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New Law Targets Pyramid Schemes

Lindeen given tools to root out schemes before they hurt Montanans

April 25, 2013

HELENA, Mont. – A bill signed into law by Gov. Steve Bullock will give Montana Securities Commissioner Monica J. Lindeen new tools to stop pyramid schemes in Montana.

The bill, sponsored by Sen. Larry Jent (D-Bozeman) at Lindeen's request, comes in response to a string of high-profile pyramid schemes targeting Montanans. Over the last three years, pyramid schemes like Fortune Hi-Tech Marketing have robbed more than $5 million from thousands of Montana investors.

"We've seen the damage pyramid schemes cause in Montana, and we can't afford to let this continue," said Lindeen. "Yesterday, con-artists operating pyramid schemes had time on their side. While we worked to build our case, they were free to exploit Montanans. But today, we've turned the tables on pyramid schemes. From now on, these schemes can't hide from the law."

Previously, Lindeen had to wait for formal complaints from victims before investigating suspicious activity. Even after receiving complaints, investigations could be complicated by the fact that pyramid schemes often masquerade as multi-level marketers -- legitimate businesses selling products and services through independent salespeople. This delay would give the scheme's organizers more time to attract new victims and steal more money.

The bill signed into law today requires multi-level marketing companies to register with Lindeen's office before recruiting salespeople in Montana. The registration requirement does not apply to individual salespeople participating in a multi-level marketing business. To lessen the burden on legitimate multi-level marketers, the law exempts members of the Direct Selling Association, a trade group with strict membership requirements.

Lindeen plans to use the registration process to weed out pyramid schemes. If a pyramid scheme tries to skirt registration, Lindeen can issue a cease and desist order and immediately open an investigation. By halting schemes before they have a chance to prey on Montanans, Lindeen hopes to save potential victims.

"Montanans need protection from pyramid schemes and easy access to opportunities in direct selling," said Jent. "By partnering with industry, this law protects consumers and valuable economic opportunities alike."