Attorney General Salazar Announces Settlements in Adams County Pyramid "Gifting" Schemes

Denver-- Attorney General Ken Salazar announced today that his office has entered into settlements with eight of the ten named defendants charged with participating in two illegal pyramid schemes in Adams County.

Attorney General Salazar's Office on April 15 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 alleged that the defendants violated the Colorado Consumer Protection Act by promoting the “Original Dinner Party” and “The Garden” pyramid schemes. The lawsuits were filed following a lengthy investigation based on a referral of the alleged activity by 17th Judicial District Attorney Bob Grant.

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

The eight settlements will result in the defendants paying a total of $26,100 in civil penalties and the forfeiture of $84,950 in illegal proceeds they received from participating in the pyramid scheme. The proposed stipulated final judgments filed with the court on Tuesday for its approval include a permanent injunction preventing the defendants from any involvement in any other pyramid schemes. The agreements also require all eight defendants to "fully cooperate" with the Attorney General's Office in connection with any further proceedings concerning the operation of these two pyramid schemes.

The settling defendants are: Joseph N. Abeyta, Valerie L. Arfstan, Tina M. Gerhardt, Joyce L. Keeling, Lynette R. Merich, Margaret Beatrice Montoya, Dawn R. Sanchez, and Jamie J. Stapleton.

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.

The Attorney General's Office investigation of these pyramid schemes is ongoing and may result in additional enforcement action by the State.