A Baltimore County woman has agreed to refund $10,500 to players of a pyramid scheme in Pennsylvania after a large-scale investigation which has implicated thousands of participants including a small-town police chief and doctors in Philadelphia hospitals.
Officials in Maryland and Washington are conducting independent inquiries in the illegal but wildly popular game that HTC promises to parlay a $1,500 investment into a $12,000 return in "Friends Helping Friends," the local version most widely played.
Pennsylvania Attorney General Ernest D. Preate Jr. said yesterday that Diana Lynn Elk, 28, of White Hall in northern Baltimore County, has begun refunding $10,500 to participants of a scheme called "Friends Network Gifting Program" that she ** promoted in York.
Mr. Preate said pyramid schemes are barred by the state's Unfair Trade Practices and Consumer Protection Law because the vast majority of players lose their investments when the pool of possible recruits dries up.
Maryland law also forbids the pyramid games and officials in the District of Columbia are pressuring hotels there not to permit meetings catering to pyramid groups because they violate a local consumer law.
Baltimore County police are investigating -- both criminally and internally -- reports the game has been widespread, including among some sworn officers.
Leaders of the county fire department and Harford County Sheriff's Department have issued written warnings to members that the game is illegal in Maryland.
A Baltimore-area woman who has "cashed out" twice in Washington said last night she was called by an official from the District of Columbia Department of Consumer and Regulatory Affairs last week "who was very firm, very demanding."
"He told me he got my name from a hotel registration book and wanted names of other players, other hotels," said the woman, who asked for anonymity. "I told him nothing."
In the Pennsylvania case, Ms. Elk commuted from Maryland to York where she worked as a physical fitness instructor. She was identified as an organizer of a pyramid game there.
"We received a complaint that Ms. Elk did not give a player a refund after a certain amount of time," said Deputy Attorney General Joseph K. Goldberg, who directed the investigation that started in April in southern Pennsylvania and spread to the Philadelphia area.
"She admitted no wrongdoing but she agreed to refund $1,500 to each of seven consumers from whom she received money and to pay the state a total of $373 in costs."
Despite publicity about the investigation, Mr. Goldberg said "the game is going on all the time in courthouses, hospitals, businesses and bars. It is being conducted through the mail and on computer bulletin boards.
"Players are not clandestine about it . . .," he said. "They are using their real names and investing with their personal checks."
He said a "number of police officers and a small-town police chief have been implicated." He did not identify the police chief.
Mr. Goldberg said players who argue pyramid games should not be illegal have not been on the receiving end of complaints from people who have lost their investments.
"We've had hundreds of calls to our Harrisburg office and thousands in Philadelphia," he said. "The problem is too many people end up losing. And it's not like putting 50 cents down on the daily number. Folks put up $1,500 and can wind up suffering substantial losses.
"We have thousands of complaints we still are working on."
So far, his office has filed legal actions against 77 alleged promoters of the pyramid game and 58 of those cases have been settled. Those individuals have been ordered to pay a total of $288,905 in restitution and $64,600 in penalties and costs.
Cases against the remaining defendants are pending.