, says the FTC's Bernstein, even record conversations with customers and then doctor the tapes to make it seem as if the company authorized service. If you've been crammed, don't look to the phone company for help--it's your responsibility to clear up the charge.

So what should a business do to protect itself? First, educate employees about cramming, and instruct them to avoid conversations with telemarketers pitching Net-related services. Employees should immediately end the call or route it to a supervisor. Managers should also be wary about accepting free information packets, trial offers, or other gimmicks. If the telemarketer is aggressive, don't hesitate to say you'll file a complaint with the FTC if she doesn't leave you alone. Next, scrutinize phone bills--in particular, the "miscellaneous charges and credits" section, where a cryptic acronym could signal a bogus fee.

That's what happened to Bo Corby, who finally received a credit of $149.70 from WebValley some six months after the feds caught up with it. The refund was $24.95 less than Corby should have gotten, but at this point he's happy to cut his losses.

www.fsb.com Fight back against crammers. Point your mouse at www.fsb.com/toc/ for a list of organizations that can help you defend yourself.