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ATTORNEY GENERAL TARGETS ILLEGAL PYRAMID SCHEMES
August 21, 2001
AUGUST 21, 2001
CONTACT: Linda Conti, Assistant Attorney General
The Attorney General's Office announced today that it has sued Theodore McLeod, Jr. of Hermon, Maine for promoting a pyramid scheme. Pyramid schemes are illegal money making ventures in which large numbers of people at the bottom of the pyramid pay money to a few people at the top. Each new participant pays for the chance to advance to the top and profit from payments of others who might join later.
Promoters of pyramid schemes refer to them as investments or gifting programs with the hope that consumers will believe their claims that the scheme is not illegal. A scheme known as the NASCAR Racing Club operated in several Maine counties earlier this year. It now appears that the NASCAR pyramid has collapsed, leaving many Mainers out the initial investment of up to $5000.
The Attorney General continues to investigate these schemes and anticipates that more lawsuits will be filed in the future.
New schemes are being created all the time. Attorney General Steven Rowe warned, "Because promoters of these types of programs try to convince consumers they are legal, it is important to know some common factors so you can recognize the pyramid scheme, including the following 'red flags':
- Money is made by recruiting distributors or investors;
- Your initial investment buys you the right to recruit others for profit;
- There is high pressure to join or 'buy-in.'"
Attorney General Rowe noted that his Consumer Protection Division is working hard to shut down all of the pyramid schemes in Maine but strongly urges consumers to recognize the warning signs and steer clear of these bogus plans that offer unbelievable short-term returns. Furthermore, he asked consumers who have been approached about joining such a program to contact his Consumer Protection Division at 626-8800.