NMart seeks investigation by CID, how funny?

NMart filed a writ petition in Andhra Pradesh High Court seeking transfer of all criminal cases filed against the company to the Crime Investigation Department (CID), Hyderabad. The High Court admitted the petition and issued notices to the State Government and the Director General of Police to present their views on the petition.
Though it has to be wait and watch what the government would do in this respect, some basic questions arise regarding the writ petition.
Can a theif ask or demand that a particular police officer or a group of police officers should investigate his crime?
This is not first time such proposal was put forward by NMart. Earlier also, the same demand was proposed and that writ petition was wtihdrawn later.
WHY NMart is asking the judiciary to transfer the criminal to the CID is the moot point to be discussed at length. However, due to the constraints of many things, let us briefly discuss about the issue here.
The CID has the dubious distinction of prolonging the investigation for several years. Moreover, the CID never presses for the expedition of the trial in the court.
The cases in point are several instances.
The CID filed a criminal case against the Amway India Enterprises in 2006. The Amway India moved the AP High Court to declare its business model legal. However, the High Court in unambiguous terms stated that the business model of Amway is illegal.
Then Amway India tried its hand by moving a special leave petition in the Supreme Court. Unfortunately for Amway, the Supreme Court upheld the High Court decision.
Then following direction of the Supreme Court to complete the investigation in six months and file the chargesheet, the CID filed the chargesheet in the Chief Metropolitan Magistrate Court, Nampally, Hyderabad in 2007. 
For reasons better known to the CID officials at the helm of affairs, the name of the company i.e.Amway India was not mentioned in the chargesheet. When that was pointed out by a section of media and Corporate Frauds Watch, the CID officials included the name of the company in the chargesheet. 
After that the CID never bothered to pursue the case in the CMM Court.
The accused in the criminal case including the CMD of Amway India 'visit' the court occasionally whenever it was suited to them and ask for a date for the next appearance whenever suited to the accused.
Now it is more than six years, the 'farce' has been going on without taking the case to its logical end.
Then again in 2008, Corporate Frauds Watch filed a criminal case against GoldQuest International, which has duped Indian up to over 20 billion rupees. When several criminal cases were filed against the fraudulent company all over the State, the investigation was transferred to the CID in 2008. Even after five years, the CID did not file even the chargesheet in the court. It is not even sure whether it had completed the investigation into the whole murky deals of the GoldQuest.
The CID has also taken up investigation into the Rs. 30 billion fraud by speakasiaonline. The Singapore-based company had defrauded Indians and after Corporate Frauds Watch lodged a complaint, the CID has taken up investigation in 2011. The investigation remains incomplete till date forget about chargesheet.
Morever, there have been several allegations against the top CID officials regarding the investigation into these criminal cases.
In essence, transfering the case to CID means burying it fathoms deep. That is why the crooks of NMart has moved the High Court to transfer the case to the CID.
The reasons:
1. The accused would obtain the bail easily since there would be little resistance.
2. The case would be pending investigation for many years
3. After investigation the case would be pending trial for many years.
4.The accused would enjoy the 'fruits' of his crime without hindrance.
5. The accused would have to appear, if at all, before only one court instead of various courts throughout the State.
6. The accused would be able to start another racket before the law-enforcing agencies caught him.
7. The conviction, if at all, for the crime would not be in near future.
 When there are so many benefits, naturally, the thief asks for investigation into his crime by an officer of his choice.
P.S. After making many trips to various parts of Andhra Pradesh, Gopal Mohan Singh Shekhawat is now cooling his heels in the Ongole district jail comfortably with the luxuries his ill-gotten money provides him.

RMP Infotech writ petition dismissed in AP High Court

IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH

RMP INFOTEC PVT.LTD

VS

THE STATE OFAP.,REP BY PP.,HC.,HYD & 4 OTHERS

HON’BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU

Crl.P.Nos.9771, 10597, 10603, 11729, 12472, 12476, 12610, 12913 of 2011 and W.P.No.17544 of 2012

COMMON ORDER:

Crl.P.No.10597 of 2011 is filed by A.5 in Cr.No.338 of 2011 of  Arundalpet Police Station, Guntur; Crl.P.No.10603 of 2011 is filed by the accused in Cr.No.267 of 2011 of Old Guntur Police Station; Crl.P.No.11729  of 2011 is filed by A.1 in Cr.No.206 of 2011 of II Town Police Station,  Ongole; Crl.P.No.12472 of 2011 is filed by RMP Infotech Private  Limited relating to Cr.No.82 of 2011 of Santhamagulur Police Station;  Crl.P.No.12476 of 2011 is filed by the accused company in Cr.No.370 of  2011 of Pattabhipuram Police Station, Guntur; Crl.P.No.12610 is filed by  RMP Infotech Private Limited in Cr.No.387 of 2011; and Crl.P.No.12913  of 2011 is filed by the same Company in Cr.No.95 of 2011 of Kothapeta  Police Station for quashing respective FIRs under Section 482 Cr.P.C.
One of the main grievances of the petitioners in these petitions is that the  accused are being harassed by the police in Guntur and Prakasam Districts  by registering various crimes making the same or similar allegations in  all the cases.
It is contended by Senior Counsel for the petitioners that  instead of registering different cases, the police could have taken facts  relating to the subsequent FIRs as additional information in FIR registered  on the first occasion.  The said course suggested by the petitioners’ Senior Counsel could not have been adopted because facts/allegations in each FIR occurred within the territorial jurisdictions of different police stations in different districts.  The police from one police station may  not have territorial jurisdiction to make investigation into the allegations relating to other FIRs occurred within the territorial limits of other police stations either in the same district or in another district.  For that reason,  the premier crime investigation agency of the State namely CID took over all the above cases from Guntur Urban and Prakasam Districts vide Memo C.No.2614/C.12/CID/2012 dated 13.06.2012 of Additional Director General of Police, CID, Andhra Pradesh, Hyderabad for investigation; and all the matters were entrusted to Deputy Superintendent of Police, CID, RICU, Guntur for further investigation.
2. It is contended by Senior Counsel for the petitioners that business activity of RMP Infotech Private Limited does not attract any penal provisions of any enactment.  All the above cases were registered by the respective police against the respective accused in each case for offences punishable under Section 420 of IPC and Sections 4 & 5 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (in short, the Act).  It is contended that there is no element of cheating in the business activity attracting Section 420 of IPC much less activity of the petitioners and more particularly RMP Infotech Private Limited (in short, the Company) does not attract definition of ‘Money Circulation Scheme’ contained in Section 2(c) of the Act.  On the other hand, it is contended by counsel for the de facto complainant in Santhamaguluru Police Station that activity of the Company through its local branches in different parts of the State squarely attracts the definition under Section 2(c) of the Act.  It is further contended on behalf of the de facto complainant that activity of the Company resembles that of Speekasia Online Private Limited covered by unreported decision of this Court dated 30.08.2011 in Crl.P.No.5626 of
2011 and also that of Amway Case as laid down by this Court in Amway India Enterprises v Union of India[1].
3. In police proceedings/special report of the police which is FIR in Cr.No.338 of 2011 of Arundalpet Police Station, Guntur the business activity andmodus operandi of the Company is noted in the words of an independent distributor of the Company who was taken into custody, from the following lines:

