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Michigan Attorney General's Office Warns Against Internet Pyramid Scheme

According to a report in the Detroit News, participants could be charged with a felony for buying into the program which is being classified as a 'wealth redistribution' scheme.

The promotion boasts that participants can turn $120 into more than $116,000 without selling a thing and goes on to describe an internet based "business" which has been considered by state officials to be an illegal pyramid selling scheme.

The company, Pentagono, a division of Future Strategies International in Italy was served with a cease and desist order by Michigan in January.  The Securities and Exchange Commission in Atlanta is also on a growing list of organizations investigating the company.  "All are skeptical about the company's 'wealth redistribution program'." writes Noreen Seebacher in the Detroit News.

Promoted on a web site and dozens of home pages set up by participants, the offer is to pay $120 to add your name to a list of participants.  Part of the money is sent to the company and part to the person whose name is first on the list.   The promised riches are to be expected when your name reaches the top of the list.   The booty could amount to thousands of dollars, according to the promoters.

Pyramid schemes are illegal in the United States and many other countries, as are chain letters.  In some references on the internet, Pentagono is called a multi-level marketing opportuntiy and an "electric chain letter".  One distinguishing characteristic between a chain letter and a bona fide multi-level marketing opportunity is the value of some business purpose.  In other words, "What is the company selling?" An illegal pyramid scheme or chain letter has no business purpose, but an emphasis on getting other people to sign up.

What's Pentagono sell?  Participants say the company is in the business to promote "certificates" that are bought by new participants and distributed to others whose names are higher up on the list.  When joining, a new member receives a Suprema card which promises "worldwide discounts".   Lindauer, a US attorney speaking for the company, said the discount card is the company's real product - and that the "certificates" are part of the company's compensation structure.

Whether or not Pentagono will withstand scrutiny remains to be seen.   Pentagono and parent company, Future Strategies International, must be concerned that their Suprema card is not widely accepted.  In fact, the card is not valid at any Michigan businesses, according to their Web site.

For more information about the difference between legal and illegal companies in the United States, visit the library.   Particularly appropriate is this article: Identifying Illegal Pyramid Schemes.

For more information, read State Warns Against Internet Pyramid Scheme by Noreen Seebacher in The Detroit News, May 2, 1999.