Siren songs of easy cash tempt unwary

By JUHA SAARINEN

"Do you want financial freedom? Welcome to Cashevolution, where we give you the means to control your financial destiny."

Siren songs like this, aimed at the unsophisticated and unwary who flock to the internet in increasing numbers, are a common ploy for pyramid scheme operators overseas.

But this time it's Auckland-based Cashevolution.com that's playing the Pied Piper's tune.

The Cashevolution scheme run by directors Craige Mayo and David McQuoid started on the internet in May this year.

Mayo says the scheme "was created to help ordinary and unsophisticated people to understand business".

Inspired and "deeply moved" by an episode of the Oprah Winfrey chat show about many people in the United States living below the poverty line, Mayo says he and McQuoid have a "philanthropic vision" for Cashevolution.com.

They "wanted to create a programme that would not only provide the means to create extra income, but to retain it".

But the Commerce Commission, which is investigating the scheme, has found little evidence of philanthropy.

In July, chief adviser Janet Whiteside said it breached three sections of the Fair Trading Act - those dealing with "referral selling, misrepresenting certain business activities such as those carried on from a person's home, and pyramid selling".

Whiteside's emailed opinion is now circulated on the internet.

Mayo says the message "has created controversy" but "it is not an accurate account".

However, he acknowledges the commission has issued a notice that Cashevolution may be at risk of breaching the Fair Trading Act.

Mayo says the website Cashevolution.com was rewritten in response to the warning, but since August 8 the scheme has been listed by the Ministry of Consumer Affairs on the pyramid selling section of its scam watch website.

Mayo insists that Cashevolution.com is "a viable network marketing company, and not a pyramid scheme, that offers a valuable product to the market".

The product it sells is a "subscription to education", says Mayo.

Asked if the Commerce Commission warning is damaging for the scheme's credibility, Mayo says no action has been taken since the warning was issued in July, and he believes that Cashevolution is "compliant with the Fair Trading Act".

Mayo says Cashevolution has 50,000 members worldwide, with 600 in New Zealand.

Each member pays a US$25 (52.30) joining fee with a monthly subscription of US$25 on top.

Asked what you will get for the money, Mayo says "education" and "investment modules" - as the previously promised Desktop Companion software has now been "put on hold".

Also, Cashevolution "will provide members with access to third parties who are licensed to sell investments" in the future.

To make money from the scheme you have to start recruiting others into it. The "realistic US$1500 ($3138) a month" that the website says it is possible to earn from the Cashevolution scheme requires at least 155 other regular subscribers to be recruited.

Commission earned from recruiting new members is paid via a debit card issued by The Loyal Bank located in St Vincent and the Grenadines in the Caribbean.

With 50,000 members paying regular monthly subscription fees, Cashevolution may have brought in around US$7.5 million ($15.75 million) - a staggering amount, considering the scheme has run for only about five months.

Mayo says Cashevolution pays "100 per cent commission".

Asked to explain what this means, he says the scheme sees only 5 per cent of the membership fees. The rest is returned to members.



An online "report of third party due diligence" posted by associate Mark Joyner outlines the scheme's benefits and tries to show that it is legal.

The report says prominent New Zealand law firm Lowndes Jordan is acting for Cashevolution and says it has set up an email "autoresponder" to confirm this - although the message from the autoresponder makes it clear that the law firm does not endorse, promote or take responsibility for any Cashevolution.com material or services.

Cashevolution.com also employs a public relations agency, Firebrand Communications in Auckland, yet the scheme does not list its office telephone numbers anywhere.

Although Mayo says that Cashevolution.com does not market the scheme itself, affiliates do.

Some have been caught spamming, and a quick search through Google reveals that Cashevolution is being sold to punters in the same way as internet pyramid schemes.

Deborah Battell, director of fair trading at the Commerce Commission, says the commission cannot comment on active investigations.

But, she says, it tries to move as quickly as possible on schemes that appear to breach the Fair Trading Act.

Battell says the commission is able to take out temporary injunctions against the operation and promotion of schemes.

She says internet-based scams have seen a "real resurgence lately".

Battell encourages people to be careful and to be sceptical about any emailed offers.

She says any received should be logged at the Ministry of Consumer Affairs website.

Ironically, says Battell, the internet is a good way to vet scams.

"Type in the name of the scheme into a search engine. More often than not, you'll find messages from people who have already been taken in by the scheme, and want to warn others."

David Russell, chief executive of the Consumers' Institute, says internet scams represent "nothing that we haven't come across before, in different guises".

He says the schemes target two kinds of people - those with a psychological disposition to believe that they can make money quickly and easily, and "unsophisticated punters", who are often "poor, desperate and innocent".

"The internet is merely a very efficient conduit for the schemes," says Russell. "It does not give rise to them."

Because multi-level marketing in itself is not illegal in New Zealand, provided legitimate products or services are being sold, the Commerce Commission cannot issue a blanket ban on such schemes.

Sophisticated operators, adept at masking the pyramid selling nature of their schemes, make the commission's work hard and time-consuming.

Russell says the commission "will never be able to shut them all down".

Operators simply change how the schemes are run, or quickly start up new ones if they are investigated.

The commission cannot always protect people against greed that short-circuits common sense and sees millions hand over their cash to pyramid schemes.

That sad fact is the reason we will see many more such cases.

Anti-scam resources

It's not just the scammers who have moved to the internet. Their adversaries are on the web too, providing plenty of frequently updated information about schemes and frauds. If you're in doubt, check these sites first and also try a search engine such as Google.

Government advisory and reporting websites

Ministry of Consumer Affairs Scam Alert

Pyramid selling

Serious Fraud Office Alerts

New Zealand Securities Commission

Australian Government Scam Watch

US Federal Trade Commission (FTC)


Volunteer anti-scam websites



False Profits links

Flim Flam Dot Com

MLM Watchdog

Worldwide Scam
New Zealand Consumers' Institute Scams A-Z
Internet Fraud (Where Michael Kay of Australia has tirelessly baited Nigerian 419 scammers and gives a valuable insight into how the gangsters operate.)