Beware the Rip-off!

By Rabbi Eli Teitelbaum

Every few months, another MLM pyramid scheme or Ponzi, goes bust leaving hundreds holding worthless promises and shattered dreams, and I’m left wondering “what’s coming next?”

Most recently a company calling itself “Purchase Plus” declared bankruptcy leaving at least $100 million owed to participants. Purchase Plus had about 65,000 members, many who had invested as much as $20,000.

I certainly wasn’t at all surprised reading the recent banner headlines   stating that “Purchase Plus Buyers Club Shuts Down!”  What surprised me was that it had taken so long. It was first on August 23, 2000, that the Ohio Attorney General filed suit against Purchase Plus Buyers group, an MLM scheme which offered consumers discounts and rewards to members for recruiting others.

I first learned about this company when a friend of mine showed me an ad that appeared in some local papers promising to make one rich overnight. He wanted me to lend him a few thousand dollars to invest in this plan. He also tried to entice me and others to invest their own money. All one had to do was put in $361, and it would turn into $11,353 in just one year is what the ad claimed. When I told him that these numbers made absolutely no sense, he showed me the ad that stated that there was a “money back guarantee” and also that the company had been tried and tested-”Tried and Tested.” In fact, the ad appeared in two supposedly responsible papers, therefore it must be reliable. He even knew of some people that had invested in this plan and were beginning to get some checks back. I told him that the few checks that these companies give back are like the cheese one puts on a mouse trap. It’s just put there to lure the rest of the mice to the trap. I took out a calculator and showed him that they were giving 3,000% interest and even Bill Gates couldn’t afford to give such high returns. The only thing that was “guaranteed” about the plan was that people would lose their money! Yet nothing that I said could convince him that this was a scam. The razzle and dazzle for some quick and easy money had totally blinded his common sense. When one wears green glasses one can’t see the color red! He acted like a moth drawn to a bright light.

When I saw that many rational people including newly married couples, were falling for this foolish nonsense, I decided to give the newspapers a call and find out why they accepted an ad that was so blatantly false. The editor respectfully explained, that it was the editorial board’s policy to accept any ad without checking on its legitimacy and it was the reader’s own responsibility to check out that he wasn’t being cheated. They simply wrote a disclaimer that told people that they took no responsibility for the ads that appeared in their paper. I replied that according to New York State law it was illegal to accept any deceptive advertising and they could be fined for it. They didn’t seem too concerned with it probably because they realize that the FTC was too busy reading better known papers. They told me that they have nothing against me taking out an ad giving my opinion.

Realizing that they were not ready to do anything about the matter, I decided to put in my own ad warning people not to invest in something that “looks too good to be true,” because they would eventually lose their hard earned money.

I immediately got many calls from people who had seen my ad, telling me that they had already lost their money to other such scam ads that had previously appeared in the paper and wanted to know how they could get their money back. I told them that I had no way for them to recoup their losses and all I am trying to do is prevent it from happening again. When they wanted to know why I was so concerned, I told them that one should not stand   idly by when he sees his friend being robbed. It hurts one to see these scoundrels ripping off people’s lifesaving newlyweds who can least afford it. It’s much better to stop people from stealing their money than having to collect charity for them afterward. I also found it quite shocking that few people seem to want to get involved in stopping these scam artists.

As I had expected, I now received a phone call from the scam operator himself asking me who had given me permission to dare proclaim that there was something illegitimate with his business. People were making lots of money and how do I dare call it a swindle. I told him that the same person he had asked before going into this business had given me permission to do what I felt was proper.

Mr. X claimed that I was guilty of ruining his business by passing around literature that claimed that all his investment schemes were a fraud and that people would lose money by investing in them and therefore demanded damages for defamation. He began by showing Bais Din the plan he was presently selling called “Purchase Plus,” which claims that one can make $11,353 within one year by investing only $363.

When the Bais Din asked him how a company could give such unbelievable great returns for such a small investment, he explained that a) this was only a potential income and wasn’t the actual guaranteed amount and b) by people using the many discount services the company offered, the company is actually saving thousands of dollars in advertisement expenses and therefore is able to give such amazing returns.