“2. Mr.Pravin Jaya Chandan is the Managing Director, Mr.Dhaval Jaya Chandan is the Chairman along with few more directors of our company.
3. Head office is located in Chennai, Mahalingapuram.
4. In the beginning through multi level marketing I have purchased an Oven and Siyaram suit length for 6500 from RMP Infotec Private Limited and from that time I am working as independent distributor.
5. In the beginning when I joined the company as independent distributor, I submitted a demand draft of Rs.6500 in favour of RMP Infotec Private Limited payable at Chennai along with a completed
application, ID Proof, Age proof and Pan card at the franchisee located in Gandhinagar, Vijayawada and took my product from there.
6. There are 16 products in our company.
7. Whenever I sell these products to two people, the company gives a commission of Rs.1000 on my name.
8. In this way I have said my friends and relatives about this scheme and products, likewise 1 person grew into 2, 2 grew into 4 and so on and as of now I am earning Rs.60,000 as commission per week.
9. In the same way I have given training to other people and help them to increase the turnover.
10. There are 98 franchises of our company in India.
11. We are buying products and applications from these franchisees by paying the concerned prices through DD.
12. After purchasing product, all independent distributors are paid commissions on product sales.
13. We consider this as multi level marketing.
14. There are around 18000 people who have purchased products and are placed below me as distributors.
15. My ceiling money does not exceed 1,30,000 per week.
16. We some times conduct Business Opportunity presentation.
17. We keep on training our distributors and that’s how we increase our company sales.
18. We create complete confidence on our company to the public and cheat them by telling that they can make huge money in less time and make them join us as distributors.”
4. It is contended for the petitioners that the Company which  is based in Chennai is indulging in direct selling of products to the customers for lower cost which is upto 70% of maximum retail prize (MRP)
of the products by directly securing them from reputed Companies like Siyaram, Big Bazar, Wipro, HCL etc. and in that process, the Company avoids C & F Agent, Super Stockist, Stockist, Distributor, Wholesale dealer and retail dealer and also avoids cost of advertisement and that by virtue of direct selling of products to the customer/buyer who joins as
independent distributor/member of the Company and that in that process, the company earns huge profits out of which 35% is distributed among independent distributors.  In the process of business of the Company, when a member joins as independent distributor, by purchasing products of the Company, he has to sell the Company’s products to at least two new customers and in which event, he gets profits/commission from out of value of products sold by him to those two new members and also certain percentage of money paid by those two new members towards their membership.  Those two new members/independent distributors have to again sell the products by each of them
to two more outsiders; and the activity percolates to the downwards.  In all such types of Direct Selling or Multi level marketing, the process reaches a saturation level when new members joining at that level will not be able to sell products to any new members.
5. In State of West Bengal v Swapan Kumar Guha[2] three Judges Bench of the Supreme Court after re-arranging definition of Money Circulation Scheme in Section 2(c) of the Act, observed:
“On a plain reading of the said definition, the requirements of a
money circulation scheme are-
(i) there must be a scheme;
(ii) there must be members of the scheme;
(iii) the scheme must be for the making of quick or easy money on any event or contingency relative or applicable to the enrollment of members into the scheme or there must be a scheme for the receipt of any money or valuable thing as the consideration for a promise to pay money on any event or contingency relative or applicable to the enrollment of members into the scheme;
(iv) the event of contingency relative or applicable to the enrollment of members into the scheme will however not be in any way affected by the fact whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscription.”
6. This Court is of the opinion that at the threshold of the investigation, it may not be proper for this Court to scrutinize the alleged activity of the Company and its branches, independent distributors etc.
and to come to any conclusion whether the said activity attracts the definition of Money Circulation Scheme contained in Section 2(c) of the Act or not.
7. Senior Counsel for the petitioners also fairly submitted that even if investigation is allowed to be proceeded further, freezing of bank accounts of the Company by the police during investigation is causing untold hardship to the Company in its business activity.  For that reason, the Company filed Crl.P.No.9771 of 2011 questioning the same and seeking quashing of directions of Sub-Inspector of Police, Arundalpet (L&O) Police Station, Guntur directing IDBI Bank to freeze two CMS accounts of the Company in that bank, by way of letter dated 04.10.2011 addressed to the bank.  Further, after CID took over investigation of all the cases, Inspector of Police, CID, RCIU, Guntur addressed another letter dated 15.05.2012 to ING Vysya Bank Limited, Chennai to freeze another account of the Company pending investigation.  Questioning the same, the Company filed W.P.No.17544 of 2012.
8. It is contended by the Public Prosecutor that Section 7(1)(d) of the Act empowers the Investigating Officer to seize all things which are intended to be used or reasonably suspected to have been used in
connection with any Money Circulation Scheme.  It is further contended that it is only for the purpose of ultimate seizing of money which is derived from the Money Circulation Scheme covered by these offences, the Police Officers have frozen bank accounts of the Company.
9. As interim measure in Crl.P.No.9771 of 2011, this Court permitted the Company to withdraw Rs.11.00 crore from IDBI Bank to meet immediate needs of the Company towards his obligations to its employees etc.  It is reported that the Company could not withdraw the said amount as by then the Kerala High Court  also have passed an order relating to freezing of the said accounts.  In the circumstances and having regard to there being prima facie case for the prosecution, this Court is of the opinion that it would not be just and proper to allow the Company to deal with the bank accounts as it likes.
10. I find no legal or justifiable reason either for quashing FIRs in these crimes or for quashing letters of Police Officers freezing bank accounts of the Company pending investigation.
11. In the result, all the criminal petitions as well as writ petition are dismissed.  At the same time, in case of any compulsive circumstances and dire necessities, the Company is at liberty to approach
this Court by separate and independent petitions for withdrawal of portions of monies lying in the bank accounts.          

