Subject: Re: Money for Howard fans
From: [email-masked] (Douglas J. Goglia)
Date: 10 May 1995 21:03:19 GMT
Newsgroups: alt.fan.howard-stern

C. Francis Pineda ([email-masked]) wrote:
: PLEASE LISTEN BEFORE YOU START FLAMING ME. I THOUGHT THESE
: THINGS WERE SCAMS ALSO BUT IN THE LAST WEEK I RECEIVED
: $50,000 IN THE MAIL FROM PEOPLE AROUND THE WORLD.  I DON'T
: KNOW ABOUT PYRAMID SCHEMES OR ANYTHING LIKE THAT BUT I DO
: KNOW I MADE $50,000 AND ALL I GAVE WAS 5 MEASLY BUCKS. I WANT
: OTHER PEOPLE TO JOIN IN MY GOOD FORTUNE!!!
:   -A satisfied customer!

:         INSTRUCTIONS

: Follow these instructions EXACTLY, and in 20 to 60 days you will
: have received over 50,000.00 dollars IN CASH.

[Deleted rest of scam solicitation]

Mr. Pineda:

Does the word "felony" mean anything to you?  Your solicitation violates 
a number of federal laws including but not limited to those relating to 
the sale of securities and wirefraud.  Surely youi don't believe all 
Howard's fans are stupid and gullible enough to be taken by a chain 
letter/pyramid scheme.  For your information, I'bve enclosed a 
publication prepared by the Direct Selling Foundation.

               PYRAMID SCHEMES:  NOT WHAT THEY SEEM!

DON'T MAKE A COSTLY MISTAKE!

     Thousands of Americans have lost millions of dollars
participating in pyramid schemes.  Many of the victims knew they
were gambling (although they didn't know the odds were rigged
against them).  Many others, however, thought they were paying
for help in starting a small business of their own.  These people
were fooled by pyramid schemes disguised to look like legitimate
businesses.

     The purpose of this publication is to help you avoid falling
victim to pyramid schemes, whether simple or disguised.  Simple
pyramid schemes are similar to chain letters, while disguised
pyramids are like wolves in sheep's clothing, hiding their true
nature in order to fool potential investors and evade law
enforcers.

WHAT IS A PYRAMID SCHEME?

     Pyramid schemes are illegal scams 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 payment of others who might join later.  A
typical pyramid scheme looks like this:

                        �������Ŀ                               
             Promoter   �       �������������������������������Ŀ
                        �       �                               �
                    ���������������Ŀ                           �
                    �       �       �                           �
                    �       �       �                           �
                    �       �       �                           �
                    ���������������Ĵ                           �
                    �   �   �   �   �                        $500 
                    �   �   �   �   �                           �
                    �   �   �   �   �                           �
                    ���������������Ĵ                           �
                    � � � � � � � � �                           �
                    � � � � � � � � ������������������Ŀ        �
                    � � � � � � � � �                  �        �
                    ���������������´                  �        �
                    �����������������                $500       �
                    �����������������                  �        �
                    �������������������New Participant�����������
                    �����������������

     To join you might be required to pay anywhere from a modest
investment to thousands of dollars.  In the above example, $1,000
buys a position in one of the boxes on the bottom level.  $500 of
your money goes to the person in the box directly above you, and
the other $500 goes to the person at the top of the pyramid, the
promoter.  If all the boxes on the chart fill up with
participants, the promoter will collect $16,000, and you and the
others on the bottom level will each be $100 poorer.  When the
promoter has been paid off, his box is removed and the second
level becomes the top or payoff level.  Only then do the two
people on the second level begin to profit.  To pay off these
two, 32 empty boxes are added at the bottom, and the search for
new participants continues.

     Each time another level rises to the top, a new level must
be added to the bottom, each one twice as large as the one
before.  If enough new participants join, you and the other 15
players on your level may make it to the top.  However, in order
for you to collect your payoffs, 512 people would have to be
recruited, half of them losing $1000 each.

     Of course, the pyramid may collapse long before you reach
the top.  In order for everyone in a pyramid scheme to profit,
there would have to be a never-ending supply of potential (and
willing) participants.  In reality, however, the supply of
participants is limited, and each new level of participants has
less chance of recruiting others and a greater chance of losing
money.

                     THINGS YOU SHOULD KNOW
                      ABOUT PYRAMID SCHEMES

     1.   They are losers.  Pyramiding is based on simple
          mathematics; many losers pay a few winners.

     2.   They are fraudulent.  Participants in a pyramid scheme
          are, consciously or unconsciously, deceiving those
          they recruit.  Few would pay to join if the diminishing
          odds were explained to them.

     3.   They are illegal.  There is a real risk that any
          pyramid operation will be closed down by police and the
          participants subject to fines and possible arrest.

         WHY WOULD ANYONE PAY TO JOIN A PYRAMID SCHEME?

     Pyramid promoters are masters of group psychology.  At
recruiting meetings, they rely on a frenzied, enthusiastic
atmosphere where group pressure and promises of easy money play
upon people's greed and fear of missing a good deal.  Thoughtful
consideration and questioning are discouraged.   It is difficult
to resist this kind of appeal unless you recognize that the
scheme is rigged against you.

                       DISGUISED PYRAMID -
                    WOLF IN SHEEP'S CLOTHING

     Because of law enforcement crackdowns, some pyramid
promoters attempt to make their schemes look like multi-level
marketing companies.  Multi-level marketing is a lawful and
legitimate business method which uses a network of independent
distributors to sell consumer products.

