Prosecutor warns about pyramid scheme

ELLSWORTH – The top state prosecutor for Hancock and Washington counties Monday warned of the rise of moneymaking pyramid schemes in the area.

Hancock County District Attorney Michael Povich said he called a news conference about such schemes after he learned of somebody who had attempted to borrow money from a bank in order to participate in one of the plans, dubbed “Women Helping Women.”

According to Povich, the women-only group seeks guests to attend mock birthday parties. Once at the “party,” guests can become “appetizers” by making $5,000 contributions. With similar investments at each subsequent meeting by new appetizers, a person is able to become one of four “soup and salads,” one of two “entrees” and finally, the single “dessert.”

After becoming a dessert, a participant receives a birthday party in which she receives $40,000 from the eight newest appetizers to join. “Essentially, a total of $160,000 will have to be raised before a person will receive the $40,000 because you have to move through all four levels,” Povich said.

Under state law, anyone who organizes or participates in a multilevel pyramid scheme could be found guilty of a misdemeanor, resulting in a fine of up to $5,000 and 11 months in jail. “It has the appearance of being legal because all of the money that changes hands is considered gifts,” Povich said.

The problem with pyramid schemes is that the people who invest late don’t end up seeing returns if no more new appetizers participate. In that instance, Povich said, the scheme usually falls apart.

Povich will act as a conduit for the state Attorney General’s Office for complaints about the program in Hancock or Washington counties. His office may be reached at 667-4621.