Promoter fined $4,500 for multi-level selling

Promoter fined $4,500 for involvement in SkyBiz multi-level selling scheme

Gregory Ian Dawson was fined $4,500 plus $1630 costs in the Auckland District Court on Friday having pleaded guilty to breaching the Fair Trading Act in relation to his involvement in US-based international multi-level selling scheme SkyBiz between 1999 and 2001.

The prosecution, brought by the Commerce Commission, comes hot on the heels of the Commission’s recent successful prosecution of pyramid scheme Infinity Concierge and its promoters.

The SkyBiz scheme involved the sale of website programmes or ‘WebPaks’, for US$100 per year, plus a one-off US$25 establishment fee. Individuals were recruited over the internet to promote the purchase of these WebPaks, with the lure of vast profits.

New recruits to the scheme were required to sell WebPaks to at least two others in order to qualify to receive compensation. However, further down line sales of at least nine WebPaks were required before the recruit was eligible to receive any of this compensation.

Director of Fair Trading Deborah Battell said that the Commission decided to take action against Dawson as he had been identified as being one of the major participants and promoters in New Zealand of what was a now defunct US-based company.

“The Federal Trade Commission in the United States stopped SkyBiz from operating and the company subsequently ceased operations in March last year. Other court action against the promoters of SkyBiz has been taken in both Australia and Canada,” she said.

Background Earlier this month, the Christchurch District Court fined Infinity Concierge and its operators a total of $38,760 including costs for operating or promoting a pyramid selling scheme, in breach of the Fair Trading Act.

Two New Zealanders, Rodney McColl and Kenneth Olorenshaw, were among four men who pleaded guilty to the charges of promoting the British-based international selling organisation. A fifth man, David John Mawson, will be sentenced on Thursday 10 April in the Christchurch District Court. -------------------------------- A bill currently before Parliament would, if enacted, significantly increase the penalties for operating a pyramid scheme. Under the proposed Fair Trading Amendment Act, operators would face penalties of up to $200,000 (for companies) or $60,000 (for individuals). In addition, the courts could fine people up to the value of any commercial gain resulting from the scheme.

-------------------------------- The Commerce Commission recommends some basic precautions to avoid getting drawn in to a pyramid scheme: Be wary when approached to join schemes where there are promises made about future earnings that require people to recruit members to obtain those earnings. Be extremely cautious if you are encouraged to borrow money to join a scheme on promises of easy returns. Always consider getting professional independent advice (for example, from an investment advisor or manager at your local bank, an accountant or a lawyer) before investing money in any scheme. Don’t rely on claims made by the promoters or by people who claim to have made money from the scheme. If it sounds too good to be true, it probably isn’t true.

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