Attorney General Salazar File Civil suits Against Adams county Individuals Involved in Pyramid “GIFTING” Schemes

Denver--Attorney General Ken Salazar today filed civil lawsuits in Adams County District Court against nine employees of the 17th Judicial District and one former Adams County deputy sheriff for their alleged involvement in the promotion of two illegal pyramid schemes. The lawsuits allege that the defendants violated the Colorado Consumer Protection Act by promoting the “Original Dinner Party” and “The Garden” pyramid schemes.

“Pyramid investment schemes are illegal in Colorado. They eventually always run out of new recruits and collapse, leaving victims in their wake,” Attorney General Salazar said. “The great danger of every pyramid scheme is that the only people who make money are the initial promoters."

Named in today's civil lawsuits are persons who were most active in promoting both schemes: Joseph N. Abeyta, Valerie L. Arfstan, Anne Marie Eichinger, Tina M. Gerhardt, Lorna Kay Hein, Joyce L. Keeling, Lynette R. Merich, Margaret Beatrice Montoya, Dawn R. Sanchez, and Jamie J. Stapleton. Abeyta and Gerhardt are no longer employed by County or Judicial District offices.

The lawsuits were filed following a lengthy investigation based on a referral of the alleged activity by 17th Judicial District Attorney Bob Grant.

Under Colorado law, a pyramid scheme is any program that uses a pyramid or chain process in which participants pay in excess of $50 for the opportunity to receive a much larger payoff once others are induced to join. The pyramid derives its funding primarily from money paid by newly recruited members rather than from the sale of products or merchandise to individuals outside of the program. So-called "gifting programs" are pyramid schemes because they depend solely upon the participation fees paid by new recruits to be able to pay off more senior participants in the scheme.

Under the Colorado Consumer Protection Act, the defendants may be fined up to $2,000 per violation (for example, per promotion), plus costs and attorney fees.

The gambling feature of these money chains or "non-product" pyramids is evident. Mathematically, approximately 90% of the participants must "lose" because at any given time, 90% of all that have invested will be in positions of having paid in money but not yet receiving any return. As the number of new recruits expands, the total number of losers grows geometrically. The only way all participants could be paid is if there were an infinite number of participants to enroll and the program continued forever.

The “Original Dinner Party” and “The Garden” promoters targeted their co-workers within the Adams County Justice Center. Both schemes promised participants a large return of money for their original investment and recruiters referred to the schemes as “gifting clubs.”

The "Original Dinner Party" required members to pay a $5,000 entry fee for the alleged opportunity to receive $20,000 from future new recruits to the scheme. Many recruits took out loans or even cash advances on their credit cards to pay the entry fee. Once enrolled, the participants encouraged their co-workers, friends and family members to join in order to keep the pyramid going.

"The Garden" pyramid, which required $100 to join, rapidly expanded throughout the judicial system. The more aggressive promoters entered several times, recruited numerous co-workers and friends, and kept $800 to $2,000 each from the entry fees of these new recruits.

The Attorney General's Office investigation into the involvement of other Adams County government employees in these pyramid schemes is ongoing and may result in additional lawsuits.

The following are tips to help consumers identify whether a multilevel investment program is an illegal pyramid scheme.

SOME TYPICAL FEATURES OF A PYRAMID
• Do you have to pay or "contribute" large sums of money (more than $50) to an earlier participant in order to join?
• Does the program lack legitimate sales of products or services to individuals outside the program?
• Do you earn money in the program simply through the recruitment fees paid by new participants?
• Are "privacy" and "confidentiality" emphasized? Legitimate business ventures are not conducted secretly without any accounting.
• Are "success stories" of tremendous payoffs touted to potential participants?
• Are there claims that law enforcement officials endorse the program as being "legal"? Government officials do not endorse investment opportunities.
• Does the program involve deceptive claims of gifting? True gifts do not involve an expectation of a financial return.

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