To look like a multi-level marketing company, a pyramid scheme
takes on a line of products or services and claims to be in the
business of selling them to consumers.  However, little or no
effort is made to actually market the products.  Instead, money
is made in typical pyramid fashion, from recruiting.  New
distributors are pushed to purchase inventory when they sign up.

     For example, you might be required to purchase $1,000 of
near worthless products in order to become a "distributor."  The
person who recruited you receives $500 (a fifty percent
commission) and $500 goes to the top (the company, in this case). 
Notice the similarity to the simple pyramid scheme diagramed
earlier.

     Most disguised pyramids, however, are not this easy to
unmask.  Pyramid schemes often choose products which are cheap to
produce but which have no established market value, such as new
miracle products, exotic cures, etc.  This makes it difficult to
tell whether there is a real consumer market for the products. 
The best way to avoid a well disguised pyramid fraud is to know
what to look for in a legitimate income opportunity.

                     MULTI-LEVEL MARKETING -
                 LEGITIMATE INCOME OPPORTUNITIES

     Multi-level marketing is a popular method of retailing in
which consumer products are sold, not in stores by sales clerks,
but by independent businessmen and women (distributors), usually
in customers' homes.  As a distributor you have the opportunity
to set your own hours and earn money based on your efforts
selling consumer products supplied by an established company.

     In a multi-level structure you also have the opportunity to
build and manage your own salesforce by recruiting, motivating,
supplying and training others to sell those products.  Your
compensation then includes a percentage of the sales of your
entire sales group as well as earnings on your own sales to
retail customers.  This opportunity has made multi-level
marketing an attractive way of starting a business with
comparatively little money.

                   HOW TO TELL THE DIFFERENCE
                  BETWEEN A LEGITIMATE BUSINESS
                 AND A DISGUISED PYRAMID SCHEME

     Pyramid schemes seek to make money from you (and quickly). 
Multi-level marketing companies seek to make money with you as
you build your business (and theirs) selling consumer products. 
Before you sign up with a company, investigate carefully.  A good
way to begin is to ask yourself these three questions:

     1.   How much are you required to pay to become a
          distributor?

     2.   Will the company buy back unsold inventory?

     3.   Are the company's products sold to consumers?

1.   Start up Cost?  IF THE COST IS SUBSTANTIAL, BE CAREFUL!  The
     start-up fee in multi-level companies is generally small
     (usually for a sales kit sold at or below company cost). 
     These companies want to make it easy and inexpensive for you
     to start selling.

     Pyramid schemes, on the other hand, make virtually all of
     their profit on the signing up of new recruits.  Therefore,
     the cost to become a distributor may be high.  CAUTION:  
     PYRAMIDS OFTEN DISGUISE ENTRY FEES AS PART OF THE PRICE
     CHARGED FOR REQUIRED PURCHASES OF TRAINING, COMPUTER
     SERVICES, PRODUCT INVENTORY, etc.  These purchases may not
     even be expensive or "required", but there will be
     considerable pressure to "take full advantage of the
     opportunity".

2.   BUY-BACK OF INVENTORY?  IF YOU COULD BE STUCK WITH UNSOLD
     INVENTORY, BEWARE!

     Legitimate companies which require inventory purchases will
usually repurchase any unsold products if you decide to quit the
business.  Some state laws require buy-backs for at least 90% of
your original cost.

3.   SALES TO CONSUMERS?  IF THE ANSWER IS NO OR NOT MANY, STAY
     AWAY!  This is a key element.  Multi-level marketing (like
     other methods of retailing) depends on selling to consumers
     and establishing a market.  This requires quality products,
     competitively priced.  Pyramid schemes, on the other hand,
     are not concerned with repeat sales to users of the product. 
     Profits are made on volume sales to new recruits, who buy
     the products, not because they are useful or attractively
     priced, but because they must buy them to participate in the
     scheme.

          HOW TO PROTECT YOURSELF FROM A BAD INVESTMENT

1.   Take your time.   Don't let anyone rush you.  A good
     opportunity to build a business in a multi-level structure
     will not disappear overnight.

2.   Ask questions:

     	    About the company and its officers.

     	    About the products - their cost, fair market value,
          source of supply, and potential market in your area.

     	    About the start up fee (including any required
          purchases).

     	    About the company's guaranteed buy-back of any required
          purchases.

     	    About the average earnings of active distributors.

3.   Get written copies of all available company literature.

4.   Consult with others who have had experience with the company
     and its products.  Check to see if the products are actually
     being sold to consumers.

5.   Investigate and verify all information.  Do not assume that
     official looking documents are either accurate or complete.

                      WHERE TO GO FOR HELP

     For assistance in evaluating a company, contact the Direct Selling
Association, 1776 K Street, N.W., Suite 600, Washington, D.C.  20036, your
local Better Business Bureau, your local district attorney or your state
attorney general.  If you suspect that a company or an individual may be
engaging in illegal pyramiding, contact your state and local law
enforcement offices and the Federal Trade Commission. 

                           MORE HELP!

     If you are thinking about paying for help in starting your
own business, disguised pyramid schemes are not the only danger. 
For help in spotting and avoiding business opportunity frauds,
the FTC's publication entitled Franchise and Business
Opportunities, as well as other FTC publications, is available on
the FTC Consumerline (gopher://consumer.ftc.gov:2416).

THIS FILE WAS COPIED FROM A PAMPHLET ORIGINALLY PUBLISHED IN 1989 BY THE 
DIRECT SELLING FOUNDATION.  ACCORDING TO THE DIRECT SELLING FOUNDATION, 
QUOTES AND REPRINTS ARE PERMITTED WITHOUT ATTRIBUTION!!!