Attorney General's News Release

March 20, 1998

Nixon warns Missourians about pyramid schemes

Jefferson City, Mo. — Missouri Attorney General Jay Nixon today warned consumers to beware of investment schemes that promise easy money for entering "on the ground floor of a new business opportunity." Such schemes, he said, are often illegal pyramids.

A pyramid scheme is any situation where the primary way of making money, commissions, or completion of purchase agreements is by getting others involved in the organization. Nixon said his office has received reports from southwest Missouri and other parts of the state of current schemes that may involve products like jewelry, crystal or gold coins, but actually rely on the recruitment of more participants as the way of making commissions.

"The names may change, but the scam is the same," Nixon said. "Pyramid schemes are illegal, regardless of the form they take. Consumers should steer clear of any scheme in which they do not make money unless they recruit others to participate in the scheme."<

Nixon said his office has received complaints about a North Carolina company called International Heritage Inc. In the past week the Securities and Exchange Commission has taken action against IHI.

Nixon said that under Missouri law, recruiting people to participate in a pyramid is a felony, punishable by up to five years in prison and a maximum $5,000 fine. In addition to criminal penalties, pyramid operators are subject to civil liability.

"Operators often claim they are not running a pyramid and claim to be endorsed by officials from other states. Nothing could be further from the truth," Nixon said. "Investors quickly find they can no longer recruit more participants. The pyramid then collapses, leaving most participants with little, if any, chance of recouping their money."

Nixon encourages anyone who has information or questions about pyramid schemes to call the Attorney General's Consumer Protection Hotline at 1-800-392-8222.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818