Media Release: Pyramid Selling fine

Issued 9 November 2000/114

$8,000 fine for promoting "Focus International" and "World Net" pyramid selling schemes

The Auckland District Court has fined an Auckland man, Terrence Samuel Wall, $8,000 for promoting in New Zealand two overseas-based pyramid selling schemes, "Focus International Credit Card Plan" and "World Net International Inc."

In setting the fine, Judge Nicola Mathers said that she was taking into account Mr Wall's limited ability to pay fines-he is currently unemployed-and that he made little if any money from the illegal schemes.

Commerce Commission Chair John Belgrave said that Judge Mathers' decision should be a warning to anyone thinking about promoting a pyramid selling scheme: "courts will impose substantial fines-to an unemployed man who made little from these illegal schemes, $8,000 is a considerable amount".

Earlier this 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.

Last year 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.

In Mr Wall's case, Focus International is based in Jamaica and Antigua. People paid $US299 to join, plus an additional annual fee of $US149 and a monthly fee of $US69. World Net is based in Texas and people made a one-off payment of $US149 to join.

Mr Belgrave warned that Focus International and World Net are typical of pyramid schemes that are deliberately promoted in ways that hide their true nature. In reality they rely on constantly recruiting more and more people, and the goods or services that they offer provide little or no return.

"Glossy brochures, presentations at hotels and convention centres, people in suits using what sounds like professional financial jargon and promises of big profits are all part of the scam," he said.

"These are slick operations, but at the end of the day all pyramid selling schemes run out of people and fail, and most people who bought into them lose their money.

"It is true that some people can make money from a pyramid selling scheme. But they are only ever a small proportion at the top, and they do it by taking money off the many people below them.

"Our advice to anyone considering buying into any scheme is to get independent professional advice before signing up for anything. Do not rely on promoters' claims and do not rely on people who claim to have made money from the scheme. Talk to people you can trust and who are not involved in the scheme."

Section 24 of the Fair Trading Act prohibits all pyramid selling schemes. That is, there is no such thing as a legal pyramid selling scheme. 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.

Media contact: Fair Trading Manager Ross McPherson Phone work (04) 498 0909, cellphone 021 627 909, home (04) 232 6004

Senior Advisor Communications Vincent Cholewa Phone work (04) 498 0920, home (04) 473 3827 Commission media releases can be viewed on its web site www.comcom.govt.nz

Regards Leo van Schyndel Records Officer Corporate Services Direct dial : (04) 498-0929 E-mail : leo.vanschyndel@comcom.govt.nz

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