Pyramid parties are no surprise to lecturer

Press, 9 June 1980, Page 5

Pyramid parties are no surprise to lecturer

. T , he Py os Pect of big money deals in' pyramid parties in Christchurch holds no surprise for a University of Canterbury lecturer who has studied “get rich quick” Schemes.

According to Mr M. L. Gimpl, senior lecturer in business administration, pyramid-type schemes have a long history and can hold an allure for everybody. He was commenting on the plans for several Christchurch persons to launch pyramid parties along the lines of those proving popular in Los Angeles. The parties, the legality of which is now being examined, would entail participants buying “tickets” for $5OO. Each participant would recoup his money and add to a pool by “recruiting” two others, each willing to pay in $5OO. Such recruitments would build successive “tiers” in the pyramid, each tier comprising double the number of participants of its proceeding, or “higher,” one. The pyramid party would end with the person at the appex of the scheme, initially the organiser, taking the accumulated pool. In the parties envisaged for Christ-

church, the pool would be allowed to grow to $BOOO, the pyramid being at that point five tiers. Obviously for the scheme to keep going, which it must, if new participants are not to avoid losing their money, ever increasing numbers of people would be required to join in. Mr Gimpl calculated that a party every day would by the twnety-second day involve New Zealand’s entire three million population. In that hypothetical situation about half would have recouped their $5OO. a relatively small minority would be financially ahead,’ and the rest would lose. With this requirement forj perpetual growth in partici-! pation the scheme must falter sooner or later. Mr Gimpl conceded that the logic in favour of quick gain was exciting — “until you look at the numbers.” . His advice, therefore, to anyone interested was: “If you want to make money, get involved as the organiser and check the legality.” People would probabh’ have a better chance _of making a gain on their $5OO if they spent it to buy tickets in a $500,000 first-pri’.e

lottery, he suggested. However, Mr Gimpl thought there was “something inside everybody” attracted to such get-rich schemes provided they were organised in the right way. Pyramid schemes have been numerous in the past, particularly in the United States, Mr Gimpl’s homeland. The units of exchange, he said, varied from bottles of liquor to Government savings bonds to thousands of dollars| in cash. In many cases, the obvious: failure to satisfy all participants was never publicised because of the embarassment of those who lost and their reluctance to admit being “sucked in.” Nevertheless, Mr Gimpl said, people seemed to forget the past when the opportunity came to get'’ involved again.. “After a few years people forget about it and they are ready to play again with slight variations.” It was a matter of the organiser “pitching” his pyramid scheme at some sector of the community capable of responc' ig, he said. Setting the “ticket” in the proposed Christchurch parties at $5OO could be understood in this way.

“There are no convenient avenues to invest $5OO. It is too small a parcel to make a good investment,” he said. The sum was also about the I size of back-pay wage earners might expect to receive in a lump sum.

Mr Gimpl recalled perhaps the biggest pyramid scheme in the United States in recent vears. Although it had an element of fraud, the scheme required the organisers to “keep selling more to keep ahead of it.” When the scheme, supposedly involving oil exploration, collapsed in 1973, Americans had contributed SIOOM in units of $15,000, said Mr Gimpl.

Among those to be “sucked in” were 23 top executives of the General Electric Corporation — men supposed to be shrewd business directors — who among them lost SIIM.