Litigation

Marketing Fraud: Why multi-level marketing pyramids and financial ponzis are ignored by law enforcement

By Tracy Coenen

Dear Colleagues, Consumers and Pyramid Scheme Alert Supporters,

A new essay recently posted on the False Profits Blog addresses a question many of you  have raised.

Why are multi-level marketing pyramids and financial ponzis able to ensnare so many people today? What is the power behind this Main Street epidemic?

This question goes beyond the lack of law enforcement, the failure of the FTC and SEC, or the difficulty of grasping “exponential expansion.”

The False Profit Blog ventures an answer: It is that pyramid schemes, operating as multi-level marketing, are a new form of fraud that public awareness and law enforcement have not caught up to. This new form of fraud is called “marketing fraud.”

Marketing fraud evolved from the earlier  stages of “product frauds” and “financial frauds.”  Its uses bogus or overpriced products and deceptive money transactions like older models of fraud do, but that is not the heart of this new fraud. The power of this fraud is in marketing. It employs the most powerful tools of business today — branding, positioning, community and identity — to swindle.

Like all powerful marketing, frauduklent marketing promises to fulfill basic and crucial needs, much more valuable  than just money or the hyped up benefits of products. The needs that these pyramid marketing scams claim to fulfill address people’s deepest longings and their greatest fears. The sophistication of the marketing program, complete with Washington DC lobbyists, trade association, “education” foundation, gifts to charity, celebrity endorsements, sports sponsorships, national conventions, and church affiliations ? prevent many in the media and government from grasping the extraordinary deception or to accept the devastating financial consequences they inflict on millions of people. Even many of the victims cannot believe they were defrauded by an organization of such benevolent outward appearance. Many choose instead to take on personal blame for their misfortune rather than face this reality. Powerful marketing, whether in the employ of legitimate business or pyramid frauds, has the ability to transcend verifiable reality and hard cold facts with its own fictional narrative.

The blunt instrument used by marketing frauds to carry out their theft is the “endless chain” or “closed market” a.k.a. pyramid scheme.  This is a classic swindle but is now carried out within a  marketing program so powerful it leads the victims not only to fall into the financial trap but to to support the perpetrators against exposure and to enroll their  closest friends and relatives into the scam as well.

I will appreciate your comments and thoughts on the Blog.

Sincerely,

Robert L. FitzPatrick, Pres.
Pyramid Scheme Alert

Full post as published by The FRAUDfiles Blog on January 31, 2010 (boomark / email).