1974 0710 - GOV (Senate) - Pyramid Sales, Frank E. Moss (D-UT)

  • (p1) - Frank E. Moss (D-UT) - Today we will look into the strange and disturbing world of the fast buck pyramid sales scheme.
    • Untold hundreds of small investors have been bilked out of hard earned savings by the fast talking operators of these get rich quick schemes. 
  • (p9) - Securities & Exchange Commission v. Glenn W. Turner Enterprises Inc.
  • (p9) - The non-disclosure charged Is that it Is mathematically impossible for each participant to do so. See Blachly v United States .380F.2d 665 (5th Clr.1967).
  • (p11) - Third. lines 12 through 16 of the amendment are objectionable for vagueness. With the acceptance of this amended language, counsel for the United States would be forced to ask a jury in a criminal prosecution to find beyond a reasonable
    doubt that there is a "reasonable probability" that compensation will be derived "primarily" from recruitment of others. 
  • (p11) - Fourth, the last four lines of the proposed amendment on page 12 of the IFA Statement fail to distinguish between sales to consumers and sales to other participants and, therefore, it is objectionable for the reasons mentioned earlier.
  • (p11) - endless chains
  • (p15) - 
  • (p16) - Senator MONDALE (D-MN)  - However, their efforts have frequently been frustrated by neighboring States with no law concerning these organizations or no enforcement efforts. Pyramiders simply flee to States with weak or nonexistent legislation.
    • The bill imposes criminal and civil penalties on those fraudulent pyramid sales operators who prey on the public with unfounded presentations of future earnings through endless chain promotions.
    • Pyramid sales schemes are defined by  S. 1939 as including any plan or operation for the sale or distribution of goods, services, or other property which contains any provision for increasing participation in the plan through a chain process.
    • This chain process is further defined to include payment of considerable compensation for introducing one or more
      additional people into participation in the plan each of whom receives the same or  similar right or opportunity to receive compensation when a person introduced by the participant introduces one or more additional persons into participation in the plan.
    • This definitional language isolates the fraudulent pyramid sales operations without affecting the hundreds of legitimate companies which do business using commission arrangements or franchise organization in which the primary aim is sales to the consuming public rather recruitment of additional persons into an endless chain.
  • (p17) - Senator Moss (D-UT) - I wonder if I can interrupt. Do you know of any organized opposition to the basic thrust of this bill? There may he questions on the definition or something like that.
    • Senator MONDALE (D-MN) -  I know of none. More than that, there is a very strong sense of urgency by all concerned, and I think the attorneys general will spell out why we need legislation of this type to help them and to help the Securities and Exchange Commission and other agencies that have been frustrated in attempts to eliminate this pernicious and widespread practice.