24 March 2005

Rubbish bin recommended for chain letter promising riches

The Commerce Commission warns the public to ignore and bin a chain letter currently circulating in New Zealand, apparently initiated by Perth-man David Rhodes.

Under the Fair Trading Act, chain letters that ask people to send money are deemed to be pyramid selling. Pyramid schemes are specifically prohibited by the Act.

The “David Rhodes” letter promises a return of ‘$70,000 guaranteed’ within 60 days of sending off $10 and spending about $200 on stamps, photocopying and envelopes.

The Commission’s Director of Fair Trading Deborah Battell says that chain letters involving claims relating to money and possible financial returns mislead people into believe they can receive significant amounts of money with a small outlay.

“The letter obviously targets those who will see it as a magic bullet, but it is rare that anyone reaps the rewards promised, and most people actually lose by it - often those who can least afford to do so.”

The Commission has warned more than a hundred people recently about their involvement in the scheme, many of whom had been unaware that it is illegal. Individuals and corporations can be fined up to $200,000 for promoting or operating a pyramid scheme, and may be ordered to pay an extra penalty based on the amount they have gained from it.

The letter is emotively worded, for example: ‘I have fulfilled my duty to my children by securing their futures in a very uncertain world’. Many people have found the scheme convincing and apparently straightforward in the steps laid out. Recipients of the letters are asked to send $10 to the top name of five listed on the letter; delete this name and add one’s own name to the end of the list; send the letter onto at least 200 people, taking names and addresses out of telephone directories.

“There is a significant misrepresentation in the letter where it instructs the sender of the $10 to include a note stating ‘please accept this as a gift’ to guarantee that they are operating within the law. This is not a gift and it is illegal,” said Ms Battell.

“The Commission has not found anyone who has made a return out of this scam. The only winners are the scam promoters, stationery shops and the postal service.”

ENDS