LOTTERY CHARGE.

Auckland Star, Volume LXIV, Issue 237, 7 October 1933, Page 11

LOTTERY CHARGE.

decision reserved.

«MAGIC OF MULTIPLICATION."

prosecution by police.

Charges of, on or about June 1, managing a lottery known as "Multiple System, Ltd.," and, on the same date, managing a lottery known as "The Multiplication Bureau," were brought on summons in the Police Court yesterday afternoon against George Kennedy Elliot McLean.

On the application of Mr. V. R. Meredith, who appeared for the Crown, the £ rs t charge was withdrawn.

Mr. A. H. Johnstone, with Mr. B. ■RoU.-prle"'. repreesnted the defendant, •who pleaded not guilty. Mi'. Wyvern Wilson, S.M., was on the bench. In opening, Mr. Meredith said the information "on which the police were proceeding was laid under section 41 of +he Gaming Act. There would be no conflict on the facte, the whole question whether the scheme constituted a lottery or not. He quoted at length from "a small book showing how commissions could be earned. Detective's Evidence. Detective Murch produced a book entitled "The Magic of Multiplication," issued by Multiple Systems, Ltd. He said that a member joined by paying a subscription of £1, and then became a life member. He was given a registered number and a number of membership and enrolment forms, containing his registered number. His first duty was to° enrol four new members at £1 a head, and he was paid a commission of 15/ on the fourth member enrolled. He was not paid any commission on Uie others. Tlie four members each had to enrol a further four. In respect of the first three of such, the original member received a commission of 12/0 on each. He i°"ot no commission on the fourth, as the fourth member started his own tree. Commission on the fourth member went to the person who sold to the fourth member. Each person had to sell before he was entitled to anything, and on -'ach of the first three sold in respect of the new cycle commission went to No. 1. The fourth member started his own "tree." When the scheme reached the eighth stage, there would be 87,380 members enrolled, if the enrolment of fours was maintained. There was a provision that the commission which any person could earn could be only £1500 in any one year. Witness said he saw McLean about the matter on June 17. He admitted that he conducted the scheme, and that it was in operation, ancl that enrolments had been sold under the scheme as set out in the book. Purpose of Fund.

Mr. Johnstone: The fund is to he established to provide funds for a highminded newspaper dealing in currency reform? —I believe so, but only on a portion, and not all the funds. Each member its entitled to a. fullypaid share in the newspaper venture?— I don't know about that.

Under the scheme each member is entitled to la/ for direct sales and WO on indirect sales. It is quite clear what he is entitled to, He gets that — no more and no Ices? —Yes, but the system is different now to wfiat it was when I made inquiries. It is always possible at the beginning to designate who is entitled to the funds, whatever they may be?=Yes. Professor's Evidence. Mr. Meredith called Professor H. W. Segar, of Auckland University College, wha said he had examined the first edition Of the booklet, "The Magic of Multiplication," and since had prepared a report, together with a table calculated on what could be called the normal development of a group from any single member. The table showed how quickly the operations of the scheme would reach impracticably huge dimensions if successfully operating. The Professor said it was true, as claimed by the company's booklet, that it was possible for a member to receive hack a considerable sum for his £1 membership fee, but only if the "tree" developed a number of stages. It was practically beyond the member's control what happened beyond the first stage, and it was dependent upon the inclinations and exertions of others, thus making any amount received a matter of chance as regards the individual. Question of Distribution. Mr. Johnstone: It is always possible to designate who is entitled to the funds, whatever they may be ?—Yes. He does not have to wait until some fund is built up?— No. So far as the distribution of that part of- the money which flows from the original fund, that's his. No one else is entitled to it?— No.

The Magistrate: He does not get the whole amount from his "offspring"?— No.

Mr. Johnstone: He gets what is proTided by the scheme. There is no element of chance. The member gets strictly what arises from his own investment?— Yes.

One might properly divide the scheme into two points of view: (1) raising the fund, and (2) from the point of view of distributing it. Nothing can be distributed until it is received ?—No.

The distribution is quite definite? — Yes. 4

There is no element of chance in the distribution?— No, but there is an element of chance in obtaining sales. Hr. Meredith: Professor Segar, the return of the money may be certain, but the amount of money to be returned is quite uncertain ? —That is so. Criticism of Scheme. Mr. Meredith said the scheme under review in the present case was practically identical with the scheme before the Court of Justiciary in the Scottish case Barnes versus Stratliern which decision was conclusive of the matter. Concerning the "Multiplication Bureau" scheme, he said this was a lure held out in the suggestion that other people would work to make money for a member. All future payments were purely a matter of chance. "This firm lias no assets, and no morals, and it is inevitable that the misguided people will lose their money," he added. "There is no virtue "in it in that respect. Of course, that is nothing to do with the matter of chance, but the results that come from it are a matter of chance. The whole hasis of the booklet, 'The Magic of Multiplication' is that you get someone , clso to make money for you. The mere fact that this scheme may include something that is legitimate does not make the scheme good. That has been set down in a judgment of the Full Court."

'"The whole object of this scheme is having a big 'tree' growing with those | who conduct it plucking the fruit," said Mr. Meredith. "There is a certain amount of ingenuity and skill in it. The main character of the scheme depends entirely on chance, and they are backing on chances of getting the tree growing well before the whole thing bursts. I submit that this matter has been definitely settled by the well known Scottish case I have already quoted." Mr. Johnstone's Submissions. "In this case I am in no wise concerned to defend the scheme as it is put forward," said Mr. Johnstone. "All I am concerned with is whether this scheme is proved by the prosecution to be a lottery. One must bear in mind what the true issue of this case is. In a lottery, not only must the distribution be by lot or chance, but by pure chance, I submit that the Scottish case which brings my friend such comfort does not hold in this matter. In the Scottish case the allotment of the prize was determined by lot or chance. In that ease the successful person had to sell thousands of tickets before he cauid win the prize of £150. There is nothing like that in this case. The selection of the winner in the Scottish case is the result of something determined by lottery or chance." Mr. Johnstone said that whatever came in in the "present case was not distributed by chance, but by a definite, fixed system, predetermined beforehand. The Magistrate: May not each payment of commission be regarded as a prize, Mr. Johnstone?—lt may be. The sum to be offered may in some degree depend upon chance, but I'm not concerned tfith that. If there is any chance it is in the raising of the fund, but not the distribution of it. "Part of the fund," said Mr. Wilson. "No Chance in Distribution." Mr. Johnstone: There is no element of chance in the distribution. The member receives the whole amount promised. Whatever is raised is distributed. As an analogy, suppose a man leaves a sum in the bank at compound interest? It cannot be surmised how much will be earned in a certain time. Nothing may be earned. Another familiar analogy is overriding commission. Whatever a man gets, so far as his own efforts are concerned, is wholly a matter of chance. Looking higher, there is the Biblical parablo of the sower who threw seeds, some of which fell on stony places, etc." (Laughter.)

Mr. Johnstone said he had said eiioush to convey the general principle. lie relied on showing in the legal sense that the system was not a lotterv.

Mr. Wilson: The prospectus, if I may call it such, offers a reward on the happening of each contingency.

Mr. Johnstone: No money is offered until it is actually in hand, sir.

In conclusion, Mr. Johnstone remarked that the charge was 'aid under r. high'y penal section, and it was strongly upon the prosecution to prove their case up to the hilt. If there was a doubt, then his client was entitled to the benefit of such doubt.

After Mr. Meredith had replied to some of Mr. Johnstone's submissions, the magistrate intimated tjiat lie would >rive a written decision. Judgment Mas reserved,