Cagey Consumer

Authorities Say Internet Pyramid Schemes Dupe Thousands

original article

Associated Press, 11/08/98 23:11 BOSTON Massachusetts

In July, 200 people filled a function room at the Newton Marriott to find out how they could get rich.

They just had to pay $6,250 to join the Global Prosperity Group, and the money would pour into their pockets, a speaker told them during the eight-hour seminar.

But that tempting promise was nothing more than a high-tech pyramid scheme allegedly crafted by an elusive company, according to state and federal investigators.

Upon learning of the meeting at the hotel, Massachusetts regulators served Global with a cease-and-desist order - an order that has been ignored, according to The Boston Globe.

Authorities say the company is being tracked by the FBI, Federal Trade Commission and Postal Inspection Service, though none has taken official action against Global. Investigators allege the case is just one of a growing number involving companies using the Internet to pull off sophisticated pyramid schemes.

In July, New Jersey authorities ordered the Texas-based Global Marketing Group to stop using the Internet to lure investors into participating in a scheme that promised they could earn up to $4,800 a month in commissions and receive unsecured credit lines of up to $15,000, despite credit problems.

That same month, the Federal Trade Commission won a civil settlement in which more than 15,000 people around the world would receive refund checks of $300 to $500 after losing money in Internet pyramid schemes called the Fortuna Alliance and its successor, Fortuna II.

In March, federal regulators charged that Washington-based International Heritage Inc. was a front for a fraudulent pyramid scheme that raised over $150 million from more than 155,000 investors. The company described itself as a purveyor of fine jewelry, luggage, collectibles and golf equipment.

Federal and state regulators say financial fraud committed in part over the Internet has been on the rise in recent years.

In July, the Securities and Exchange Commission set up an Office of Internet Enforcement, in which a ``CyberForce'' of 125 staffers performs computer surveillance nationwide.

Officials from the Global Prosperity Group deny the company is a front for a pyramid scheme.

But former members told the Globe they took part in nightly telephone motivational meetings and teleconferenced prayer sessions. They said they went broke in the process, some having spent more than $40,000 in pursuit of wealth.

Global tells members they can earn six-figure incomes if they buy a $1,250 set of audiotapes and a series of ``exclusive offshore seminars in tropical locations,'' according to former members, investigators and company literature.

The company's two founders, Dan Andersen of Fitchburg and David Struckman of Renton, Wash., could not be reached, but Anderson - through his attorney - denied any wrongdoing by the company.

Government officials said Global's promotional material depicts a classic pyramid scheme, in which new members must pay $1,250 for audiotapes, and give that money to their ``director.'' Before they can begin making money, new members also must recruit two more people to buy the tapes. Those new recruits must each bring in another two, for a total of six.

Once the quota is met, the original recruit - who gives the money from the six recruits to his or her director - then becomes a director.

"It's a huge money machine," said one federal investigator. "I've never seen anything quite like it."

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Posted November 22, 1998