The Bais Din didn’t seem to understand how a company could offer such high returns without a person having to do anything at all and tried very hard to understand how this was possible. Mr. X  explained that by each person bringing his friends into the company they would be making lots of money and saving millions in advertisement costs.

I assured the Bais din that this plan would follow in the ways of all previous plans such as Winners Circle, Corner Stone, JewelWay and the others that all went bankrupt and ended up cheating thousands of people out of their money. I explained that many of these plans are illegal MML (Multi Level Marketing ) plans also known as pyramid scams. I explained the difference between legal MLM’s and illegal ones and provided the Bais Din with the proper legal documents to explain the difference. I explained that every year there are new companies opening up these MLM scams and it takes a few years before the FTC (Federal Trade Commission) closes them up. In the meantime thousands lose their money as is well known in the community. Being okayed by the Better Business Bureau is meaningless since the BBB only lists people’s complaints and does not investigate the legitimacy of any company. By the time people complain that they have been ripped off it is already too late. I showed the Bais Din copies of the FTC regulations that says that newspapers are not permitted to accept deceptive advertisements. I explained that since these ads were all in Yiddish, the FTC has no clue as what they say, but explained that they are against the law in any case. I pleaded with the Bais Din to put a stop to these swindles and not allow him or any newspaper to continue to rob the community blind since it can cause an enormous chillul Hashem.

I also called on a witness,  who testified that he had been swindled out of thousands of dollars which he had been conned to invest into those same companies which Mr. X was selling. He explained how these scam artists bamboozle you with their smooth talk and convince you that this new plan is different than all the other previous plans that have gone bankrupt. I offered to bring many more people to Bais Din who would testify that they lost money. Mr. X claimed that if people who lost money with Winners Circle would fill out the proper papers that they received in the mail, they would get their money back. I replied that when a company goes bankrupt one usually never gets back more than ten cents on the dollar.

I asked that if the Bais Din find these ads to be false then it is obligated to stop the Yiddish paper from accepting these fraudulent ads. The Bais Din replied that they didn’t believe that the newspapers would listen to what they have to say.

Mr. X claimed that every business was a risk, so why don’t I speak out against people investing in the stock market or lottery? Why am I picking on him? I  replied that there was a big difference between a business that was a risk and a business that was an outright fraud in which thousands had already lost lots of money.

When the Bais Din asked Mr. X to explain how a company could offer such high returns he explained that the company was not guaranteeing these returns since he clearly states in the ad that it was only potential income.  The word potential means that it’s only possible and that is not a lie, he explained. Bais Din replied that most readers are not very clear as to the meaning of the word “potential” and believe that one will actually make the money and therefore it is deceptive advertising. Mr. X also explained that the word “boduk U’menusa” only applies to the original investment and not to the potential profits.

Furthermore, the Bais din wanted to know what product the company sells that it is able to offer such high returns. Mr. X explained that the company called “Purchase Plus” gets people to become members and as a member people can choose to buy the hundreds of different products the company offers at discount prices. Since these companies make lots of money by getting people to buy their product without having to advertise them, the company can afford to give people lots of profit. The Bais Din continued by asking him how the savings in advertising alone could possibly give such high returns? Furthermore, what was the actual product they were selling that would make it possible for them to give a 300% return on their money? The Bais Din also wanted to know what guarantee people have that the company would not go bankrupt and people would lose their original investment as they did with Winners Circle or JewelWay? Mr. X tried as best as possible to explain why this company was different than the others he had previously sold, but Bais Din wasn’t able to understand his explanations since he just kept repeating himself without actually answering the question. Mr. X showed that there were many mutual funds that gave similar returns and therefore this company wasn’t any different. The Bais Din replied that a mutual fund does not guarantee any returns but only advertises their past earnings. People know that the future is unpredictable and it can even go down. There are no guaranteed returns.

He told Bais Din that hundreds of mosdos had invested lots of money in the plan and they were all making lots of money. When I asked him to show Bais Din the cancelled checks in order to prove it, he told Bais Din that this was a secret that he was not allowed to reveal.