_____________________________

SAMUDRALA GOVINDARAJULU,J

Dt.11th December, 2012

2007(4) ALT 808 (D.B)
(1982) 1 Supreme Court Cases, 516

Tupperware indulges in illegal multilevel marketing

Tupperware is another American company which set foot in India in the name of direct selling after liberalization was introduced in the country. It also claims like other members of Indian Direct Selling Association  (IDSA)that it is a good business opportunity and the consumers would get benefit through this business model.
Like the products of all these direct selling association members, the products of Tupperware are also exorbitantly priced and one has to become a member by paying certain amount. Never ask the question why should anybody become a member to purchase products. That is the racket behind the business model.
But there is a difference in this business model. The Tupperware targets women, that too, upper middle class women, all over world. Generally, they are all housewives with 'disposable' income. They are induced with the pep talk of easy and quick money and good business opportunity sitting at home.
Once they fell for the trap, they are encouraged to make their friends and relatives to buy products by becoming members. The members who introduced the new members would also be rewarded with commission.
The women try their hand to enroll new members and sell the products to them. But it would be very difficult to sell a plastic water bottle for Rs. 250 though it is guaranteed to last for a life time. By the time they realised that it is not easy, they would be losing some thousands of rupees by way of buying kitchen plasticware.
Anyway, they do not realise that they are cheated. They believe that they could not do that 'wonderful business' like everybody and they themselves are to be blamed for the failure. They never realised that the scheme itself is cheating. On the other hand, they are afraid that their husbands would scold them if they learnt about it. Moreover, their friends and relatives who were joined into the scheme by them would never trust them again.
Vijayawada-based Corporate Frauds Watch filed a criminal case against the Tupperware. So far, the police could spare no time to investigate into the scam. Already several millions of Indian were duped into the scam and several hundreds of crores of rupees were siphoned out of our country.

Self-evidently, 'MLM' adherents have all been deceived into buying, and peddling, an 'opportunity' to commit financial suicide

Shyam

 

I observe that someone  called 'Kishore Reddy' has left a particularly infantile comment on Corporate Frauds Watch in which he ignores quantifiable reality (in the form of countless persons around the world who have all been tricked into losing their time and money, and sometimes their friends, families or lives, in blame-the-victim closed-market swindles and related advance fee frauds dressed up as 'MLM Income Opportunities') and, instead, treats us to the Cambridge Dictionary definition of the highly-ambiguous word, 'opportunity.'

 

'an occasion or situation which makes it possible to do something that you want to do or have to do, or the possibility of doing something.'
Fortunately, this classic, thought-stopping 'MLM' bullshit contains another, unambiguous word, 'given.' The use of this term (in its reality-inverting 'MLM' sense) clearly demonstrates that 'Kishore Reddy' is either an 'Amway' propagandist or an intellectually-castrated inhabitant of the 'Amway' fools' paradise; for this slimy little character follows the ritual script and insists that 'MLM' adherents are 'all given the situation or occasion to participate' and that no one is forcing them.

 

Now even a ten year old child should be able to see immediately that nothing is ever given to 'MLM' adherents (in the traditional sense of this word). They all have to pay (and continue to pay) through the nose to participate in their financially-suicidal so-called 'Income Opportunities.' 

 

I challenge the narcissistic racketeers behind 'Kishore Reddy,' to produce quantifiable evidence which would prove that any so-called 'MLM Income Opportunity' has ever generated any significant or sustainable revenue other than that deriving unlawfully from a never-ending chain of losing participants.

 

Self evidently, 'MLM' adherents have all signed up in ignorance of key-information, and thus, they have been deceived into buying, and peddling, an 'opportunity' to commit financial suicide. Indeed, during the final months of WWII, Japan's doomed, young army of thousands of so-called 'kamikaze' were also described as willing volunteers.

 

In the most extreme cases, destitute, dissociated and depressed former inhabitants of the 'MLM' fools' paradise have also taken their own lives.

 

David Brear (copyright 2012)

Thoughtless questions?: Thoughtful answers!

One of the poor inhabitants of the 'Amway' fools' paradise, Anshuman Sharma, has politely asked: 

You said 10 millions distributor signed in Amway and no body earned what they invest.

1) then how you say in early blogs MLM is quik and fast money?

2) if no body is earning how this orgnisation is running in more then 100 countries .and why distributors are get enrolled?

The answers to these questions are as follows:

• The only people who have been making quick and easy money in 'Amway'are the tiny minority who have been peddling the overwhelming majority (i.e. a never-ending chain of vulnerable participants) expensive places in a classic fools' paradise. Over the years, tens of millions of victims have been attracted into the 'Amway' trap by an offer of future easy money (i.e. 'total financial freedom'), but, to avoid the accusation that they are running a 'get-rich quick scheme,'  the 'Amway' racketeers have fostered the reality-inverting belief that only people who believe 100% in success and who are prepared to work hard for 2-5 years, will achieve 'total financial freedom.' Yet the quantifiable evidence clearly proves that no matter how hard you work in'Amway' or how much you believe that you will succeed, eventually, you can never succeed.

• Until the 1970s, the  'Amway' racketeers confined their clandestine cultic/criminal activities to North America. Only when faced with investigation and the possibility of closure, they began to move abroad to Australia, Europe etc.. As trade regulators/legislators around the world have slowly begun to understand how the blame-the-victim 'Amway' fraud functions, the 'Amway' racketeers have simply moved their abusive activities to countries where the problem is largely unknown. Vulnerable people continue to be fooled by the 'Amway' fraud, because the organization has maintained an absolute monopoly of information about the catastrophic results of the so-called 'Amway Income Opportunity.' Obviously, no one would join any so-called 'Income Opportunity' with an effectively 100% loss/churn rate, unless they were being deceived.

Corporate Frauds Watch

The 'Amway Income Opportunity' is a fools' paradise

Shyam

 

This week, I was contacted by a highly-educated, and deeply religious, Indian man living in Europe, who asked me:

 

• How can millions of Indians fall for this glittering Amway nonsense?

 

• How can my poor countrymen be so foolish as to think that there really are these wonderful Christian Amway billionaires in America who want to make non-Christians into millionaires?

 

This was my reply:

 

The fact is that there are vast numbers of decent people (Christians, Muslims, Jews, etc.) around the world who all genuinely believe that,when they die, they will enter paradise provided they continue to believe totally in the existence of paradise.

 

Now I don't believe in the existence of paradise, but if people want to believe, then they have every right to do so. What I do object to, is when charlatans exploit vulnerable persons' need to believe in future redemption, but actually peddle them places in a fools' paradise.

