02/29/04 — Pyramid scheme alert

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Pyramid scheme alert

By Jack Stephens
Published in News on February 29, 2004 2:10 AM

Wayne County authorities are warning residents and consumers not to take part in pyramid schemes being promoted as "gifting programs."

Sheriff Carey Winders, Goldsboro Police Chief Tim Bell and District Attorney Branny Vickory issued a consumer alert Friday about the schemes that have been developed in several eastern counties.

The schemes have names like Elite Activity, Prosper Elite, Gift Givers, Women Empowering Women, and Private Gifting.

Vickory said that those who promote these schemes, he said, can be prosecuted for a criminal offense or be sued in civil courts.

Under state law, a pyramid scheme is any program that uses a chain process in which participants pay for the opportunity to receive a payoff for inducing others to take part in the scheme. The program, Vickory said, derives its funding primarily from money paid by newly recruited members and not from the sale of products to individuals outside of the program.

The great danger of every pyramid scheme, the district attorney said, is that as the pool of investors dries up, later participants will lose their money.

Winders, Bell and Vickory urged consumers to be very careful about being lured into these illegal schemes, because they say it is a mathematical certainty that most participants will lose their money with very little chance of recovering it.

Vickory said that what has made these schemes so troubling is that the promoters have passed them off as being legal. The promoters have misled new recruits by saying the Internal Revenue Service allows people to get gifts of up to $10,000 without gift tax liability.

"In the end, a program which claims to help those in need," Vickory said, "will cause financial hardship to many."