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Second Promoter Prosecuted Over Pyramid Scheme

Second Promoter Prosecuted Over "World Net" Pyramid Selling Scheme, More Prosecutions Pending

Commerce Commission action against the World Net pyramid selling scheme has continued with the Auckland District Court fining Kevin Leslie Bryson $2,500 for promoting the scheme.

Commission Chair John Belgrave said that the Court had previously fined Terrence Samuel Wall $8,000 for promoting World Net and another pyramid selling scheme, Focus International Credit Card Plan. The Commission is prosecuting two other men who it alleges also promoted World Net.

In imposing the fine, Judge Deobhakta said that a deterrent penalty is needed because promotional activities such as Mr Bryson's had drawn people into the scheme and they had lost money. However, Judge Deobhakta also said that in setting a specific fine he had to take into account that Mr Bryson is a superannuitant with family commitments, and that his involvement in World Net was less than Mr Wall's.

"All pyramid selling schemes are illegal in New Zealand," Mr Belgrave said. "They are all rip-offs. Increasingly, they are promoted in ways that hide their true nature. But behind the glossy brochures, financial jargon and slick presentation they are schemes that rely on constantly recruiting more and more people. The goods or services that they offer provide little or no return.

"At the end of the day all pyramid selling schemes run out of people and fail, and most people who bought in lose their money.

"One of the tricks promoters often use is to find someone who has made money from their scheme. This is one of the difficulties in convincing consumers to stay away from pyramid selling schemes-it is true that some people can make money from them. But those people can only ever be the small proportion at the top, and they do it by taking money off the many people below them.

"It is mathematically impossible for a pyramid selling scheme to work in any other way-the few at the top take money off the many below them and then the scheme fails because it soon needs to recruit millions, and eventually billions of people."

World Net was based in Texas and people each paid US$149 plus US$10 to join. Amongst the claims made about it was that the scheme could turn the US$159 into US$1.2 million. In New Zealand, World Net was promoted through flyers and other documents and at meetings.

Background

Section 24 of the Fair Trading Act prohibits all pyramid selling schemes. Courts can impose fines of up to $30,000 on an individual and up to $100,000 on an organisation. They can also impose various orders and injunctions.

Last year, the Auckland High Court ordered Tauranga brother and sister, Kerry Lindsay Paul and Coralee Ngaio Judson to pay back more than $3.1 million to people who had bought into their Maximus Intermediaries Limited pyramid selling scheme. However, Maximus owes creditors and the Inland Revenue Department more than $1.3 million, and the 12,000 people who bought into the scheme will probably get nothing back.

In 1999 the Napier District Court fined Lisa Sharon Morton $30,000 and ordered her to pay back $200,000 to people in the Joker 88 and Liberty Group Bonds pyramid selling schemes.

Media contact: Fair Trading Manager Rachel Leamy Phone work (04) 498 0908, cellphone 025 208 0841, home (04) 569 5058 Senior Advisor Communications Vincent Cholewa Phone work (04) 498 0920, home (04) 477 0039 Commission media releases can be viewed on its web site www.comcom.govt.nz


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