Morrison issues cease and desist order
against Great Falls pyramid scheme participants
State Auditor John Morrison today issued a cease and desist order against Great Falls residents Heidi Wadsworth and Georgia Wadsworth for their participation in the gifting program Women Helping Women. Gifting programs are pyramid schemes that are specifically outlawed by state law, Morrison said.
"We need to stop these programs and the people promoting them before any more Montanans lose their hard-earned money," Morrison said. "Many Montanans have been deceived into believing these are legitimate, legal programs, but they aren't and people stand to lose their money if they participate."
The order alleges the women held a recruitment meeting in Heidi Wadsworth's home with 80 to 100 women in attendance. Some individuals gave money to the program and later asked that it be returned, but their funds were not returned as requested. The order notes that because the people being recruited by the women were expecting compensation as a result of joining and that no products or services had been exchanged, the program is a pyramid scheme, which is inherently fraudulent and illegal.
Morrison, Montana's Securities Commissioner, said his office has learned that Montanans are being solicited to pay $3,000 to join this and similar pyramid schemes. He said promises are made to recruits that they will receive $24,000 if they recruit additional members. Morrison said his office has received information that organizers of the program recruit new members by mischaracterizing their investments as a gift or a legal investment, saying they can avoid paying taxes on profits and that it is legal under the Montana Securities Act.
Morrison encourages people participating in the programs to stop, request their original payment be returned, and if they have been given money, to return it to those who paid them. Participants also should contact the State Auditor's Office at 1-800-332-6148 if they have information about a pyramid scheme.
"Our objective is not to prevent consumers from getting ahead financially in these difficult economic times," Morrison said. "In fact, we often make financial literacy presentations and work to educate Montanans about the importance of informed saving and investing. But regardless of how these programs are pitched, the bottom line is that they are illegal."
People found in violation of the law prohibiting pyramid promotional schemes could face penalties of up to $10,000 per violation and/or 10 years in prison.
"We do not plan to prosecute every single pyramid scheme participant," Morrison said. "But we do intend to stop individuals who promote and lead recruitment efforts."
Pyramid schemes are fraudulent because nothing of value is purchased or sold when a person joins the program. Rather, the money is "recycled" to existing program participants. Continuation of the program is dependent upon new recruits. Eventually, the pool of people available for recruitment dries up and the pyramid collapses so the people on the lower pyramid tiers never get their money back, let alone make a profit.
The women have 15 days to request a hearing. If they fail to request a hearing, the order shall become permanent and the allegation contained in the order will be declared conclusions of law.
Anyone with information about the gifting program or questions about other investment opportunities should call the State Auditor's Office at 1-800-332-6148.