Economic Misery Increases Vulnerability to Pyramid Schemes – National Consumers League

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

Millions of Americans are out of work and millions more worried about making ends meet. In the face of this troubled economy, consumers are giving home-based business opportunities more consideration as a way to make additional money. Unfortunately, scam artists often mask their fraudulent schemes as legitimate home-based business “opportunities.” The confluence of bad economic conditions and the proliferation of such scams could be putting many more consumers at risk of falling victim to these fraudulent pyramid schemes.

These are the conclusions of a new survey released today by the National Consumers League, produced in partnership with Opinion Research Corporation. Some of the worrying findings of the survey include:

  • 31% of survey respondents said that they are more likely to consider a home-based business due to the current economic environment.
  • One third of survey respondents couldn’t identify a pyramid scheme as a scam when one was described to them.
  • Low-income Americans could be especially vulnerable to pyramid schemes. Among respondents reporting annual incomes below $35,000, 39% were unable to identify a pyramid scheme as a scam, the lowest percentage among income groups surveyed. Low-income respondents were also the most likely (42%) to consider a pyramid scheme as a good source of supplemental income when it was described to them.
  • Chain letters were the most common kind of pyramid scheme that respondents reported being approached to join (33%), followed by general pyramid schemes (21%), gifting clubs (12%), and Ponzi scheme (7%).

For more highlights from the survey, click here.

To help address the growing threat of pyramid schemes, NCL has launched a new section on our Web site to help consumers identify and avoid falling victim to pyramid schemes, particularly the many scams masquerading a legitimate multi-level marketing plans. We’ve included a scam-spotting checklist that consumers can take with them to the often high-pressure sales “seminars” that are frequently used to lure victims into pyramid schemes, a handy chart comparing pyramid schemes and legitimate multi-level marketing plans, and links to additional information about pyramid schemes.

Consumers who have been approached to join a pyramid scheme or those who may have already fallen victim to one should definitely report the scam via our Online Fraud Complaint Form. These reports are incredibly important to helping federal, state, and local law enforcement and consumer protection agencies take action to help bring scam artists to justice.

If you’ve been a victim, don’t be afraid to report it. You are not alone! In addition to, there are several great forums online, including Scam Victims United and Scamwarners, where victims can network, share their stories, and hopefully avoid becoming repeat victims.

More bad economic news: Recession putting consumers at increased risk of being duped by pyramid schemes – National Consumers League

February 26, 2009

National Consumers League issuing consumer alert, new resources at

Contact: 202-835-3323,

Washington, DC—With nearly a third of Americans saying the current recession has made them more likely to consider a home-based business offer, consumer advocates have issued a warning that fraudulent pyramid schemes disguised as legitimate business opportunities are posing a greater threat than ever to consumers’ wallets and financial health. While “pyramid” and “Ponzi” schemes have received some media attention recently, with Bernard Madoff’s allegedly fraudulent investment scams making headlines, it’s clear that even the most sophisticated consumers are vulnerable to business opportunity scams. Today the National Consumers League (NCL) announced the findings of an Opinion Research Corporation (ORC) survey and launched new resources at aimed at helping consumers spot and avoid risky business “opportunities.”

Pyramid schemes have existed for more than a century and in a bewildering array of guises. Despite their differences, pyramid schemes tend to share common elements, such as a focus on recruitment of new members, promises of unrealistic or “guaranteed” returns and, most importantly, the inevitable threat of collapse. Increasingly, pyramid scheme operators have tried to cloak their scams as multi-level marketing (MLM) opportunities through the sale of dubious products or services with little or no established market. Legitimate MLM businesses, also known as “networking marketing,” operate legally and offer goods and services through independent distributors. In legal MLMs, the focus of the business is on sales of products, not the recruitment of new members into the business.

In the ORC telephone survey of Americans ages 18 or older conducted February 12-15, 2009, many respondents—particularly African-Americans, Hispanics, and those with low incomes—revealed themselves to be at risk of falling for pyramid schemes disguised as legitimate work-from-home opportunities. Lower-income consumers (those reporting annual income of less than $35,000) were found to be more likely to mistake pyramid schemes for legitimate ways to provide supplemental income (42 percent vs. 33 percent of all respondents). They were also least likely (61 percent), as compared with all respondents (66 percent), to correctly identify pyramid schemes as a scam. Similarly, African-American (46 percent) and Hispanic (48 percent) consumers surveyed were more likely to consider a home-based business than the average (31 percent) yet less able to identify a pyramid scheme as a scam (48 percent and 35 percent, respectively).