 

You should bear in mind that, despite all the scripted-bullshit regurgitated by deluded 'Amway Income Opportunity' believers, during the previous 50+ years, 'Amway's' echelon of amoral attorneys has always avoided answering the most basic, common-sense questions concerning the hidden results the so-called 'Amway MLM Income Opportunity.'  

• Since the organization's instigation, exactly how many people around the world have signed-up with 'Amway,' and exactly how many of these alleged 'Independent Business Owners' have got back more money than they paid in?

• What quantifiable evidence can you supply which would prove that the so-called 'Amway Income Opportunity' has had any significant and sustainable revenue other than that deriving unlawfully from a never-ending chain of losing participants?

 

In the adult world of quantifiable reality, the honest anwsers to these questions are as follows:

• Over the years, tens of millions of people have signed up with'Amway' around the world, but effectively none of them have got back more than they paid in.

• No quantifiable evidence can be produced which would prove that the so-called 'Amway Income Opportunity' has had any significant and sustainable revenue other than that deriving unlawfully from a never-ending chain of losing participants, for the simple reason that no such evidence exists.

In the light of these irrefutable answers, anyone with fully-functioning critical, and evaluative, faculties should immediately be able to deduce that the 'Amway Income Opportunity' is a fools' paradise. Classically, its inhabitants' belief is quite genuine, but what they believe in, is a cruel lie.

 

David Brear (copyright 2012)

Don't fall for promises of easy and quick money

Many people are arguing in this blog that why I have taken so much time to set the law in motion. Some others want a regulatory mechanism to bring order in multilevel marketing. 

When the law clearly says that becoming a member and enrolling others to become members in such schemes is prohibited under the provisions of Prize Chits & Money Circulation Schemes (Banning) Act, 1978, 1978, what is the point to have a regulatory mechanism to make an illegal act legal. It is an open illegal money circulation scheme.

I have made it clear several times, many people who join in these schemes want to earn easy and quick money though they know it is a crime. I have heard at one NMart retail shop, that NMart is going to file a writ petition in the High Court, and we could continue for sometime. It means that they know well that they are cheating their own friends and relatives to join such scheme. 

That is why people are vociferously raising their voice against me and even casting aspersions on my action.

Andhra Pradesh High Court in its judgement in the writ petition filed by speakasiaonline pointed out that "The first contention raised by the learned Senior Counsel is that First Information Report can be registered only on commission of an offence. It is true that First Information Report is to be registered on commission of an offence, more particularly, for a cognizable offence. Once a cognizable offence is committed, First Information Report can be registered. But at the same time, some of the provisions in the law enable the Investigating Agency to register First Information Report for mere preparation alone, for example, Sections 120-B, 399 of IPC and 7(1)(a) of the Criminal Law Amendment Act. Further, whether an offence committed or not always depends upon the ingredients mentioned in the provision of law. Some provisions in the penal laws made the preparation also as an offence. When the provision deals the preparation as an offence, the preparation itself is commission of offence."

The Supreme Court in its judgement in AR Antulay vs. RS Nayak (AIR  1984 SC 718) case stated that "Crime is a wrong against the society at large and therefore, as a general rule, any person having knowledge of the commission of an offense may set the law in motion by a complaint."

It is clear here that a person need not be a victim to lodge a complaint and anybody could complain whenever a crime takes place.

In the speakasiaonline case also, the racketeers raised the same question that the complainant made unjust demands and when it was not met, he lodged a complaint.

The High Court has looked whether there was prima facie offence in the complaint and when the crime was found it dismissed the writ petition.

This is exactly what is going to happen in the case of writ petition filed by the NMart.

In fact, the first complaint was lodged with the police way back in 2010 and had the police taken action at that time, the NMart would not have grown to this extent. Many people would have been saved. Now everyone is going to lose their hard-earned money. I really feel sorry for them. Many of them were lured by easy and quick money and high returns. Even today they strongly believe that they are going to earn a lot of money as per the promises of Gopal Shekhawat.

People should realise that it is a crime to join such schemes and that the friends and relatives they have joined in such schemes would never believe them in future if they suffer loss. If the mutual trust is lost, the society would collapse.

I appeal to the people all over world not to join such multilevel marketing companies and cause damage to the social fabric of our closely knit society.

Gopal Shekhawat's writ petition posted next week

In a sudden twist of the story, the NMart writ petition No. 27101 filed by NMart racketeer Gopal Singh Shekhawat seeking relief from the Andhra Pradesh High Court has reached the Bench of Justice K C Bhanu on Monday afternoon.
However, the counsels of both sides could not reach the court probably thinking it won't reach the bench in time.
But it did reach and since both the counsels did not appear, the Honourable Bench adjourned the hearing for one more week.
In effect, Gopal Singh Shekhawat has to wait for one more week sitting in some rat hole to learn that his writ petition was dismissed. Anyway, the petition would be dismissed once the judge hears how shallow was the argument and how the huge money was amassed by the accused in a short span of two years.
Meanwhile, the Corporate Frauds Watch filed its vakalathnama in the High Court to present its version of the daylight robbery indulged in by the accused persons in the now infamous criminal case.
It is already reported that the Police from Prakasam district are leaving no stone unturned to trace the whereabouts of Gopal Singh Shekhawat and his wife Pratibha who preferred to hide in some mysterious place.
Sources said that the police suspect that Gopal Singh might have left the country to hide in some foreign country though it is not yet confirmed.
Anyway, since he stashed a lot of money, he could comfortably settle anywhere in the world without bothering about the people whom he had cheated up to billions of rupees.

NMart manager arrested in Vijayawada

Machavaram police in Vijayawada city have arrested the local manager of NMart retail shop, J Leela Kumar for indulging in money circulation scheme by inducing members with easy and quick money.

SI Mohan Rao said that several hundreds of members joined in the scheme of NMart and it is a crime under the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
They are looking for the members who amassed sizable amount by joining members into the scheme, he said. However, it would take sometime to take stock of the situation before further arrests, he added.

Surya Micro's computer education is a money circulation scheme

Yet another cheating company in the name of computer education has cheated already thousands of people indulging money circulation scheme in the multilevel marketing. 

Bangalore-based Surya Micro Technologies with N H Raju at the helm of affairs has cheated the gullible up to several crores all over south India. According to information available, the fraudulent company has cheated the people of Karnataka and Kerala. It is not sure how many victims are in Andhra Pradesh and Tamil Nadu. This is also an open money circulation scheme in the name of service while Amway and others indulge in the same crime in the name of product sales. 

