A Pennsylvania computer company accused of running an illegal pyramid scheme has agreed to pay a $15,000 fine and provide refunds to at least 1,100 people, the Maryland attorney general's office announced yesterday.
Destiny Foundation and its president, Nadim Baker of Mountville, Pa., while admitting to no wrongdoing, also have agreed to stop doing business in Maryland.
Attorney General J. Joseph Curran Jr. had ordered the company four months ago to halt its twice-weekly meetings that drew thousands of people to the Best Western Inn on O'Donnell Street in Southeast Baltimore.
Mr. Curran's office began issuing alerts about pyramid games late last year when thousands of people, including doctors, lawyers, police officers and firefighters, were traveling to Washington to take part in the "Friends Helping Friends" network. That scheme promised a $12,000 return on a $1,500 investment.
After law enforcement authorities shut it down, former "Friends" participants joined the Destiny Foundation. Investors at the bottom level of Destiny's marketing hierarchy were required to put up $1,500 to participate, and pay an additional $25 for the company's product -- a floppy disk containing a computer program called "Organize Your Destiny."
"Pyramid operators sometimes try to make their schemes look legitimate by offering a product -- in this case it was software," Mr. Curran said. "But if you peel away the fancy words and sales guides and discover that the real selling point of the deal is a possible 'cash-out' after recruiting new participants, then it's a pyramid scheme, and we're going to go after you."
Each person's goal in Destiny was to recruit seven new members and eventually become a "sales group manager" -- and collect $10,000. Destiny would keep $2,000 for its effort, expense and taxes, plus the $25 for the software.
Mr. Curran said yesterday that pyramid schemes are inherently fraudulent because they allow initial promoters to reap huge gains from the investments of new members, but the scheme collapses when the pool of possible recruits disappears.
Sandra Cox, a Baltimore clerk, considered herself lucky to have lost only $25 to Destiny.
She said leaders of a meeting at the Best Western told her that the company was legitimate and that Mr. Baker had a software company, as well as a product. Destiny even promised to give each investor a tax form to report sales commissions received from recruiting other investors, she said.
Letters offering refunds will be mailed to investors within two weeks, Mr. Curran said.
Efforts to reach Mr. Baker were unsuccessful yesterday. Destiny Foundation's toll-free telephone number was no longer in service., and Donald E. Brand, a Bel Air attorney representing Destiny, did not return telephone calls.