Pyramid schemes targeted Federal judge dismisses A Woman’s Project suit

BANGOR – On the heels of a federal court victory against A Woman’s Project, an alleged pyramid scheme that bilked some Maine women out of as much as $5,000, the state Attorney General’s Office on Friday announced a stepped-up legal attack against a similar alleged pyramid scheme for men.

In addition, Assistant Attorney General Linda Conti warned the public of a third type of scheme that has cropped up in which organizers guarantee to help people recoup money they lost on either of the first two pyramid schemes. Conti asked the public to call the Attorney General’s Office at 626-8861 if they encounter such an offer.

Offers to recover money in such cases are not valid, Conti said. “People will be throwing good money after bad. It’s not uncommon to have copycat schemes. People may be desperate to get their money back,” Conti said. “If you lose money, report it, but don’t go to another scheme thinking you’ll gain the money back.”

The flurry of legal activity is a response to an increasing number of pyramid schemes invading the state that promise recruits a monetary windfall that virtually never materializes, according to staff at the Attorney General’s Office.

“We’ve been hit by a rash of pyramid schemes,” Assistant Attorney General James McKenna said Friday.

“I can’t explain exactly why they’re springing up like mushrooms,” McKenna said.

“These days, people can get cash advances on their credit cards. They figure why not drop $5,000 if they can collect $40,000 before the bill comes in,” McKenna said.

A Hermon man and a Baileyville man each have been sued by the Attorney General’s Office in connection with the NASCAR men’s club that operated in Maine earlier this year. Theodore McLeod Jr., a Hermon businessman and member of the town’s zoning board of appeals, and John L. Naddeau, a millworker from Baileyville, face civil lawsuits filed at Kennebec County Superior Court in Augusta.

The two lawsuits allege that the two men engaged in deceptive conduct in connection with an illegal pyramid scheme. The NASCAR club demanded $5,000 upfront from each participant. In turn, the investors were to recruit a minimum of eight other people who would invest $5,000 each. Those eight then would recruit more people. Upon reaching the top status of “race-car driver,” each member would get $40,000, according to the plan.

About 10 men complained to the Attorney General’s Office about the NASCAR scheme.

Efforts to reach Naddeau were unsuccessful Friday. McLeod has formally asked for an extension of time to reply to the civil litigation. He has hired an attorney. On Friday, McLeod’s father said he “knows nothing” about the lawsuit and that his son was out of town until “very late in the evening.”

No court action has been scheduled yet on either matter.

In the meantime, Chief Judge D. Brock Hornby of the U.S. District Court in Maine recently dismissed a federal lawsuit against Attorney General Stephen Rowe and the state’s eight district attorneys. The lawsuit had been filed last February by four female organizers of The Women’s Project who claimed Rowe and the state’s district attorneys violated the women’s constitutional rights to freedom of speech and association.

Judge Hornby left it up to the state courts, however, to weigh the issue of whether The Women’s Project, also known as Women Helping Women, is an illegal pyramid.

Portland attorney Jeffrey Thaler, who represented plaintiffs Deborah Henderson of Lowell, Meg Peterson of Brooks, Susan Hart of Belfast and Beth Connor of Washington, said Friday he had to discuss with his clients whether to appeal Hornby’s decision. Most of the women were out of the state as of Friday, Thaler said.

Thaler termed Hornby’s ruling a “partial decision.” He said the question of the legality of The Women’s Project most likely would be pursued at the state Superior Court level.

The case rose out of a press release issued by Michael Povich, district attorney for Hancock and Washington counties, who in January warned of “an illegal pyramid scheme loose in our community.” The women claimed Povich’s public warning chilled their First Amendment rights as membership dwindled in the group after the concerns were made public.

“Informal methods of enforcing the law, like a prosecutor’s statements to the press that he/she considers particular conduct illegal, do not violate First Amendment rights,” Hornby wrote.

“The plaintiffs have not alleged that the prosecutors were doing anything more than advising them and the public that in their view A Woman’s Project violates [the law barring pyramid schemes],” the judge wrote.