The modus operandi of this computer education conman is same that of MyVideoTalk.  After becoming a member, he/she has to enroll ten members and in turn these ten members have to join ten more members each. The initial payment at the time of joining is Rs. 1250. Thereafter the joined persons have to mobilise unauthorised deposits from the members ranging from Rs. 10,000 to Rs. 50,000 in various denominations. The promoters and members induce the gullible to believe that they would give high rate of interest apart from commissions on the joining of new members in the scheme.

They issue post-dated cheques for the satisfaction of the new entrants.

The whole fraud came to light when some of the cheques got bounced due to lack of sufficient funds in the account. Already several criminal cases were filed against the promoters and upline members. Already several criminal cases were booked against the fraudulent company. However, the police have yet to take action against the promoters who are on enrolling spree.

Corporate Frauds Watch is once again alerting the public not to fall prey to such crooks who offer high rate of interest on the unauthorised deposits. These type of schemes are liable for punishment under The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and Reserve Bank of India Act, 1934. Public are hereby alerted to be very cautious against such schemes and do not get enrolled and enroll others into scheme.

Amway only makes money not its distributors

One of our readers Ramu describes how only Amway makes money and almost all its distributors who are actually customers lose money.

Amway says it is building Distributors network. But actually they are building customer network. They give away distributorship for free and with no particular experience of selling products - because they are not making you a distributor but only making a customer of Amway.

Once a person become distributor (so called). He has to purchase stuff for his own use (this is forced by upline) and this is how Amway does business.

Distributors are themselves buying products for self or for family members.

Amway pays 21% to the distributor incentive to entire line. They give 20% commission to the distributor, they spend 7 - 8% on promotions/meetings/seminar and 3% is diamond/platinum member’s bonus. Amway as a Company earns 20% profit. So if you add all these around 80% of the MRP is distributed and the Product is just works out to 20% (including manufacturing cost, employee salary, infrastructure expenses etc).

So just imagine you are paying Rs 1000 for a Rs 200 product. Which customer is going to buy such a product??? 
I have worked with Amway (Alticor is the actual entity). And the so called Distributor information is saved in CUSTOMER Tables. So for Amway all distributors are just customers. The one higher on the line earns some incentives and the one below just dreams of getting higher. 

Tycoon money fraud kingpin in police custody

Kerala Police's Special Investigation Team (SIT) recently arrested Narayana Narasimhalu, chief of the Tycoon Empire International Ltd of Chennai, which has defrauded several millions of people all over South India up to Rs. 400 crore. The 36-year old accused, an MBA graduate was arrested after the SIT team raided his house at Valsaravakkam in Chennai. Police also seized four luxury vehicles and documents relating to 82 acres of land which the accused bought at Ooty, Coonoor and Palladam using the ill-gotten money.

The police said that the accused is the kingpin of the Chennai-based multilevel marketing company though he did not involve directly in its activities. "He was very much aware of the illegality and was careful not to use his name or address anywhere in the documents related to the marketing company or on its website. However, the accused was zeroed in after tracking the cash flow from various accounts in the Banks, the police said.

The company was registered in the name of his personal staff including driver and sweepers and they were later appointed as directors. He was staying in a multi-crorehouse at a posh residential area inChennai with four gates fixed with high definition security cameras, police said.

The 'Amway' bosses have recently confessed to running a Ponzi scheme

Shyam 

I observe that Corporate Frauds Watch has again attracted another little flock of bleating 'MLM' apologists. As ever, not one of them has offered to supply quantifiable evidence in the form of audited accounts (particularly, income-tax payment receipts) which might prove that at least one person has derived an overall net-benefit lawfully from regularly retailing significant qantities of over-priced 'MLM' wampum to the public for a profit.

 When will these thoughtless little lambs finally realize that CFW simply does not accept their 'MLM income opportunity' fairy tale? 

Your free thinking readers should, however, be interested in examining some remarkable new evidence and learn that Messrs Doug DeVos and Steve Van Andel (the billionaire bosses of the 'Amway' mob), have now foolishly confessed to running a Ponzi scheme (albeit not in so many words). No doubt the unmasked 'Amway' Lord Hee Haw, Mr. Steadson, will deny it and steadfastly continue to recite his 'MLM income opportunity' fairy tale. 

http://mlmtheamericandreammadenightmare.blogspot.com/2012/03/chairman-and-ceo-of-amway-have.html

 

David Brear  (copyright 2012)

Allen Stanford is yet another economic alchemist

Shyam 

The millions of Indians who are currently drunk on the fantasy that a miraculous means of earning money without any effort, exists, should take note of the following sobering information from the USA. 

Yesterday, despite his continued protestations ofinnocence, a Texas court found Allen Stanford (b. 1953) guilty of defrauding 30 000 persons in an Ponzi-style investment scam fronted by a labyrinth of legally-registered, but fake, corporate structures, including 'Stanford International Investment Bank' and 'Stanford Capital Management'. He now faces a maximum sentence of 20 years prison. 

On the pretext that he was able to invest money on the stock/securities market and always show a profit, over a period of 20 years, Stanford persuaded wealthy (and often highly-educated) persons (in more than 100 countries) to keep giving him their cash to invest.

At the height of his criminal activities in 2006, Stanford had 30 000 devoted followers who all totally believed that he was a talented investment banker and the 605th richest man in the world.  Stanford was linked to leading US politicians and sports stars.

In order to fool casual observers and prevent his victms from facing reality, Stanford used some of his ill-gotten gains to finance a lavish Twenty20 cricket competition in 2008, with a $20millions prize for the winning team. At this time, Stanford's victims had the same valueless pieces of paper which said that they owned a share of 'Stanford international Investment Bank's' $8 billions capital assets.

In the adult world of quantifiable reality, law enforcement agents have only been able to find less than $I billion.

http://www.bbc.co.uk/news/world-us-canada-17274724

http://uk.reuters.com/article/2012/03/06/uk-stanford-jury-idUKTRE82517220120306?feedType=RSS&feedName=topNews

http://www.bbc.co.uk/news/world-us-canada-17279419

David Brear (copyright 2012)

'Nutrilite Double X' is/was really a double cross

Shyam 

You latest post paints a frighteningly-familiar picture. 

On September 6^th 1949, two USAAF veterans, Richard De Vos (aged 23) and Jay Van Andel (aged 25), registered the ‘Ja-Ri Corporation (later to become known as "Amway").’ However, during the 1950s, this company was only the agent of another one, the ‘Nutrilite Products Company Inc.’ 

