HARRISBURG State authorities shut down pyramid scheme
The organizers admitted no wrongdoing, but paid a $54,000 fine.
HARRISBURG (AP) -- A pyramid scheme that took in thousands of dollars from more than 220 participants recruited nationwide through direct mail promotions has been shut down, Pennsylvania Attorney General Mike Fisher said Tuesday.
Under an agreement that Fisher's office filed in Commonwealth Court, the organizers of Club Freedom, based in Centre County, must pay nearly $54,000 in restitution and fines. They admit no wrongdoing under the agreement, Fisher said.
The club's president, Neil Telafor of Chestnut Hill, Monroe County, said it was intended to be a legitimate business, and organizers even sought the advice of a marketing attorney after they became aware of the allegations.
"A lot of people got paid ... but the people who came in at the end had to wait a little longer," Telafor said.
How it worked
Investigators allege that from November 2001 through March, Club Freedom organizers mailed hundreds of brochures that promoted a "brand new concept in the world of earning money at home," in which "all members shall have an equal opportunity to earn money."
Anyone wanting to join could purchase one or more positions with the club for $200 per position. Members who bought one position were promised a $300 payout after six additional people joined, and those who bought five positions were promised a $1,500 payout.
They also were told they could earn commissions for referring other new members or earn 10 percent of the membership fee for each person accepted into the club, Fisher said.
"This alleged scheme was based entirely on recruiting participants to sustain itself," he said.