 In order to protect oneself against a possible loss, he tells people to buy it on their credit card and then call the credit card company within 60 days to dispute the charges (and not pay the bill). Only after one receives his check and profits 3 months later, does one call the credit card company and tell them that they can make payment. Mr. X in fact claimed that he tells all his customers to do the same thing, this way their investment is insured. (Brilliant idea I thought to myself. This certainly sounds great! Only one problem; one can only dispute a credit card charge if one purchased a real product and it was faulty or it was not delivered. One cannot use a credit card to make an investment (like buying stocks), and then dispute the charges if the investment goes sour.  When one puts money into “Purchase Plus” he gets no product but rather is promised a return on his money after a certain period of time. This means that it’s an investment and not a purchase. This makes this clever scam illegal.

The next witness,  an accountant by trade, explained to Bais Din that when one invests  $3,000 and gets back  $113,538  over 2 years, the percentage of interest is 3,000% and not   300% percent as the Bais Din had calculated. This amount is ludicrous and impossible for any business to give especially for doing absolutely nothing. “If this were true,” I said, “than we ought close down every business and invest in Purchase Plus. The only way they can give such returns is by taking the money of new members and giving it to the previous investors, and that’s called a Ponzi.”

The Bais Din checked the figures once again and were utterly amazed that it was indeed a 3,000% return, something which is absolutely impossible!

A few weeks latter the Bais Din issued their ruling stating that Mr. X could continue to advertise his business but could not use the words “Guaranteed” or “Boduk umenusa” since there was a possibility that the company would go bankrupt. They also gave me permission to continue warning the public about investing in such high-risk plans but did not want me to specify his name in my writings. They also asked me to send them a copy of what I wrote before publishing it.

While I felt the Bais Din was honest and realized that this entire deal was nothing but a fraud and their ruling actually put an end to his advertising in the papers since without stating that the plan was “guaranteed, tried and tested” few people would buy it, I was surprised that they didn’t stop this swindler in his tracks and allowed him to continue spreading his swindles through word of mouth.  Unfortunately many others continued to fall into his trap. That’s because he is an unbelievably good salesman who can easily convince anyone that the moon was made out of cheese He had once invited me to attend one of his sales meetings at which I saw his salesman do a masterful job of convincing the audience that they could all get rich overnight. It was one of the best sales pitches I had ever seen. If I didn’t have my head on straight I could easily have fallen for his sweet talk. He had the frightening power of “ki tzayid b’fiv”

To understand how powerful some of these sales meetings actually are, you must go and attend one yourself. Just make sure to leave your checkbook at home!

This was already the third time Mr. X had been involved in selling plans that all went bankrupt yet Bais Din did not permit me to expose him by name. I of course felt that the only way to put a complete stop to this type of fraud is to expose him, but one must abide with Bais Din’s ruling.

A number of years ago there was a company called JewelWay holding their weekly meetings just around my corner at Montauk Public School. All you had to do was invest $500 and you would soon be rolling in money. Nearly everyone who went there fell for their slick talk. When I wrote a few articles in Country Yossi warning the public that this plan was an illegal MLM scam and would eventually go bankrupt, I was flooded with phone calls from people who told me that I knew nothing about the business and was making false claims. The company threatened to hit me with a million dollar lawsuit but I continued on despite their threats. Two of their top salesmen came to visit me and tried to convince me that the company was legitimate and people would make lots of money. With their permission, I recorded the entire proceedings and still have a copy of those tapes. Boruch Hashem, my articles reached a very large Jewish audience through Country Yossi and lots of people that were considering investing, held off. If was less than a year later that “JewelWay” was closed down by the FTC for being an illegal pyramid scheme as I had claimed, and all those who had invested, unfortunately, lost all their money.

The problem is that as soon as one quick and easy money scam closes, two others open up. People simply don’t learn from previous mistakes.

When one of the top salesmen for Purchase Plus heard that the company went bankrupt, he just shrugged his shoulders saying “big deal! People lose their money in the stock market every day, so what!” He just didn’t see the difference between an outright swindle and someone who wants to take a gamble with his money.

Here is a letter that I received from one of the people that lost his entire lifesavings in one of Mr. X’s scams.