‘Nutrilite’ was a controversial trademark owned by Carl F. Rehnborg a.k.a. Dr. Rehnborg, an American toothpaste-salesman of German origin who’d reinvented himself as a visionary autodidactic nutritionist, chemist, and businessman. Lawyers from the US Food and Drug Administration Bureau of Enforcement, who challenged the authenticity of Rehnborg's absurd claims in the federal courts during two decades, privately knew him to be nothing more than one of a trio of sinister quacks protected by an echelon of shyster attorneys, who’d combined, and updated, the medicine show and pyramid scam to reflect the spirit of the age. Tellingly, the ‘Amway’ version of Rehnborg's life sounds like a thrilling comic-book yarn. 

In 1915, Rehnborg (aged 25) voyaged to China on business. After 12 years of living in the Far East (where he witnessed ‘mass-starvation’ and survived the ‘siege of Shanghai’ by supplementing his diet with an improvised ‘vitamin and mineral-enriched broth made from grasses, powdered limestone and rusty nails, etc.’) Rehnborg sailed across the Pacific and landed on the West Coast of the USA. Despite having no money, he managed to establish a 'research laboratory’ in his modest loft-apartment on California’s Balboa Island. Assisted by his dutiful wife (Edith), Rehnborg then selflessly dedicated 6 years of his life to develop a ‘Revolutionary New Food Supplement’ to save mankind from starvation. He first naively tried to give his wonderful new formula away, but the cynical world wasn’t interested. So, in 1934, he reluctantly decided to create ‘California Vitamins Inc.’ In 1939, Rehnborg moved his ‘Business’ to a ‘Manufacturing and Processing Facility’ in Buena Park, California, and created the ‘Nutrilite Products Company Inc.’ By 1947, acting in association with a ‘Network Sponsoring Company’, ‘Mytinger and Casselberry Inc.’ (to whom he’d sold ‘Exclusive Nutrilite Distribution Rights’) Rehnborg (aged 57) had created the ‘World’s First Multilevel Marketing Scheme.’ Starting from nothing, he had become an admired and respected millionaire by ‘Helping 15 000 Americans to start their own Businesses.’ 

There is no reason to doubt that Rehnborg (who worked for 'Colgate &Co') was in China during, and after, WW I; whilst the exciting episodes in his oriental odyssey (although highly-implausible) can be neither proved nor disproved. The truth about Rehnborg’s convoluted ‘Rags to Riches’ fairytale is an entirely different matter. In 1934, Rehnborg (aged 44) created ‘California Vitamins Inc.’, to manufacture and distribute what he arbitrarily defined as the ‘World’s First Multi-Mineral/Multivitamin Plant-Based Food Supplement - a Unique Combination of Vitamins and Minerals in a Special Base.’ At first, this so-called ‘Health Tonic’ was brewed up, and peddled, in insignificant quantities. Consequently, it was of no particular interest to regulators. However, anyone with an ounce of common sense could immediately tell that Rehnborg’s ‘invention’ was just another essentially-inert potion (in the absurd tradition of the medicine show); a random mixture of cheaply-procured common substances with an expensive price tag. It had probably taken Rehnborg 6 hours to concoct, not 6 years. 

By 1939, Rehnborg changed the name of his profitable game of make-believe to the technical-sounding ‘Nutrilite Products Company Inc.’ and moved his quackery onto an almost unprecedented scale. Soon, Rehnborg was legally employing dozens of white-coated workers in purpose-built industrial buildings in Buena Park,California, but it is unclear exactly where he suddenly found all the necessary capital to acquire his impressive site and equipment. To casual observers, Rehnborg’s activity looked like any other lawful enterprise. His staff were ordinary honest folk. At this time, Rehnborg rechristened his potion ‘Double X (a.k.a. ‘XX’) Supplement.’ He now proposed to offer it as two ‘complimentary products’ in one box - a jar of red ‘Multivitamin Capsules’ and a packet of bluish green ‘Multi-Mineral Pills.’ The whole package was deliberately designed to lookpure and scientific (like a proprietary medicine), but, tellingly, the price was fixed at just less than $20 a box (the equivalent of several hundred dollars today). Rehnborg claimed that the ‘XX’ brand-name was derived from the Roman numeral representing twenty. It should have been read as ‘double cross;’ for when the former toothpaste salesman’s pricey wampum was routinely analysed by independent chemists working for the FDA, it was discovered that (although it contained essentially what it said on the labels and was quite harmless) ‘XX Supplement’ really did mostly comprise a random mixture of cheaply-procured, common substances (dried vegetable extracts: alfalfa; parsley; watercress; yeast; etc.). FDA experts later estimated that ‘XX Supplement’  cost no more than a few cents a box to produce. Thus, FDA lawyers knew that Rehnborg was, in fact, mass-producing a placebo labelled as a ‘Health Tonic’ (a meaningless term) and peddling it at a huge mark up (probably around 1000%). This crack-pot pseudo-scientific swindle, which was tantamount to selling a valueless amalgam of base-metals for the price of pure gold, could have been quickly nipped in the bud simply by charging Rehnborg with fraud. Apparently, FDA lawyers felt obliged not to take this course of action; reasoning that, by truthfully listing the banal ingredients, but avoiding making any specific therapeutic claims, on his packaging, Rehnborg had found a loophole in federal laws concerning criminal misbranding of medicines. As result, the puerile‘Nutrilite’ lie was permitted to be released on the vulnerable American public without a visible challenge. Not surprisingly, a host of copy-cat‘Unique Vitamin and Mineral Health-Tonic’ scams quickly sprang up. 

As WWII drew to its close, ‘XX Supplement’ had lost its novelty, so Rehnborg (aged 55) teamed-up with two respectable-looking associates, Lee S. Mytinger and William S. Casselberry (later described by FDA officials as a ‘cemetery-plot salesman’ and a ‘psychologist’). The result was ‘Mytinger and Casselberry Inc.,’ a second corporate structure peddling ‘Exclusive Commission-Agency Rights’ to ‘Distribute XX Supplement’ using (what was first defined by the company’s owners as) a ‘New Business Model.’ In theory… you could try to sell ‘XX  Supplement’ to your social contacts for a small profit, but, if you wanted to make big money, you didn’t need to sell anything… you could buy a monthly quota of ‘XX Supplement’ yourself and sign-up your social contacts to do the same… your ‘Sponsored Recruits’ would then ‘Sponsor’ their own social contacts, etc., ‘compensation’ would automatically multiply in an infinitely-expanding geometric progression. ‘Mytinger and Casselberry Inc.’offered a mind-numbing ‘contract’ in which the ‘company’ undertook to pay its ‘Independent Distributors’ an escalating ‘monthly commission’ on the totality of their escalating ‘Business Volume’ [i.e.their own regular monthly purchases (falsely defined as ‘Sales’),added to the regular monthly purchases (falsely defined as ‘Sales’), of their ‘Sponsored Recruits’, and those of the recruits of their recruits, etc. etc. ad infinitum]. 

