CONSUMER ALERT

MIKE COX
  ATTORNEY GENERAL

The Attorney General provides Consumer Alerts to inform the public of unfair, misleading or deceptive business practices, and to provide information and guidance on other issues of concern.

"OUR INVESTMENT PROGRAM IS
PERFECTLY LEGAL" . . . Well, maybe not.

Although the old adage that a discerning consumer should "read the fine print" is certainly true, there are some examples where even the fine print is a bald-faced lie! That's why this edition of the Michigan Attorney General's consumer alert is devoted to three statements, frequently made in investment scams, that are warning signs for the consumer.

Among the statements commonly seen in marketing literature for disreputable investment schemes are the following:

1. "This Is A Service That Is 100% Legal." This statement was found in the middle of a solicitation for a blatantly illegal chain letter. Similar statements have been found in other illegal solicitations. Often the statement will be followed by references to official sounding statutes or rules which ostensibly support the proposition that the scheme is legal. When a marketing program goes out of its way to say it is legal, it usually isn't. Enough said.

2. "Many people around the world have begun to benefit from this system of Wealth Redistribution." "Systems of wealth redistribution" is a polite way of describing a plan in which money is taken from you and placed in the pockets of pyramid investment scheme operators. This statement was taken from the promotional literature of a program that was recently ordered to cease and desist doing business in the State of Michigan and is now under investigation by several law enforcement agencies.

3. "This is not multi-level marketing." Multi-level marketing ("MLM") is a marketing plan which compensates participants not only for their own sales, but for the sales of their recruits as well.  Some legitimate businesses have been successful using an MLM compensation structure for the sale of their products. However, while many illegal pyramid schemes may say they're engaged in legitimate multi-level marketing to try to disguise their true nature, this is always a sham.  Conversely, the Attorney General's office has seen the statement "we are not a multi-level marketing operation," in many marketing pieces used by illegal pyramid schemes.  Whether or not a plan describes itself as "multi-level," it should still be evaluated closely to determine its legitimacy. 

Each of the underlined statements referenced above was taken from marketing literature for programs that have faced enforcement actions in the State of Michigan. Each of the investment scams promised easy money with little work, if only a small investment (less than $100) was made by the consumers. Each of the schemes was illegal, which should remind the consumer of another old adage: "if it sounds too good to be true, it probably is!"