Overall, an alarming number of respondents reported being approached to join some type of fraudulent pyramid scheme including chain letters (33 percent), general pyramid schemes (21 percent), gifting clubs (12 percent), and Ponzi schemes (7 percent).

“In a time like this, when many are struggling to make ends meet, some consumers may lower their guard and find themselves considering offers that – under other circumstances – they would rightfully identify as sketchy and high-risk,” said Sally Greenberg, NCL Executive Director. “NCL’s Fraud Center is alerting consumers to use their heads when it comes to searching for new offers of income. Scammers advertise pyramid schemes as businesses that provide ‘easy money’ or ‘guaranteed income.’ Consumers must keep a level head, even when times are tough, and remember the old adage: if it sounds too good to be true, it probably is.”

NCL’s Fraud Center, which tracks consumers’ reports of suspected and confirmed telemarketing and Internet fraud, publishes information about new scams and prevention tips, and forwards reports to appropriate law enforcement in the United States and Canada, has launched a new guide for consumers about pyramid schemes. The new pages at offer tools for distinguishing legitimate business opportunities from scams, including checklists for evaluating home-based-business offers, information about common types of pyramid schemes, and warning signs.

For complete survey results, or to check out NCL’s new pyramid schemes education content for consumers, visit


About the National Consumers League

Founded in 1899, the National Consumers League is America’s pioneer consumer organization. Its mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. NCL is a private, nonprofit membership organization. For more information, visit

Survey Methodology

This data is the result of a telephone survey conducted among a national probability sample of 1,006 adults, comprised of 504 men and 502 women, 18 years of age and older, living in private households in the continental United States. Interviewing for this CARAVAN® Survey was completed during the period of February 12-15, 2009.

About Opinion Research Corporation

Opinion Research Corporation, an infoGroup company, has offered innovative solutions to the toughest market research challenges of clients worldwide since 1938. Since the 1960s, ORC has conducted CARAVAN®, the USA’s longest continuously running consumer omnibus. In addition, the firm has been conducting national, speech reaction, state and flash/overnight polls for CNN since April 2006. To learn more, visit

Update: Obama’s ‘Blueprint’ Delivered to Congress … – National Consumers League

by Mimi Johnson, NCL Health Policy Associate

… and by redirecting taxes on the rich, instituting pollution surcharges, and cutting back on such things as farm subsidies, the President hopes to save money and help YOU. By raising taxes on the wealthiest 2 percent of Americans, Obama says he hopes to redirect the nearly $318 billion (over ten years) of increased revenue to the “health care reserve fund.” This fund of over $640 billion would help “finance fundamental reform of our health care system that will bring down costs and expand coverage.”

The budget also “accelerates the adoption of health information technology and utilization of electronic health records,” expands research – both in comparing the effectiveness of medical treatments and to better understand and fight cancer, and ultimately invests in health care infrastructure to help rebuild the health care system. Current government agencies such as the Centers for Medicare and Medicaid Services and the Food and Drug Administration would be strengthened and standards raised.

The federal budget won’t get out of the red anytime soon, though. In fact, the stimulus will send us further into debt, by spending money to employ Americans and rebuild our country, before we start to see an increase in revenue.

‘Blueprint for Our Future’ Includes Health Care Reform Wing – National Consumers League

by Mimi Johnson, NCL’s Health Policy Associate

President Obama addressed Congress last night in a State-of-the-Union-like speech to prepare them – and the American people – for his forthcoming budget. During the speech, the President addressed three major priorities – energy, education, and health care – as we all try to rebound and rebuild during these tough times.

“So let there be no doubt: Health care reform cannot wait, it must not wait, and it will not wait another year.” Good news for consumers and not a moment too soon, as a new poll reports that a majority of Americans say their family has cut corners on their health care because of the economy. The Administration, however, is working to diminish the health care hardships on families and Obama reassured Americans that unemployment benefits and continued health care coverage will be available to those who have lost their jobs in this recession.

Still, Obama pointed out that health care costs cause “a bankruptcy in America every 30 seconds,” and it causes millions of Americans to lose their homes. Another alarming fact Obama reported was that” premiums have grown four times faster than wages over the last eight years,” resulting in unaffordable care even for the insured.