In reality, the new set-up was merely the original lie with a second chapter, but to casual observers ‘Nutrilite Products Company Inc.’appeared to be exclusively manufacturing for, and wholesaling ‘XX Supplement’ to, ‘Mytinger and Casselberry Inc.,’ whose commission agents, in turn, appeared to be retailing it on to the public. Although‘XX Supplement’ was presented as ‘Unique,’ it mostly comprised substances which could easily be bought at a fraction of the cost in traditional retail outlets. The assembled-product was effectively impossible to sell on the open market. Therefore, the overwhelming majority of final customers were the non-salaried agents of the second corporate structure, which itself was the sole agent of the first corporate structure. In order for them to maintain the false hope that if they signed-up further contributing participants they would automatically become rich, the participants in this camouflaged money game were obliged by its rules to hand over a monthly payment to Mytinger and Casselberry, to be shared with Rehnborg. From all points of view (medical, economic, legal, etc.), ‘XX Supplement’ might have well not existed, since it was just of laudering illegal payments in a closed market swindle. New victims were supplied with a $49.50 ‘Business Kit’ (i.e. a large cardboard box stuffed with a month’s supply of ‘XX Supplement’ and a fat folder containing page after page of mystifying pseudo-economic/medical presentations and diagrams, and instructions in how to go aboutremembering, contacting and recruiting everyone they’d ever known during their lives). These presentations contained the concrete evidence which FDA lawyers would later use to prosecute Rehnborg, Mytinger and Casselberry. Contributing participants were being instructed to smile, project enthusiasm, and to recite a precisely-worded script which proclaimed ‘Nutrilite XX Supplement’ to be ‘good value,’ because it could ‘cure or prevent,’ virtually any known human illness. 

Even though it wasn’t his area of responsibility, FDA Legal Counsel (1939- 1972), William H. Goodrich, was probably the first US law enforcement agent to deduce that the innocent baby that Rehnborg, Mytinger and Casselberry had baptised a ‘New Business Model’ (later to become known as: ‘Multilevel Marketing’) was actually the same old delinquent previously known as ‘multi-level pyramid selling.’ Again, anyone with an ounce of common sense could work out immediately that, since Rehnborg was a medical quack, the strong likelihood was that Mytinger and Casselberry were commercialquacks. The dubious trio were obviously acting in association, but agents of the Food and Drug Administration and those of the Federal Trade Commission acted independently. However, in the late 1940s, the rapidly-expanding ‘XX Supplement’ dossier was already in the hands of FTC lawyers. At this time, anti-racketeering legislation did not exist in the USA.  

By 1947, Rehnborg, Mytinger and Casselberry were steadfastly pretending  ‘15 000 Successful Distributorships in the USA,’ with ‘Sales’ totalling ‘$500 000 dollars per month.’ They had also organized the production of a ‘Free’ booklet, ‘How to Get Well and Stay Well’, in which they further pretended that ‘Nutrilite Double X Supplement’ had ‘cured or greatly helped such common ailments’ as : ‘Low blood pressure, Ulcers, Mental depression, Pyorrhoea, Muscular twitching, rickets, Worry over small things, Tonsillitis, Hay Fever, Sensitivity to noise, Underweight, Easily tired, Gas in stomach, Cuts heal slowly, Faulty vision, Headache, Constipation, Anaemia Boils, Flabby tissues, Hysterical tendency, Eczema, Overweight, Faulty memory, Lack of ambition, Certain Bone conditions, Nervousness, Nosebleed, Insomnia, Allergies, Asthma, Restlessness, Bad skin colour, Poor appetite, Biliousness, Neuritis, Night blindness, Migraine, High blood pressure, Sinus trouble, Lack of concentration, Dental caries, Irregular heartbeat, Colitis, Craving for sour foods, Arthritis, Rheumatism, Neuralgia, Deafness, Subject to colds.’

Rehnborg now cast himself in the role of ‘Scientific Adviser’ to‘Mytinger and Casselberry Inc.’ He toured the USA preaching thegospel to wide-eyed ‘Distributors’ - ‘for less than $ 20 a month’,‘Nutrilite Double X Supplement’ was the ‘Answer to Man’s Search for Health.’ After both companies’ owners were approached by FDA officials and warned that they could face criminal prosecution for misbranding, the booklet was ‘revised.’ Specific therapeutic claims were supposed to be eliminated. ‘All illnesses’ suddenly became a‘state of nonhealth’ produced by ‘chemical imbalance’.… ‘Nutrilite XX Supplement’ cured nothing, it merely ‘enabled people to Get Well and stay Well’ by themselves. However, pages 41-52 of the booklet still recounted alleged case-histories explaining that ‘Nutrilite brought relief from such ailments as diabetes, feeblemindedness, stomach pains, sneezing and weeping.’ Not surprisingly, the FDA officials were not impressed, so they finally launched a number of raids, and seizures of ‘Nutrilite XX Supplement’ and associated publications.

In 1951, after a series of lawsuits, appeals and countersuits (in which Mytinger and Casselberry hired top lawyers who portrayed their clients as  American capitalist heroes being crushed by Soviet-style bureaucracy), the FDA obtained (on behalf of the people) a permanent Supreme Court injunction against ‘Mytinger and Casselberry Inc.’preventing ‘Distributors’ from referring to 50 publications making false claims about ‘Health Tonics and Food Supplements’ (including various ‘Revised Editions’ of ‘How to Get Well and Stay Well’). FDA agents soon found that the injunction was being flouted. As result of mounting complaints, they infiltrated the organization (as potential recruits) and recorded deluded proselytizers chanting the same cure-all mantra about ‘XX Supplement.’ Faced with more litigation and fearing that their monopoly of information might be lost, in 1954, Rehnborg, Mytinger and Casselberry produced a 20 minute colour propaganda film, ‘From the Ground up’ (featuring themselves as three nice ordinary American guys turned philanthropic scientists and industrialists), and they began to publish their own propaganda magazine, ‘Nutrilite News’ (stuffed with colour photos of happy, healthy and wealthy ‘Distributors’). Soon, they were organizing ‘Rallies and Seminars’ (addressed by ‘Successful Christian Distributors’ like Rich De Vos and Jay Van Andel). No quantifiable evidence (in the form of audited accounts) was ever produced to prove what percentage of claimed ‘Sales’ were authentic retail transactions to the public, or how many people who’d signed a ‘contract’ with ‘Mytinger and Casselberry Inc.’ had actually generated an overall profit from the operation of what its instigators arbitrarily defined as a ‘Business/income opportunity’. Excluding the tiny percentage of grinning schills at the top of the pyramid, the hidden, rolling insolvency/churn-rate was 100%. Since there was effectively no external revenue, participants were actually buying infinite shares in their own finite money. In 1959, when it seemed that ‘Mytinger and Casselberry/Nutrilite Products Inc.’ might finally be shut down (under the ‘Federal Food, Drug and Cosmetic Act 3381-3383’, rather than anti-pyramid scams legislation) De Vos and Van Andel created the‘American Way Association’ - the first of what was to become a shoal of red, white and blue herrings. The original 'Nutrilite' lie was finally absorbed back into the spin-off 'Amway' lie, in the 1970s. 

