European Stars And Stripes (Newspaper) - February 6, 1987, Darmstadt, Hesse                                Consumer watch a Pyramid scam in the making by Mary Neth consumer editor w As it a spoof or a scam commissary shoppers Al one Slofkin Germany found More Nan groceries to take Home recently. There was also a flier promising Cash Back " for buying groceries plus everything you have Ever wanted in a multilevel marketing company. And More no Cost to join. Satisfaction unconditionally guaranteed an almost unbeliever be Bonus schedule. An outstanding award and car  it was explained that Tor just $20 monthly you will receive 160 Worth of coupons your Choice from a Catalon Itiat you can redeem for 150. What really slopped the Reader though was the Promise that once you completed your "3x9 Grid your monthly Bonus Check will exceed $75.000 per  an eventual income of $75.000 just to buying groceries a pretty tidy sum right the Grid referred to was outlined in a Chart showing nine Bonus Levels Wasfi multiplied by three with a list of percentages paid on each. To find out More All that was needed was to mail in the attached Coupon and Wail for Tea information including a free Catalon and  a Coupon was sent in by an employee of the stars and stripes. Staff members however weren t holding their breaths. When the letter came Bach stamped address  there was no weeping or gnashing of Teeth. No one Felt cheated out of a possible $75,000 a month income. Ii was obvious that it was a Pyramid. Or ponzi scam. The . Securities and Exchange commission Sec considers these schemes fraudulent. Don t tall Lor such Cami. Report them to the Sec investor services. 500 North Capitol St. Washington . 2059, of if the scam is being offered to the military overseas to your local Legal assistance office 01 the military police. Capt. Maria Fernandez chief of client services of the Usa eur Legal assistance office Points out that not Only Are such Pyramid schemes illegal under both . And German Law it also is against the Law to use an Apo for business purposes she has sent out a notice to All the Legal assistance offices telling them to be Alert right now when people Are having difficulty making ends meet such an Olteia Tor grocery coupons might seem enticing ii should be realized however that there Aro Many legals mate sources for free  she says. How does a Pyramid or ponzi scheme Woik it is essentially a business Varia Hon of the tamil at Chain  explains the Sec any Type of product can be used groceries cosmetics housewares. Example a promoter Jones otters Black and White a Chance to invest by purchasing distributorships Al 11,000 each in a housewares business. The distributorships give Black and White the exclusive right to sell More distributorships to others for $1,000 each and to sell the products to the Public. However each $1,000 that Black and White receive from their sales of distributorships Musl be divided with Jones say 50-50. Thus theoretically Black and while can Reusze $500 on each distributorship they sell and can completely recover their initial $1,000 investment by Selling Only two distributorships. Jon however has received not Only Black and White s $1,000 each but also $500 Lor each distributorship thai Black and White sell. Initially ii appears that this can go on forever with no one being Hurt and everyone making Money. But. Tha number of investors needed to keep the Pyramid scheme rolling along would exceed the population of the United states. It also becomes obvious Why the scheme is called a Pyramid. The promoters Are at the lop of a Pyramid shaped How of Money. Money coming from later investors flows upward to a top. Being at the top May result in your receiving a lot of Money quickly but it is virtually impossible to determine at irm beginning where in the Pyramid you stand. The ponzi name it comes from Charles a. Ponzi who used the Pyramid scheme Todel Raud hundreds of investors in the 1920s, the scheme can Rock along with no one the Wiser until eventually Loo Many investors begin to ask Lor their Money Back generally the promo Lorthen will pull the plug that is either disappear with All the investments or reveal the bad news thai the investments went  a major Factor in tha eventual collapse of a ponzi scheme is trial there is no significant source of income other than from new investors. No one is really interested in Selling any product involved. The months 1 23 4 5 67 89 10 11 1213 participants 6 36 216 1,2967.776 46,656 279,936 1,679,61610.077,696 60,466,176 _ 362.797,056 2.176.782,336. 13.060,694.016 United states f population 211,719,000 world population 3.860.000,000 Honey making a t of the scheme lies in lining up now investors. Frequently these schemes Are disguised so thai it appears there is a profitable product or service thai is to be sold in the lorm of a franchise or another  there Are differences Between a Pyramid scheme and a legitimate franchise. In in Anchise investor s work consists almost entirely of Selling a. Product or service. In franchises an investor nominally has the sole right to a certain territory. Ponzi scams Are easy to spot. You should be particularly cautious when an investment Opportunity emphasizes very High yield Quick return a once in a lifetime Opportunity and the Chance to get in on the ground  one of the most publicized Pyramid schemes closed Down by the Sec in 1975, was that of the Kos cot interplanetary inc. Of Orlando Fla. Kos cot appearing As a cosmetic company operated what is termed a multilevel distributorship. On the first leva was a Beauty adviser whose income came Horn retail sales o Kos cot products made Avail beat a45 percent discount. Next cams the supervisor or retail manager. To become a supervisor a j1.000investment was required. In return a supervisor received cosmetics Al a 55 percent discount. He could sell these either directly to tha Public or Lor wholesale distribution to the Beauty advisor. In addition the supervisor who recruited another supervisor received $600 or the to Floo investment paid 1o Kos cot. Net at level three was a distributor who was required to invest $5,000 with the company. He was entitled to Purchase cosmetics at 65 percent discount for distribution to supervisors and Beauty advisers. For sponsoring a supervisor he would receive $800 and lot sponsoring another distributor he would receive $3,000. The investment promotion was made at Opportunity meetings conducted by Kos cot employees in conformity with scripts prepared by founder Glenn Turner. Investors and Kos cot employees were instructed to drive to meetings in expensive eats preferably Cadillac to dress expensively and to daunt Larga amounts of Money. It was intended that prospects would be enticed into signing a contract by these ostentatious displays in the evangelical atmosphere of the dare Tolob Greal meetings when the Bubble burst. The insubstantial Structure of the corporation and its virtual Lack of assets was exposed. Widespread publicity resulted in the drying up of potential new investors. Thus Many who had invested found their Haid named savings for fever Tost. The Federal Trade commission estimated Hal investors lost $44 million. Turner was sentenced to live years in probation was the flair that commissary shoppers received a spool or a scam either Way the originators had belter watch out putting out a flier with such oilers could put them in jail Page 16 the stars and stripes Friday february 6,1987