State Attorney General Files Suit Against Promoters of Pyramid

“Washington Attorney General Christine Gregoire has filed a lawsuit against 13 promoters of Renewal Celebration, what the Attorney General’s Office is describing as a large-scale illegal pyramid scheme that has been operating out of the Tri-Cities area. The suit stems from a Renewal Celebration meeting in Kennewick last September. Plain-clothes police officers estimated as many as 1,800 people attended with as much as $2.1 million put in circulation during the evening. The officers broke up the meeting and with court authorization seized various records and approximately $50,000. Pyramid schemes are an old consumer fraud, according to the AG’s Office, and have been reappearing recently throughout the state, including in the Tacoma area. Pyramid schemes are illegal, Gregoire said. People are enticed to join in with the promise they will get more cash back than they contribute, but the reality is, the vast majority of people involved lose everything they invest. Benton County Prosecutor Andy Miller endorsed the filing of the lawsuit. Even after money and records were seized from the committee, they simply moved their illegal scheme outside Benton County, Miller said. The attorney general’s action is exactly the step needed to attack this problem on a statewide basis. Gregoire praised the efforts of Benton County law enforcement officials in investigating the Renewal Celebration. She described the suit, as a cooperative effort between the AG’s Office, the Benton County Prosecutor’s Office, and the Kennewick and Richland police departments. Kennewick and Richland detectives conducted an investigation and attorneys from the AG’s Office prepared the suit, which alleges violations of the Consumer Protection Act and Chain Distributor Schemes Act. Gregoire said the 13 defendants formed a committee to promote illegal pyramid games under the guise of gifting programs. Since pyramid schemes are illegal, many operators are now labeling them as gifting groups or clubs, often with wholesome themes such as family, church or self-help. One gifting operation, Creating a New Paradyme, has been operating from Freighthouse Square in the Tacoma Dome area. The defendants have previously operated under the names Northwest Gifting, Friends and Family, Northwest Family, and Jubilee Celebration. These 13 individuals have cloaked their scheme in feel-good words like gifting and renewal celebrations, but it is nothing more than an age-old scam that separates a lot of people from their money, Gregoire said. The lawsuit seeks to stop the defendants from operating pyramid schemes, pay restitution to those who lost money, pay civil penalties of up to $2,000 per violation and reimburse the state for legal fees. The state’s suit contends the defendants invited people to attend the Renewal Celebration and participate in boards or reports. In a typical board, eight individuals would be recruited to join seven existing members in a 15-member board. The board is registered by event organizers in a pyramid configuration, with the eight new recruits placed at the bottom, four members above them, two more at the next highest level, and a single person at the head of the board. The eight new recruits would each pay $2,000 to the person at the head of the board. The top person then moves off of the board with $16,000 in cash. The board is then split in half, with the two people from the second tier moved to the top of the new pyramids. The two new boards must then recruit eight new members, so it takes 16 people to pay off the top two people. Organizers also reportedly ran seven-member pyramids which required an investment of $6,000 and paid $24,000. Gregoire said the people who get in first are usually the only ones who make money because the deeper you go into a pyramid, the harder it is to find new participants. The 13 defendants we have sued today are perpetuating a fraud, Gregoire said. They have given it a new name, but it’s the same old game, and despite the rosy promises, only a few people here will walk away winners. The vast majority will lose everything. Members of the committee reportedly falsely claimed that the payoffs were tax-free because the IRS code permits gifts of up to $10,000 a year without tax liability. They also reportedly falsely implied the Attorney General’s Office had ruled the program was legal. Gregoire said her office is beginning to hear about pyramid schemes collapsing around the state. Stories of fistfights and people who could ill-afford to lose money realizing they have lost everything. Pyramids are especially insidious because in the end, people are likely to victimize their friends and loved ones, Gregoire said. They divide families and splinter our communities.”