Fair traders square up to pyramid fraud

South London trading standards officers are calling for changes in the law to curb get-rich-quick schemes which prey on the poor and unemployed.

Croydon officers investigated about 40 schemes advertised in the borough, often in shop windows. About 75 per cent were dubious; many were variants of pyramid selling.

'The vast majority were not what they seemed at face value. If people had known what was really involved, they would not have sent their money off, said Dick Diplock, assistant trading standards officer. A report is being sent to the Office of Fair Trading.

Officers also said their work was being hampered by secrecy surrounding the work of the Department of Trade and Industry, which investigates frauds. Inspectors are forbidden to share information with trading standards officers.

A common trick used by many schemes is to ask for an initial payment to find out more about how to make high earnings. The level of income stated is often unrealistic, depending as it does on recruiting others, or impossible sales targets.

One advertisement, claiming that people could earn up to pounds 1,000 per month mailing circulars, involved selling correspondence courses costing pounds 200 a year. People would have to sell 100 each month to reach the earnings target.

Another scheme offered, for a pounds 30 fee, the chance to earn commission on sales of air tickets. After pounds 30 was sent in, nothing was heard from the advertiser and the police were called in to investigate.

One company offered a chance to earn pounds 12,000 if people invested in a 'secret report. The company claimed to have a network stretching from the Netherlands to Malaysia.

In another scheme, a company offered to turn an investment of pounds 140 into pounds 600. The company, FPW, claimed it could not reveal how because of 'industrial espionage. FPW has been wound up by the DTI, but some investors are thought to have lost thousands of pounds. There is nothing to stop the man behind it starting another company.

Croydon trading standards officers are particularly concerned that the law does not protect people from schemes such as FPW, known as 'money juggling, in which early investors are given pay-offs from later ones . When recruits dry up, the scheme collapses, such as MMM which crashed in Russia last month.

Sue Wiseman, of Barking trading standards department, said: 'The regulations are useless. I've yet to find a scheme that contravenes them.

Jeffrey Smith, a part-time parking attendant from Barking, lost pounds 20 after he paid to join a scheme offering up to pounds 10,000, ostensibly from selling market research data. He received nothing.

Linda Duggins, a local government officer from Dagenham, sent pounds 10 for more information about working from home. 'I thought it was addressing envelopes. Instead, she was asked to get more people to send pounds 10 to the company by placing similar adverts.

The Direct Selling Association is seeking support for a private member's Bill to introduce new regulations on pyramid selling. The DTI, which plans a public consultation on tightening the law, said that 'it would not necessarily be helpful for investigators to share information with trading standards officers.