During his address, the President also promised a renewed commitment to cancer research, preventive care, and a move towards quality, affordable health care for every American. He also plans to “give our veterans the expanded health care and benefits that they have earned.” We were also reminded of two victories in health reform already signed into law this year, which protect and expand health care coverage for 11 million children (SCHIP), and ensure “health care professionals can continue caring for our sick” through the Economic Recovery and Reinvestment Act.

We commend the President and his Administration for “bringing together businesses and workers, doctors and health care providers, Democrats and Republicans to begin work on this issue next week.” The League has long recognized the importance of and strength in convening stakeholders from all sectors to work together on health issues. It is important that Congress and the American people continue to remember that health care costs account for a substantial chunk of the economy, and that we must move forward with reform quickly and deliberately.

FTC Fraud Forum – National Consumers League

This morning, the Federal Trade Commission will kick off its two-day Fraud Forum, a free two-day event hosted by the federal agency to examine how the FTC can more effectively protect consumers from fraudulent schemes.

As y’all know, fraud protection is near and dear to our hearts over at the National Consumers League. We operate NCL’s Fraud Center, which tracks scams as they’re reported to us by consumers and relays trend information to relevant law enforcement.

The first day of the FTC’s Forum will be open to the public and will provide an opportunity for law enforcement, consumer advocates, business representatives and academics to look at just how big of a problem fraud is in our current economy, what drives con artists to do what they do, how victims are targeted, and whether certain types of consumers are more vulnerable than others, and more. Day Two of the event is open only to law enforcement officials, and they’ll grapple with how they can better collaborate to catch the crooks.

If you’re not planning to attend the forum, you can still be a part of it – the FTC will be streaming today’s panels online. Savvy Consumer contributor John Breyault, who runs NCL’s Fraud Center, will be speaking on a panel about under-reported fraud. Check him out at 11 am here at the Webcast.

Check Us Out! – National Consumers League

Congratulations are in order for the LifeSmarts state champion teams emerging across the nation! We’re less than two months out from the National LifeSmarts Championship in St. Louis, MO, and around the country, our state coordinators are hosting exciting in-person competitions to determine who will represent their state at Nationals!

LifeSmarts state programs are getting some nice press, too! You go, guys! Here’s a sampling (and a sneak peak at some of the state champs who will be headed to St. Louis in late April)! We’ll link to more as we find them. Way to go, LifeSmarts teens and coaches!

News in Northeastern Wisconsin: Oconto High School 4-peats! Fox6News covered the competition, too! Video here.

Missouri champs declared, beating out 134 (!) other teams

Minot Daily News: “Ray High School’s award-winning Lifesmarts team doesn’t have any slackers.” Cute photo and all!

Reining In Shameful Executive Pay – National Consumers League

by Sally Greenberg, NCL Executive Director

Congress did it: it capped corporate pay for the first time in our nation’s history. The stimulus package Congress adopted at the end of last week goes further in capping executive salaries than even the Obama administration recommended. Nonetheless, the President has signed the bill into law. The stimulus pay cap applies to top execs and the highest paid employees at all 359 banks that have already received government assistance, according to the Washington Post. Panic has set in among executives; there’s talk of mass exodus among the top brass at companies where pay has been capped.

“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus,” James F. Reda told the Washington Post. Reda is founder and owner of his own compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”

Now let’s get this straight. Executives of companies that took on too much risk and saw their firms collapse had to turn to the government for a taxpayer funded bailout – which they readily sought and accepted. Now when the government wants to put strings on that money, the talk is that these same executives, who failed to keep their companies solvent in the first place, will walk away because they need higher salaries – $500,000 isn’t enough for these kingpins even if it is 8 1/2 times the salary of the average American family. (figuring that Americans’ average annual salary is around $61,000) .

Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

But the financial world brought this on themselves, with kingpins such as Lloyd Blankstein of Goldman Sachs, who made $68.5 million in 2007, setting Wall Street salary records. Richard Wagoner, the chief executive of failing General Motors, made $14.4 million in 2007 (much of it in stocks and options on a base salary of $1.6 million). (Read more on this from the Wall Street Journal.)