David Brear (copyright 2012)

Another money circulation scheme vanishes with Rs. 300 million

Yet another company namely Forever Gold vanished after collecting about Rs. 300 million from the people of Northern district of Srikakulam in Andhra Pradesh with the promise of easy and quick money. The owners of this dubious company promised short of heaven to the people and collected deposits from them.

Forever Gold is just another blade company which has vanished with the deposits. It promised huge returns within a short span of time and not surprisingly people have fallen for the bait. They have given huge sums and the company has even distributed post-dated cheques to be en-cashed later by them. However, their joy was short-lived after the cheques got bounced when they were presented in the Banks.

A larger number of people took out a procession on the streets of Srikakulam town demanding action against the erring company and repayment of their deposits.

One of the victims told the journalists that Forever Gold claimed that it is also like AgriGold, Akshaya Gold, Abhaya Gold companies which have been collecting huge deposits from public.

It is apt to recall here that Corporate Frauds Watch filed a criminal complaint against AgriGold about two years ago and police have yet to take action against the fraudulent company. Had the police taken action on that company, these fraudulent companies would not have born.

The Madras High Court aptly stated that the bureaucrats turn Nelson's eye and close the stable only after the horse escaped.

People never learn a lesson from the past and the bureaucrats never take action against the fraudulent companies for reasons better known to them.

The Reserve Bank of India has issued guidelines way back in 1986 to the State Governments all over India to appoint an officer not lower than a Station House Officer to check the illegal collection of deposits from public. The Police Chief may state his own reasons for the inaction, however, it is the people who are losing their hard-earned money due to their inaction and incompetency.

Kerala government’s guidelines in favour of MLMs says expert

Moneylife Digital Team

While intention of the state government may be genuine, its new guidelines for direct selling companies will not curb the menace of MLMs but in fact would shield them

The guidelines being framed by the Kerala state government to distinguish a genuine direct selling company from fake one are grossly inadequate and misleading. According to an expert in reality, it (the guidelines) aims to protect the fake money multiplier companies and schemes. Kerala is trying to become the second state, after Manipur, to have separate guidelines for multi-level marketing (MLM) companies.

Robert FitzPatrcik, co-author of False Profits, the first book-length analysis of pyramid schemes and multi-level marketing, told Moneylife that, “The rules (being framed by Kerala government) noted are grossly inadequate and misleading and, I fear, will  result in the tragedy of  millions morepeople falling victim to pyramid frauds that are disguised to look like legitimate sales companies. By prohibiting requirements to recruit others or to buy products, and by requiring that all payment be based on a purchase, the rule has "validated" a pyramid scheme that is disguised as a sales company, but, beneath the disguise, is perpetrating a blatant fraud.

Mr FitzPatrick is also founder and president of ‘Pyramid Scheme Alert’ and is based in the US.

The Kerala government had set up a high-level committee headed by the chief secretary following the complaints of few direct selling firms, calling themselves genuine, which were affected by the drive of the investigating agencies to weed out ‘get-rich-quick’ companies. The guidelines were approved by the state cabinet on 12th September 2011. 

According these guidelines, any direct selling company would be considered ‘valid’ if it does not directly ask seller or a consumer to purchase any product or collect membership fees as a condition precedent for enrolment. The compensation should be based solely on the quantum of goods and services. These entities would also require giving full refund to consumers who have returned the unsatisfied goods within 30 days. 

Mr FitzPatrick says that either handing over cash or purchasing products, these schemes still remain fraudulent. “The fraud lies in the false and misleading income proposition, not in the official requirements regarding products and purchases. It matter little if a person is defrauded by handing over cash or by purchasing products. If the fraud that induced the payment or the purchase are the same, and the net effect is the same -- huge losses -- then the policies protected no one. Indeed they achieved the opposite by giving protection to the scams.”

Apart from legally registering and filling necessary tax returns mandated under law, according to the guideline, these direct selling entities should also have a valid license or a registered trademark identifying its promoter, goods and services. They should also maintain websites with complete details of the company, and other such as price, terms and condition of its products/ services.

However Mr FitzPatrick says that the new policies of this state would legitimize a gross unfair and deceptive marketing practice. “Allowing the endless chain promise to drive purchases corrupts and pollutes the market place. It lures millions to join the schemes in the desperate need, not of the products, but of income. Yet, these schemes, by their design, cannot offer income to any but a few. To all others, the schemes, by design, cause financial losses.

He adds, “For this income promise to be valid, the chain of salespeople would have to extend forever, which obviously it cannot. Those who join later will not be able to gain the income because they will not be able to enroll enough new members. So the harm of the pyramid scheme occurs, just as if the money were directly transferred rather than through product purchases.”

In India there are various direct selling firms such as Amway, Herbalife, Tupperware have huge market base and membership with turnover amounting to several crore.

The sales people, according to the directive, should carry their identity cardissued by the government while selling the product. It should also furnish full details of the order date, amount, and bill to the consumer. Interestingly, the direct seller should take prior permission or appointment of the person to whom the goods or services are intended to be sold.

It is important to note that, apart from Kerala, other states like Manipur, Rajasthan, Maharashtra and Andhra Pradesh are keeping tight vigil on ponzi schemes.

Moneylife had reported that Kerala, said to be the country’s most literate state, is flooded with numerous ‘get-rich-quick’ or ‘earn-huge-return’ schemes offered by money swindlers. While the state director general of police has admitted noticing frauds amounting to over Rs1,000 crore, the worrying factor is that even a few policemen have been found to be involved in these MLM schemes.

Mr FitzPatrick says that actual fraud in MLM is the deceptive promise. “The fraud of pyramid scheme is not in whether money changes hands directly or throughout the vehicle of a purchase. The fraud is in the deceptive promise which cannot be fulfilled. The rule would not prohibit the use of this "endless chain" lie. It would, in fact, validate it by merely requiring that it assume a disguise and enact meaningless "policies" that have no effect in practice.