Trading off a popular phrase, Kerry John O’Neill’s “pay-it-forward” scheme has landed him in trouble with Canadian securities regulators, wiped him out financially and implicated an associate who helped him sell the scheme.
O’Neill even named his scheme the “Pay It Forward Program” (PIF), according to the British Columbia Securities Commission (BCSC), which accused him of collecting $9.6 million from 943 investors by telling them they could expect returns ranging from 100 percent to 300 percent in 90 days.
“Pay it forward” is a marketing buzzword phrase. The phrase often is associated with autosurf, cash-gifting and MLM schemes that recruit affiliates. The “pay-it-forward” sales approach has emerged as a potential marker of a financial fraud.
Broke and living in public housing, O’Neill now has become the subject of an investigation by the Alberta Securities Commission (ASC). Like BCSC, ASC is seeking sanctions against O’Neill, who was banned in September 2009 from the securities business in British Columbia.
BCSC accused O’Neill of selling unregistered securities as investment contracts. Although Pay It Forward was not an autosurf, similar prosecutions have been brought against autosurf operators in the United States.
“Between November 2005 and December 2006, O’Neill solicited investors to join the PIF Program and enter into investment contracts (the PIF Securities) with him,” BCSC said. “No prospectus was ever filed for the PIF Securities and none of the exemptions under the Securities Act . . . applied to their distribution. O’Neill was not registered under the Act when he distributed the PIF Securities.”
Banned along with O’Neill by BCSC was Renee Marie Helmig, also known as Nisha Helmig.
Helmig, of North Vancouver, admitted she “used false information provided by O’Neill to make misrepresentations to investors and potential investors to convince them to invest in Pay it Forward,” according to BCSC.
O’Neill’s particular brand of “pay-it-forward” involved a scheme by which investors were told that “their funds would be used to buy and sell distressed merchandise,” BCSC said.
Here is how money invested in the scheme was distributed, according to BCSC:
- $6.4 million to pay amounts owed to other investors.
- $1.1 million to purchase merchandise.
- $213,000 for “other investment opportunities.”
- $56,000 for O’Neill’s personal expenses.
The remainder was used for “expenses related to the distressed merchandise business,” BCSC said.
“[M]ost investors did not earn any return on their investments, but rather lost some or all of their investment capital,” BCSC said. “[T]he payments O’Neill made to investors did not come from profits he made from buying and selling distressed merchandise. Instead, O’Neill paid investors with other investors’ funds.”
“O’Neill has been unemployed since the PIF Program ended” in April 2007, BCSC said. “He lives in subsidized housing and his only income is a monthly disability benefit.”