These shameless compensation packages and bonuses are taking place in a year when millions of Americans have their lost jobs and with it, their health insurance. Millions of homeowners are facing mortgage foreclosures, and food pantries are facing unprecedented demand. The rich have seen their incomes grow by leaps and bounds in the last 30 years while the wages of those on the bottom have stagnated. According to Lane Kenworthy, Professor at the University of Arizona, in 1979 household income among those in the top 1% averaged $325,000 (in 2005 dollars). By 2005 that had increased to nearly $1.1 million. Among the poorest 20% of households, average income was $14,500 in 1979 and $15,500 in 2005. Among the middle 60% of households, average income rose from $42,000 to $51,000.

So Congress is understandably reacting to constituent outrage about the pay packages of the top execs. For years policy makers and shareholder activists have tried to figure out how to curb outsize executive pay, with little success. Now they’ve finally done something. We agree with the President, who told NBC Nightly News: “If the taxpayers are helping you, then you have certain responsibilities to not be living high on the hog.”

Cholesterol 101 factsheet – National Consumers League

Cholesterol is a waxy substance made by the liver and supplied in our diet through animal products such as meats, poultry, fish and dairy. Cholesterol is needed (in the body) to insulate nerves, make cell membranes and produce certain hormones. However, too much cholesterol can be unhealthy. How do you know if you are at risk?

Why should you care?

Elevated cholesterol levels can significantly increase the risk of coronary events, such as heart attack and stroke.

What is cholesterol?

Cholesterol is a waxy substance made by the liver and also supplied in the diet through animal products such as meats, poultry, fish and dairy products. Cholesterol is needed (in the body) to insulate nerves, make cell membranes and produce certain hormones. However, the body makes enough cholesterol, so any dietary cholesterol isn’t needed.

Why should you care?

Elevated cholesterol levels can significantly increase the risk of coronary events, such as heart attack and stroke. Excess cholesterol in the bloodstream can form plaque (a thick, hard deposit) in artery walls. The cholesterol or plaque build-up causes arteries to become thicker, harder and less flexible, slowing down and sometimes blocking blood flow to the heart. When blood flow is restricted, angina (chest pain) can result. When blood flow to the heart is severely impaired and a clot stops blood flow completely, a heart attack results.

Are you at risk?

An estimated 104.7 million American adults have high cholesterol (total blood cholesterol values of 200 mg/dL and higher) and about 37 million of these are consideredhigh risk, having levels of 240 or above.

A family history of high blood cholesterol increases the risk of heart disease. Other factors can contribute to a person’s risk of heart disease; these are called risk factors. Some risk factors such as age, family heredity, and gender (male), cannot be controlled. But others — such as smoking tobacco, high blood pressure, physical inactivity, and being overweight — can be controlled. Changes to these controllable risk factors are called “lifestyle modifications.”

Curbing cholesterol

For some, lifestyle modifications are enough to lower cholesterol to safer levels. For others with a hereditary pre-disposition, or who have a hard time making lifestyle adjustments, medical therapy is necessary.

Millions of people trying to control their cholesterol have turned to a class of drugs called statins, which have been used in the United States for more than 18 years to lower LDL (“bad”) cholesterol levels. They have been shown to reduce risk for heart attack and stroke by up to a third, and generally have few immediate short-term side effects.

An OTC statin?

Two companies are working to bring statin therapies — in doses identical to lower strengths currently available by prescription — over-the-counter (OTC). These low-dose options would be recommended only for individuals with borderline-high cholesterol. These companies believe that an OTC statin will both increase public awareness about high cholesterol and encourage people with moderately-elevated cholesterol levels (who don’t often seek treatment) to do something about it.

NCL’s response

Recognizing that an OTC statin would have a large impact on consumers, in July 2004, NCL convened a small roundtable of consumer and patient advocates to discuss the issue, explore whether there is existing research on the subject, and discuss the possibility of further research by NCL. Following that meeting, NCL began working with Harris Interactive, an international survey research and polling firm, to conduct a study to explore consumers’ attitudes toward the possibility of an OTC statinoption. NCL commissioned Harris Interactive to conduct a survey with an unrestricted educational grant from Johnson & Johnson Merck. NCL will continue its collaboration with other interested groups to provide relevant information to consumers about statin therapy options. For the results of the study and more information about this issue, visit

What’s next?

A number of stakeholders are awaiting FDA evaluation of the OTC statin options. We anticipate that the FDA will consider the following issues with great scrutiny:

  • Would patients be interested in using an OTC statin if one were to be made available in the US?
  • Would patients have enough information about the OTC product, written in clear language on the package, to determine whether it would be appropriate for them?
  • Would patients have enough information about the OTC product, written in clear language on the package, to determine how to use it safely?
  • Would patients be likely/willing to undergo the regular cholesterol testing required to determine whether, and to what extent, the medication is working?
  • Would patients still talk with their doctors before and during treatment with an OTC statin?

