Ponzis and Pyramids Ignored or Protected by FTC Consumer GroupCharges

Ponzi'ss and Pyramids Ignored or Protected by FTC, Consumer Group Charges

Consumers in the US Suffer as much as $10 billion in Annual Losses from Ponzi and Pyramid Schemes, due to Negligence and Corruption at the FTC, a Consumer Group Charges. In a 21-Page Whistle Blower'ss Report, the Non-profit Group, Pyramid Scheme Alert, Charges that the Federal Trade Commission has been Politicized and Muzzled by Conflicts of Interest and Lobbyists for Pyramid Selling Schemes.

Charlotte, NC -- A consumer organization is asking Congress to investigate the actions of the FTC, charging that the FTC, like the SEC, has ignored and protected pyramid and Ponzi schemes, causing as much as $10 billion per year in consumer losses. The losses over time are far greater than those suffered by investors in Bernard Madoff'ss Wall Street Ponzi.

Pyramid Scheme Alert, a non-profit consumer group founded in 2000, has released a 21-page whistle-blower'ss report that details a dramatic shift in FTC policy that began in 2001 and has left the public exposed to deceptive business opportunity frauds. Most of the schemes are disguised as multi-level marketing (MLM) companies or as online cash gifting schemes. The report, entitled, The Main Street Bubble: A Whistle Blower'ss Guide to Business Opportunity Fraud; How the FTC has Ignored and Now Protects It was written by the group'ss president, Robert L. FitzPatrick.

The report outlines evidence that the FTC policy change followed the 2001 appointment by President George W. Bush of attorney Timothy Muris as FTC chair. Muris came to the job from a law firm that counted among its largest clients, the multi-level marketing company, Amway. He currently serves as an attorney/lobbyist for another multi-level marketing company with specific responsibilities to influence the FTC on behalf of the MLM company.

Among the FTC actions that the report discloses include:

* Abruptly ceasing nearly all investigations and prosecutions of pyramid selling schemes from 2001 forward

* Consistently neglecting previous enforcement orders against Ponzi and pyramid schemes

* Removing the FTC'ss internal expert on pyramid schemes from investigations and analysis of Ponzis and business opportunity frauds.

* Publishing a widely circulated letter in which the legal foundation for prosecuting pyramid selling disguised as direct selling was weakened and questioned

* A revolving door pattern at the FTC in which some pyramid lobbyists became FTC officials and some FTC officials later became pyramid lobbyists.

* Exempting multi-level marketing companies from rules that would offer protection to consumers from fraudulent income opportunity solicitations.

The effect of these FTC actions, the report concludes, has been to allow the spread of the endless chain into mainstream business, a deceptive marketing lure that causes 90-99% of all investors to suffer losses. The Endless Chain Pyramid is a Main Street version of the Wall Street Ponzi.

In a Ponzi scheme, the perpetrators lure new investors to invest their savings based on promises of high income which they claim is from profitable trades and other investments. Perpetrators, in fact, use the investors's own capital investment funds to pay earlier investors in an endless and unsustainable system that requires constant recruitment of new investors, which is impossible. There is, in fact, little or no external revenue (income from trades and investments). The scheme is a closed market. The vast majority of the latest investors are doomed to losses.

In the Main Street version, the perpetrators lure consumer/investors to pay fees and make purchases based on promises of high income in a business which they claim is based on direct selling(retail sales to the general public). Perpetrators promise a high income to new distributors if the consumer/investors themselves recruit others to also join the business opportunity as distributors. They, in fact, transfer the capital investment funds from later distributors to those at the top in an endless and unsustainable system that requires constant recruitment of new distributors, which is impossible. There is, in fact, little or no external revenue from direct selling (income from retail sales to the general public). The scheme is a closed market of distributors (investors). The vast majority of the latest investors are doomed to losses.

The report details the extraordinary insider connections, political influence-buying and large-scale political contributions of the pyramid lobby resulting in political protection of endless chain schemes from law enforcement at the FTC.

Pyramid Scheme Alert is all-volunteer, non-partisan and non-profit. Its website, is visited by thousands of consumers, journalists and regulators worldwide each month. The author of the report, Robert FitzPatrick has served as expert witness or consultant in more than 20 court cases involving pyramid and Ponzi schemes. He provided consulting services in combating pyramids to the government of Sri Lanka in 2005. He recently worked with Canadian CBC news show, Marketplace in an undercover investigation of a pyramid selling scheme. He is author of the book, False Profits (http://www.falseprofits.com), the first book to critically examine the multi-level marketing industry. He has also provided consulting and expert witness services to State Attorney'ss General, the Better Business Bureau of Dallas, Texas and to law enforcement in Fresno County, California.

A digital file of the report is available to the media. Contact Robert L. FitzPatrick, President, Pyramid Scheme Alert, in Charlotte, NC, 704-334-2047, http://www.pyramidschemealert.org

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