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How to spot a pyramid scheme: beware of friends who hook you into selling get-rich-quick products.


Beware of friends who hook you into selling get-rich-quick products

Every year, tens of thousands of Americans fall victim to one of the most widespread business scams--pyramid schemes. Leisa Jenkins, 30, then a paralegal in New York City New York City: see New York, city.
New York City

City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S.
, was invited to attend "a business opportunity meeting" in a Brooklyn, New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
, cafe. Jenkins and 25 others were told that, with a $500 investment, they could become independent agents for a discount long-distance phone company and earn thousands of dollars a week. Their job was to sell the service and recruit a sales force to increase their returns. Jenkins, however, quickly saw the flawed reasoning behind the program.

"The only way to make money is to sign 1,000 or more people up under you consistently for one year, 11 says Jenkins, who is now a law student at the University of Iowa Not to be confused with Iowa State University.
The first faculty offered instruction at the University in March 1855 to students in the Old Mechanics Building, situated where Seashore Hall is now. In September 1855, the student body numbered 124, of which, 41 were women.
. "And you need big clients to make a profit." Participants fall into a never-ending cycle of solicitation. Most find few recruits, and subsequently lose money when the pyramid collapses. Agents realize this and begin "slamming"--switching consumers' long-distance service without their permission.

Victims of these kinds of rackets rackets

Game for two or four players with ball and racket on a four-walled court. Rackets is played with a hard ball in a relatively large court (approximately 9 × 18 m), unlike the related games of squash and racquetball.
, usually seeking to start a home-based business, typically "invest" several hundreds to tens of thousands of dollars into a purportedly legal, high-return, multilevel mul·ti·lev·el  
adj.
Having several levels: a multilevel parking garage.

Adj. 1. multilevel - of a building having more than one level
 marketing (MLM MLM Multi-Level Marketing
MLM Mailing List Manager
MLM Marxism-Leninism-Maoism
MLM Mid-Level Manager
MLM Medical Liability Monitor (newsletter)
MLM Multi-Longitudinal Mode
MLM Military Liaison Mission
) business. Scam artists pass themselves off as legitimate MLM distributors. Their products, however, usually have no real market value.

Pyramid schemes increase in number and type every year, according to according to
prep.
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

3.
 the Federal Trade Commission. Promoters often target victims vulnerable to their get-rich-quick mantras--the elderly, recent college graduates and new immigrants--who are then pressured to recruit friends, relatives and co-workers. To prevent yourself from becoming a statistic, consider the following guidelines:

* Don't believe the hype Don't Believe the Hype is the second single off of Public Enemy's second album, It Takes a Nation of Million to Hold Us Back. This songs lyrics is mostly about the politically issues that were going on the U.S. during the time of it's release. . Pyramid promoters quickly build excitement to a fever pitch fever pitch
n.
A state of extreme agitation or excitement.


fever pitch
Noun

a state of intense excitement

Noun 1.
 by emphasizing quick returns and an easy road to riches. They thrive in frenzied, highly charged meetings and use the induced emotional high to mask the dire odds of success. Sophisticated promoters recruit on the Internet and use slick multimedia presentations tied to vague high-tech ideas or New Age health and environmental products. Recruitment meetings have stepped up to cyber cafes and upscale hotel conference facilities.

* Pay attention to the source of profits. "We advise people to look at how the money is made and make sure that there is in fact a real product and real sales," says Liz Doherty, communications director of the Direct Selling Association The Direct Selling Association or DSA is the American national trade association of leading firms that manufacture and distribute goods and services sold directly to consumers typically through in-home or person-to-person sales.  of America (DSA (1) (Directory Server Agent) An X.500 program that looks up the address of a recipient in a Directory Information Base (DIB), also known as white pages. It accepts requests from the Directory User Agent (DUA) counterpart in the workstation. ), a trade association for direct selling Direct selling is the marketing of products or services to consumers through sales tactics including presentations, demonstrations, and phone calls. It is sometimes also considered to be a sale that does not utilize a "middle man" such as a retail outlets, distributors or brokers.  companies in Washington, D.C. "All the compensation should be tied back to sales instead of just entry fees, training programs and recruitment," she says.

Little explanation is made about the real consumer market for the products and whether or not the company will buy back unsold inventory, which some legitimate companies will do if you quit the business. Some states require buy-backs for at least 90% of the original cost, according to the DSA. Call the consumer fraud department of your local district attorney or state attorney general's office for information on buy-back regulations.

* Don't give money or financial information to anyone immediately. Take your time when making an investment into any business that appears to have easy entry. Appeals such as "get in on the ground level" and opportunity will be lost "if you don't pay now" are common ruses to distract you.

* Conduct your own background investigation. Contact numbers should be clearly labeled in the company literature. Call your local Better Business Bureau and the DSA (202-293-5760 or www.dsa.org) for information on legitimate companies. The DSA distributes free brochures on pyramid schemes and business opportunity frauds. For information on Internet-based pyramid schemes, contact the National Fraud Information Center (800-876-7060 or www.fraud.org). If you become aware of an illegal pyramid scheme, contact the FCC's Consumer Response Center at 800-554-5706 or online at www.ftc.gov.

RELATED ARTICLE: HOW A PYRAMID SCHEME WORKS

IF ONE PERSON RECRUITS SIX AGENTS, EACH OF-WHOM, IN TURN, RECRUITS SIX OTHERS, HERE'S HOW THE NUMBERS WOULD MULTIPLY IN THEORY. MOST PEOPLE, HOWEVER, FAIL TO RECRUIT NEW MEMBERS AND THE PYRAMID SOON COLLAPSES.
Level1    3
Level2    36
Level3    216
Level4    1,296
Level5    7,776
Level6    46,656
Level7    279,936
Level8    1,679,616
Level9    10,077,696
Level10   60,466,176
Level11   362,797,056




(HIGHER THAN THE TOTAL U.S. POPULATION)
COPYRIGHT 1998 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1998, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Article Details
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Title Annotation:Consumer Alert
Author:Coward, Cheryl
Publication:Black Enterprise
Article Type:Brief Article
Date:Feb 1, 1998
Words:728
Previous Article:Do you hire in-home help? Here's how to protect yourself from problems down the road.(Consumer & Insurance, part 3)(Brief Article)
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