Love Still In the Air? – National Consumers League

Still munching on conversation hearts? Still enjoying just-beginning-to-droop fresh cut flowers or romantic meal leftovers? Valentine’s Day may have come and gone, but for some unfortunate consumers, the sting of falling for a sweetheart swindler can last months – emotionally and financially!

It’s been more than a year since the fraud experts at the National Consumers League’s Fraud Center first identified a new trend in consumer scams: the Sweetheart or Friendship Swindle. While NCL’s Fraud Center only started tracking this type of scam in July of 2007, the Sweetheart Swindle scams gained enough momentum in the second half of that year to propel it to the 2007 top 10 scam list, which is annually released by NCL. According to complaints logged at in 2007, the average sweetheart lost more than $3,038 to con artists disguised as friends or loved ones.

The trend seems to be holding up. In 2008, Friendship/Sweetheart swindles were the 10th most-reported type of scam to NCL’s Fraud Center, and – even worse – the average loss for such scams was nearly $12,500! Four times the previous year’s average loss. This average loss made friendship/sweetheart swindles the third-most costly type of scam, on average, for their victims.

Love stinks, doesn’t it? With so many of us turning to the Internet to find dates, friends, community activities, and more, it’s no wonder that scammers have cultivated a new way of taking money from their victims. Think you’ve found a new friend online but something’s fishy? Here are some warning signs that your new beau or gal may not be the real deal:

  • The person asks you for money, to cash a check or money order.
  • Your online sweetie says, “I love you” almost immediately.
  • The person claims to be a U.S. citizen who is abroad, and or claims to be well off, or a person of important status.
  • The person claims to be a contractor, and needs your help with a business deal.

The Washington Post’s Michelle Singletary wrote a great piece on the scam last year. Read it!

Happy Birthday, NAACP! – National Consumers League

Just a few days ago, on February 12, the National Association for the Advancement of Colored People (NAACP) celebrated its 100th anniversary. What a great time, during Black History Month – and within the first few weeks of our first African American President having taken office – to reflect on this organization’s achievements. The Baltimore Sun has a good feature on the org’s history, and National Public Radio has covered the anniversary as well, including with an interview with the new NAACP president and CEO, Benjamin Jealous.

According to its Web site, “the NAACP was formed partly in response to the continuing horrific practice of lynching and the 1908 race riot in Springfield, the capital of Illinois and birthplace of President Abraham Lincoln.  Appalled at the violence that was committed against blacks, a group of white liberals that included Mary White Ovington and Oswald Garrison Villard, both the descendants of abolitionists, William English Walling and Dr. Henry Moscowitz issued a call for a meeting to discuss racial justice. Some 60 people, seven of whom were African American (including W. E. B. Du Bois, Ida B. Wells-Barnett and Mary Church Terrell), signed the call, which was released on the centennial of Lincoln’s birth.”

Many readers may not be aware that the National Consumers League, which was founded just a few years before, in 1899, has some history in common with the NAACP. Back in the early days of NCL, which was founded by activists emerging from the suffrage, abolition, and settlement house movements, many activists for labor and women’s suffrage didn’t yet see the need to represent the interests of black Americans, who were often paid the lowest wages and worked in the dirtiest jobs. But the National Consumers League was different. NCL leadership argued that black workers were the most vulnerable and needed protections as much if not more as other workers. Throughout the League’s 109 years of activism and leadership in social justice, NCL’s leaders have had close ties to African Americans and the civil rights movement.NCL’s great first leader, Florence Kelley, was a strong supporter of early black civil rights. Although the early work of the League focused on the plight of urban workers in the American Northeast at a time when more African Americans lived in the South, Kelley had strong goals of racial equality. In her role in the suffrage movement, Kelley was critical of the National Woman’s Party for its friendly acceptance of white supremacist southern women members. A friend of W.E.B. Du Bois, Kelley was herself a founding member of the NAACP. At Kelley’s death, DuBois gave a eulogy for her, saying: “Save for Jane Addams, there is not another social worker in the United States who has either had her insight or her daring, so far as the American Negro is concerned.”

Hats off to the NAACP for its first 100 years of important contributions to American social justice and history. Three cheers from your friends at the National Consumers League!