During this campaign season, political candidates have made various proposals to boost tourism.
One of them may be a pyramid scheme, according to recent warnings from police and a consumer advocacy group.
Included in a print advertisement for People’s Progressive Coalition candidate Ishmael Brathwaite is the link to a website for Caribbean Travel Group International, which states that its goal is “to develop a programme that is conducive to expanding the tourism economy of the Caricom countries.”
The organisation proposes to do this by promising payments in excess of $4,000 and a five-day Caribbean cruise in exchange for making a $60 monthly payment for one year and recruiting three other people to the organisation.
“It has the hallmarks of a scam,” said Adrian Dale, a detective sergeant in the Royal Virgin Islands Police Force’s Financial Crime Unit. “It seems to be promising an extremely high rate of return considering the initial investment.”
How it works
Indeed, the numbers do not seem to add up, considering that each member is required to pay $720 in a year but is promised more than $4,000 and a weeklong cruise.
But Mr. Brathwaite denied that the offer is a scam, insisting that the timing of the payments makes his business model sustainable.
The initial members, he said, won’t receive large payments from the beginning: The revenue starts to accumulate only when each member’s three recruits bring in three more people – and those three people bring in three more recruits, and so on.
“No one receives payment in the first month,” he explained. “In the second month, each member recruits three other people, so you now have 400 people – but only the first 100 persons are going to receive payment in the second month, and it’s going to be for a very small amount,” he told the Beacon. “When you get down to the end of the year, and you bring in a million people — a million people paying $60 each is $60 million. And that million people is far from ready [to receive their promised payments], so the money is piling up during that time.”
After a year, he added, the initial members would have to renew their commitment and restart at the first “payout level.”
On his website, Mr. Brathwaite touts this plan as a better investment than the government’s offering of shares in the landside portion of the cruise pier project.
“That minimum $5,000 investment requirement effectively excludes the average BVIslander from investing in the [pier] project,” the website states. “We will level the investment playing field so that the average BVIslander can afford to invest in the scheme and be a part of the development of the BVI.”
However, a consumer advocacy group is sceptical. According to Robert FitzPatrick, president of the North Carolina-based non-profit Pyramid Scheme Alert, the model is unsustainable and “definitely has the characteristics of a pyramid scheme.”
Mr. FitzPatrick explained that if each CTGI member is required to recruit three more members – which would triple the size of the organisation after each successive group – then before long there wouldn’t be enough people in the world to keep the scheme up and running.
To illustrate his point, Mr. FitzPatrick used basic arithmetic, multiplying one by three, then taking the result and multiplying it by three again and again until the numbers became astronomical.
After only 18 rounds of this exercise, the result was 387,420,489, which is more than the population of the United States. After 21 rounds, the result exceeded 10 billion – more than the world population.
“Those are the numbers: It can’t work. The last ones in, at some point, aren’t going to be able to find three,” explained Mr. FitzPatrick, the author of False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes. “That doesn’t mean that nobody would find three, but the vast majority at the end of the chain won’t be able to find enough to make it worthwhile, and so they will have been cheated out of their money and their promise.”
Though the model may be unsustainable, it is often legal in most jurisdictions, Mr. FitzPatrick added.
“The laws are not clear: They’re weak, and they’re seldom enforced in England and the USA,” he said. “The US doesn’t have a national anti-pyramid scheme law. When they do prosecute, which is rare, they prosecute them under the Federal Trade Commission Act, which has a broad provision against what they call unfair and deceptive trade practices.”
This reporter sent the link for CTGI’s website to Financial Investigation Agency Executive Director Errol George and Financial Services Commission Managing Director Robert Mathavious and requested comment, but he did not receive a response before the Beacon’s print deadline yesterday afternoon.
Mr. Dale said that authorities don’t send out warnings for suspected pyramid schemes unless someone reports being defrauded.
No members yet
So far, no one has signed up for CTGI’s plan, Mr. Brathwaite said, adding that he’s been concentrating his efforts on campaigning in recent weeks.
However, he hopes to kick his plan into high gear after the June 8 election regardless of whether he wins a seat in the House of Assembly.
The PPC’s other candidates, Edmund Maduro and Khoy Smith – the latter of whom is pictured with Mr. Brathwaite in the advertisement mentioning the tourism website – both said they weren’t aware of CTGI, and Mr. Brathwaite said that he is the only person involved in the organisation so far.
“Once we get the programme going, as the numbers get higher and higher, we will add more professionals,” he said.
With offices located in Wickhams Cay as well as in Dayton, Ohio, Mr. Brathwaite said CTGI is operating under the VI trade licence for Christians & Friends Investment Group.
An official at the Department of Trade and Consumer Affairs said that the company is licensed to be a music studio.