Here is what he writes

Dear Rabbi Teitelbaum,

I only recently heard of your Din Torah with Mr. X. This thief still owes me lots of money from my investment in a company called Winners Circle that has since gone bankrupt. Unfortunately I never read your warnings but I am extremely disappointed that people don’t stand up to these crooks in our midst and allow them to continue to rip people off. When will the community stop protecting the criminals in our midst?

 The issue on trial was whether Jewish newspapers and individuals are permitted to advertise misleading and deceptive plans that have proven to go bankrupt and thereby cause thousands to lose their investments. I know that you have been a lone voice in the battle against companies such as JewelWay and others that have tried to scam our community and has managed to save thousands of people from losing their money through your brilliant newspaper articles and advertisements that alerted the public and made them aware of the dangers. Your articles have saved thousands from losing their money in illegal M.L.M pyramid’s and Ponzi schemes making the rounds. Perhaps if readers would voice their opinion, then things would change.

Here is a copy of an open letter I recently sent to the Jewish Papers.

An open letter to  the Editorial Boards of all Jewish Newspapers:

Once again a company (Purchase Plus) that was advertised in the Yiddish papers has declared bankruptcy and left many people with broken hearts and shattered dreams as many people lost their entire lifesavings and were completely wiped out! This is not the first time this has happened. It happened with JewelWay, Winners Circle and Cornerstone that have all advertised in your newspaper. They have all since gone bankrupt and left people with broken promises and empty pockets. While I fully realize that newspapers can’t be held responsible to check out and investigate the legitimacy of every ad that appears in their pages, simple morals and ethics demand that they refuse to accept ads that are blatantly misleading, fraudulent and are designed to tempt the “blind” to lose their money. Any company that offers a person 3,000% interest, as did “Purchase Plus,” is an obvious fraud and therefore you should not have accepted their ad. While some people may see some checks back, they are only given to draw the mice to the trap.

By running such ads in your paper, you are lending credibility and dignity to these schemes. In effect, you may possibly be considered agents, accessories or accomplices in helping promote these swindles.

While it is certainly every individual’s responsibility to check out the authenticity of every ad, by accepting these ads the publishers are aiding in the spread of these schemes to the unwary public, causing the ignorant and naive to lose their hard-earned money.

Just as responsible newspapers do not accept advertisements for non-kosher products, they should not accept ads for non-kosher money schemes. It is true that people who respond to get-rich schemes are letting greed get the better of their judgment, but shouldn’t newspapers have a responsibility to protect the gullible? The papers lecture us in their editorials and columns on proper ethics and morals; don’t they apply to them as well? Aren’t they morally and ethically obligated to protect their readers from financial loss?

I think it is time that rabbonim affiliated with these papers voice their opinion. Those who lost money on account of them ought express their strong protest (respectfully, please! ) at the editorial boards’ policy, and demand that this unacceptable S’domite  type practice come to a stop. Is a Jewish newspaper willing to sell its soul for the few dollars it makes on these ads? We must not allow the con artists in our midst to use our Jewish newspapers as a vehicle to scam and rob the Jewish community out of its hard earned money!

While I’m all for freedom of expression, one can’t shout fire in a crowded theater. Neither is it legal according to U.S. law to accept such ads.

More: Newspapers actually have a responsibility to write articles that explain and warn the public not to invest their money in false promises. After all, “haTorah chasa al ma’monam shel Yisroel” so should they! Let them teach their readers the golden rule that says that “anything that sounds too good to be true, probably is!” They ought teach them about Ponzi scams and illegal MLM scams so that their readers recognize these swindles and learn to keep their distance.

The Chinuch (mitzva #237) says that the lav in the Torah of “lo saamod al dam rei’echah” includes not remaining silent when one sees another person’s money is being stolen! I have been called by someone who lost his life savings to a scheme advertised in a Jewish newspaper. Isn't that bloodshed?

I find it abhorrent that I must take out a paid ad in “The Yid” and “The Tzeitung” warning people about the blatantly false ads they dare carry. This is outrageous! Let the one who helped spread the fire pay for putting it out. Let the one who allowed the “michshol” to appear in his paper, pay for the expenses of correcting it!  Since I have now been proven right, don’t I deserve to get my money back? After all, the mistake was your doing!

Respectfully
Rabbi Eli Teitelbaum