BULLETIN: In a case that could have been taken from the MLM and security swindler’s playbook, James A. Sweeney and Patrick M. Ryan have been found guilty by a state jury in California of operating a pyramid scheme and stock fraud and stealing $8.2 million after soliciting business at “seminars.”
The men face more than 20 years each in prison. Prosecutors said they told members that their “opportunities,” known as Big Co-op Inc. and Ez2Win.biz, represented the “future of online commerce.”
The firms were compared in promos to Google and eBay, and members were told an IPO was “imminent” and that “when the company went public, the stock would double or triple and [stockholders’] investment[s] could climb to well over $100 per share,” prosecutors said.
At an October 2006 pitchfest attended by a state undercover agent, prospects were falsely told that the company that had taken Google public had been hired to manage Big Co-op’s purported IPO and that the company would go public in December 2006, according to the state.
But no arrangements with Google’s IPO manager to take the firm public had been made and no “application to any governmental or regulatory agency to allow Big Co-op to make an initial public offering of stock in 2006, or at any other time thereafter” had been filed, the state charged.
Filings by the California Department of Corporations paint a picture of affiliates making wild claims to drive business to the company. The company itself lured prospects by planting the seed they’d be driving a Mercedes Benz and wearing a Rolex wristwatch, according to state filings.
Vague — and even wild claims of future success — often are part of MLM scams. It also is common for hucksters to plant the seed that a company “soon” will go “public” and become the “next” Google, Microsoft or eBay. At least one Big Co-op promoter declared the firm the next Walmart, according to records.
Even if no claims that a firm will go “public” are made, it is common for MLM hucksters to leech off the brands of famous companies to create a sort of legitimacy by osmosis. In the universe of MLM fraudsters, it is common for hucksters to plant the seed that figures such as Donald Trump, Warren Buffett and Oprah Winfrey have endorsed the “opportunities,” when no such endorsement had occurred.
Some MLM hucksters even have traded on the names of various presidents of the United States and other world figures.
Sweeney, 64, of Afton, Tenn., and Ryan, 35, of Canyon Lake, Calif., were arrested in June 2009.
By the time it was all over, more than 1,000 California residents had been lured into the scheme, prosecutors said.
The scam “purported to be an online shopping hub where consumers could go to purchase thousands of goods and services at discounted prices from big-name retailers including, Sears, Target and Macy’s,” prosecutors said.
Members were told they’d earn “rebates” and “rewards,” which never came. In reality, the state said, any “monetary gains” were based on a member’s ability to recruit people into a pyramid, have those people recruit others “and so on.”
Taking another page out of the scammer’s playbook, the “opportunity” sold stock ranging in price from 50 cents a share to $5, “with two-for-one deals offered to investors willing to pay cash,” the state charged.
“Sweeney and Ryan bought luxury homes, country club memberships, five Mercedes, and ran up $30,000 to $50,000 in monthly credit card bills,” prosecutors said. “Investor funds were also used to pay for an elaborate bachelor party in Las Vegas, a $23,000 wedding ring and a $100,000 wedding.”
