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WMkM Wiffi Mail Frauds On Increase Postal inspectors probing business opportunity schemes which could violate the mail fraud laws are reporting an increase in the number of companies selling pyramid-type distributorships to small investors, Postmaster General W. Marvin Watson said this week. He warned that "fraudulent multi-level distributorships can hiirt many thousands of investors. In many ways they are like a phain letter, except the stakes are much higher. "In a typical illegal pyramid scheme, families with savings of from $2,000 to $10,000 are lured into buying a distributorship for a 'fabulous new product* which can bring them five and six-figure incomes. "But to achieve success," Mr. Watson adds, "the small investor is told he must recruit sub-distributors or retailors. "And, once the victim is trap^ ped, he rarely complains. Too often the new distributor can only recoup his investment by recruiting others into the scheme". The pyramid-type of distributorship is one of three major types of business opportunity schemes which can be in violation of mail fraud laws, according to Mr. Watson. Hie others usually involve misrepresentations in selling vending machine routes and franchises for marketing goods or services. PENALTIES GIVEN Hiose using the mails, directly or indirectly, to further a fraudulent scheme are subject to the mail fraud statues, and penalties of up to five years in prison and fines of $1,000 for each count. At the present time 199 questionable schemes are under investigation. J ' Henry B. Montague, chief postal inspector, said the recent conviction of the National Marketing association's officers indicates that the penalties can also be severe for promotors who defraud. The president of this Tulsa, Okla. firm which fleeced some 400 investors of more than $400,000 was sentenced to ten years in prison. In the National Marketing case, as in most pyramid schemes, selling distributorships is more important than selling the product. At lavish free dinners investors were told how they could earn more than $15,000 a year as "Terrific" cleaning solvent distributors. Hie victims were reassured by claims that their investment was secured with inventory at a commercial warehouse, and they received impressive looking, but phony, warehouse receipts. Then, when a person had invested, he was invited to share lye LOOK TO THE RIGHT FOR A GIFT SELECTION IDEA! in the growth of the company by inviting others to the free steak dinners which also featured impressive speakers, such as a professor of marketing from a Texas university and a "beauty queen" as hostess. The "Terrific Success Plan" provided the distributor with no* only a percentage of his recruits' investments, but also an override on all of their cleaning solution sales. Hie 400 victims included a carpenter, with no sales experience, who mortgaged his furniture to invest $1,200; a couple in their twenties who took $23,- 000 from a trust fund, and a railroad worker buying the Tulsa distributorship for $7,200. START WITH AD Inspectors have found that the typical "come-on" inaVending machine swindle is an ad in the help-wanted columns seeking men or women to service coin-operated machines on either a full or part time basis. Those answering the ad are then approached by high-pressure salesmen who induce them to purchase vending units by felsely claiming they can earn big profits. Salesmen often promise that a trained factory representative will arrange suitable locations. Locations, if obtained, are generally the poorest sort and the investor discovers the company did not pay the applicable license fees. Sometimes flimsy vending machines are . sold at exhorbitant prices. In a recent case, where the promoter received a three-year sentence, victims were paying $100 for hot-nut vending units that cost the promoter $17. The $100 seemed small to the investor. He was promised profits of from $2,000 to $4,275 per machine, depending ig>on lo- MMCCS McHaniyi Mat CompW* CeM»tlc Sttodton U» tin® to vtm atabolkut with wstNft» trots MVRUROIA COTY ami MM «r MM POtOTMT MAT H U LTQ N Jw» D AURET Marcelle The success of the legitimate franchising industry has alsb mfnanti new opportunities for the swindler. CHANCE TO SHARE Recently small town contractors, cement masons andplumbers were givena chancetp share in the swimming pool construction boom by becoming franchised dealers for corporations with such glamorous names as Bermuda Pools, Cinderella Pool Corp., and Town and Country However, none of the vending machine operators mads the promised profits, and it was found the victims lost about $350,000 on these machines and the supplies. Pools. Tlie three Colorado corporations, ed by eleven promoters, lured small contractors to-Denver by falsely promising an expense paid trip. There, the building tradesman was told he haal a competitor for the sWhiwnfl^g pool franchise in his area; l|rt because his rival, lacks c$jpstruction experience, he can get the franchise if he signs Hie new swimming pool dealer is then told he must b^ jat least six swimming pool kits, priced at $2,000 eacli.. It jie can't raise $12,000, the printers settle for advance deposits of $500 a pool. However, tfre franchise holder is faced with COD charges for the fullamoi|nt when the kits arrive. , r But, the swimming pool towding boom passes the new dea|er by. There is no advertising for Bermuda Pools, the local families that had ordered pools never materialize. The franchise is stuck with lots of vinyl sheeting for lining pools, filter equipment, and a big debt. How can a small investor tell if a business opportunity scheme is legitimate? Chief Montague recommends that one: --Be wary if the promoters are more interested in selling distributorships than they are a product or service consumers need. --Ask those selling vending machines routes or franchises for the names and addresses of those making the "fabulousprofits". Ask to see their business records, and interview those actually operating a franchise. --Check the company with Better Business Bureau. --Be skeptical of promotions involving new products or fads. Mr. Montague warns that before "one plunges into a 'fabulous' business opportunity he stop and think how really hard 385-0170 MOTH CAMPAIGN . . . Sterilized moths are i honeycombs at Brownsville, Texas U.S. riculture Research Station where they are dyed for i tion purposes. Under a pilot program, steriliz introduced in trouble areas in such large mating between fertile moths will not occur. of Agi'K& E (FT. 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