OFFICER LINKED TO `PYRAMID' MONEY SCHEME.
An LAPD Devonshire Division police officer has been indicted and other LAPD officers are being probed in separate investigations of illegal ``pyramid'' chain investment schemes that promise windfall profits, police officials said Tuesday.
The probes targeting Los Angeles Police Department officers mark the latest in a series of recent pyramid scheme scandals that have rocked law enforcement agencies in the Southland, authorities said. The cases now stretch from Simi Valley to Riverside County.
``The bottom line is that I think there are people that get lured by the chance of making some quick money,'' said James Ellison, senior deputy district attorney in Ventura County. ``They hear somebody say that it's not illegal because of this catchy thing (they've) done. They really don't want to find out whether it's legal or not.''
In an illegal pyramid scheme, ``investors'' put up a certain sum of money on the promise of a windfall payout if they recruit more people to enter the scheme. Those at the top of the pyramid receive payments from those below them, but police say those at the bottom are left with losses when the pyramid collapses.
There is no product in these schemes, which are variously dubbed ``Friends Helping Friends,'' or ``Money Tree Gift Exchange,'' Ellison said. They are based strictly on the exchange of cash, he said.
Ellison said he was troubled that so many police officers have been caught up in the schemes.
``That astounds me, why this time around it seems so heavily law enforcement involved,'' he said.
Darryl Mounger, an attorney representing Devonshire Division Officer Amby Owens, said he could not explain why officers get involved in such schemes.
``Apparently they didn't know better - they are no different than anybody else,'' he said. ``I know it's gone on in three different counties - more than that - Riverside, Orange, Los Angeles and Ventura.''
In Los Angeles, officers have been questioned by the LAPD about ``endless chain'' schemes in which participants are promised an $8,000 payoff when they recruit eight people to put up $1,000 each.
Owens, a 19-year veteran, is facing charges in Ventura County. Last week, the LAPD's Internal Affairs Division served search warrants on the home and car of at least one officer who works in the Central Division.
LAPD Cmdr. Tim McBride, spokesman for the department, refused to comment about any personnel matter.
``Pyramid schemes in general would be viewed as misconduct, as they are illegal activity,'' McBride said. ``Some people don't think their way through it before they get involved - both civilians and officers.''
Owens, 47, was indicted by a Ventura County grand jury last month on a felony charge of ``operating an endless chain.'' However, he has not been charged formally with misconduct by the LAPD.
``He didn't make any money on this,'' said Mounger, Owens' attorney, adding, ``when he was advised there was a problem with this, he returned everybody their money.''
Calling his client an ``outstanding police officer,'' Mounger said: ``This obviously is going to destroy him and his image.''
The Owens case arose out of the pyramid scandal that rocked the Simi Valley Police Department in which five officers lost their jobs, two of whom were convicted in a pyramid scheme, Ellison said.
The two convicted officers, Raymond Madden and Michael Cratch, resigned from the Police Department with two other officers who were linked to pyramid schemes by witnesses who testified to the grand jury. A fifth officer was fired after being linked through grand jury testimony.
Ellison said that officers were not the majority of those involved in the Simi Valley pyramid scheme discovered in the past summer. But, he noted, a ``large number'' were involved and that some even used false names to cover their involvement.
One key, he said, is that the leaders of the schemes claim they are legal, based on the word ``endless'' in the law. ``The penal code section outlaws endless chains, so they say, `We're going to put an ending date on ours, therefore it is not an endless chain.' ''
Ellison noted that the claim is bogus and the scheme still violates the law.
``The end date doesn't make it any difference,'' he said, ``since the whole scheme is dependent on getting new members in order to redistribute money.''
Ellison said that all the law enforcement officers were charged with a felony, but so far there have been only misdemeanor convictions. The penalty for a felony is a maximum of three years.
Owens was indicted after being caught up in the undercover investigation in Simi Valley, Ellison said. He was indicted by a grand jury April 17 and was arraigned May 1, and is free on his own recognizance.
According to grand jury testimony, Ellison said, Owens ``purported to be a chairman, and told people at a meeting ``all about the operation of the pyramid - Money Tree Gift Exchange.''
Diane Marchant, an attorney who represents officers, said she recently issued a warning to the law enforcement community by writing a trade publication article titled ``The Perils of the Pyramid.''
``The bottom line is, if you are in one of these, get out,'' she said.
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||May 8, 1996|
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