Pyramid Scheme Sweeping Upstate New York
Attorney General Spitzer today issued a consumer alert regarding a pyramid scheme rapidly working its way through upstate New York.
Spitzer's office confirmed that his office has received numerous phone calls regarding a scheme commonly known as "Women Empowering Women."
"This so-called 'gifting' program - which claims to empower women by regaining control over their destinies and redistribute wealth - instead defrauds participants," Spitzer said. "Although it purports to be legal, the Women Empowering Women program is an illegal pyramid scheme that is certain to collapse, leaving broken promises and empty wallets."
State law prohibits "pyramid schemes" under which a non-refundable investment is made and the ability of the investor to receive a monetary return is conditioned on his/her recruiting additional people to invest. This can be distinguished from a true gift in which a person gives another person something of value with no expectation of profit or something in return.
The latest pyramid scheme to sweep across upstate New York is typical but is characterized by dining terminology. The lowest level of participants, the "Appetizer," is eight women "gifting" $5,000 to participate in the program. The next level is the "Soup and Salad" level for those successful in recruiting eight additional participants. Finally, there is the "Entree" level and the "Dessert" level, the top of the pyramid when a person theoretically receives the "gifts" from the incoming "appetizers."
Another version discovered in the Southern Tier uses terminology such as "giver", "support", "apprentice", and "receiver."
Spitzer's office confirmed that his Plattsburgh, Watertown and Binghamton offices have been receiving numerous phone calls from participants and potential participants concerned about the program's legality.
Pyramid schemes were outlawed in New York State in the early 1970's providing both civil and criminal sanctions. "The end result of a pyramid scheme is inevitable since there are only a limited number of potential investors in any given community" Spitzer said. " At best, the original promoters, the few people responsible for the fraud, walk away with a lot of money, leaving the bulk of the investors out in the cold."
Spitzer noted that, specific to this scam, with eight investors recruiting eight additional investors, it would take merely seven levels for the pyramid to encompass nearly the entire population of the state.
Spitzer offered the following advice to consumers on ways to avoid this type of scam:
- Beware if the start-up cost is substantial. Some pyramid schemes pressure you to pay a large amount to be a "distributor." What are you getting for your money? Beware of promises of quick, easy and unreasonably high profits.
- Resist the temptation to invest just because the people selling you the program are friends or are part of organizations to which you also belong. They may have been misled into believing that they could make large amounts of money in a short time.
- Check out any opportunity with the proper authorities such as the Better Business Bureau, the Federal Trade Commission and contact the Attorney General's consumer help line at (800) 771-7755 for information.
- Remember, simply participating in a pyramid scheme is illegal. Report any solicitations for such unlawful activity to the Attorney General's Office.