Attorney General's Office Warns Consumers to Avoid Unlawful Pyramid Scams

Business Wire, July 23, 1999

OLYMPIA, Wash.--(BUSINESS WIRE)--July 23, 1999--

Attorney General Christine Gregoire today warned Washington consumers to beware of "pyramid" schemes that promise participants they will get rich quick.

In the last week or so the AG's Office has been flooded with calls from consumers inquiring about solicitations for programs that require an initial investment or gift and promise that the more people they bring into the program, the more money they will receive. These gifting programs are operating under various names and guises. These include, but are not limited to, programs using meal, auto racing and airline formats, and may be circulated among friends, religious or social groups, or family members.

"In the end there are always more losers than winners in pyramid schemes such as these," said Gregoire. "These schemes eventually collapse and many of the people who contributed to them are going to lose their money."

Gregoire reminds consumers that the Attorney General's Office does not endorse or approve any venture, including the pyramid schemes that are so prevalent at the moment.

"Despite what is being said, our office has not written letters, given okays through our Consumer Resource Centers, attended any meetings of these groups, or published a flyer that in any way validates these programs," said Gregoire. "It is a violation of state law for any pyramid operation to claim or imply the program has the approval of the Attorney General's Office."

Consumers are reportedly expected to "freely give, without consideration" up to $2,000 in $100 or $50 bills and to recruit others to join them. Participants are required to state this is strictly a gift and they expect nothing in return. In fact, people are led to believe they will receive $12,000 from each group they join.

Consumers who are approached should ask themselves three questions before proceeding:

1) Do I have to make an "investment" or give money to get the right to recruit others into the program?

2) When I recruit another person into the program, will I receive what the law calls "consideration" as a result? That usually means money.

3) Will the people I have recruited have to make an "investment" to get the right to recruit and receive "consideration" for getting other new people to join?

If in doubt, consumers should consult an attorney. Anyone participating in an illegal pyramid is violating the state Chain Distributor Scheme law and is subject to penalties of up to a $2,000 fine, plus restitution to any injured consumers, and charges for court and attorney fees.

Anyone wanting more information can call the Consumer Resource Centers at 800/551-3646 to request a brochure on "Illegal Pyramid Schemes" or can download the information from the Attorney General's web site at www.wa.gov/ago/consumer and clicking on "More Consumer Information".