Pyramid Scheme Promoter To Pay $25,000 In Restitution And Fines
Attorney General Spitzer today announced that his office has obtained a court order against a key promoter of a pyramid scheme that swept through the Southern Tier in 2002.
The consent order and judgment signed by Justice Phillip R. Rumsey of State Supreme Court in Broome County requires Helene "Lennie" DiOrio of Vestal to pay $22,500 in restitution to the state. In addition, it orders her to pay $1,500 in civil penalties.
The court order also bars DiOrio from participating in or promoting illegal pyramid schemes in the future.
"This case sends the strong message that individuals who promote and participate in illegal pyramid schemes face sanctions and fines," Spitzer said. "State law prohibits pyramid schemes because they are bound to collapse under their own weight resulting in the enrichment of a few individuals who got in early at the expense of those who got in later."
A lawsuit was filed by Spitzer's office in December 2003 which alleged that DiOrio actively pursued and recruited individuals to participate in the Seasons of Sharing pyramid scheme.
In the summer of 2002, Spitzer's office issued a public warning that the "Seasons of Sharing" gifting circle was in fact an illegal pyramid scheme. When potential participants and board members asked about this, DiOrio, adamantly disagreed and mentioned that pressure from legal authorities would die down and they could continue the program.
As a result of DiOrio's participation in Seasons of Sharing, she reached the top level and obtained at least $22,500 from other participants.
Women were told that a $5,000 investment would make them a member of the "gifting circle" board. The Seasons of Sharing gifting circle resembled an "upside down triangle" with four levels for participants to progress in order to receive their "gift" for their investment. The introductory level, referred to as "Winter", had eight positions, each requiring the payment of $5,000. As more participants joined the board, individuals moved down to one of the four levels of the "triangle" on the "Spring" level, followed by "Summer" and finally "Fall Harvest." It is at this final level that an investor would collect $40,000 from the incoming participants.
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.
Spitzer's office initially sought to dismantle the pyramid scheme by mediating refunds by those who participated without understanding that their actions were in violation of the law. Through mediation, Spitzer's office successfully oversaw the repayment of more than $300,000 to participants.
Spitzer's office was forced to sue DiOrio because she repeatedly refused to make repayment even after numerous requests by participants and by Spitzer's office.
Individuals concerned that a solicitation is an illegal pyramid scheme are encouraged to contact Spitzer's office by calling his consumer help line at (800) 771-7755 or by visiting his web site here.
This case is being handled by Assistant Attorney General Michael Danaher of the Binghamton Regional Office.