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The Gullible Travels Show

Andhra’s had a law banning ponzi schemes since 1965. But the people just don’t learn.

The Gullible Travels Show
The Gullible Travels Show
outlookindia.com
-0001-11-30T00:00:00+0553

In Vijayawada, Andhra Pradesh, you can earn Rs 10,000 a month working just twice a week from home. The catch is, to become a multi-level marketing “leader”, you first have to pay prospective employers Rs 1,500. Also, friends and family must enrol into the scheme, each paying Rs 1,500 “fees”. Chances are, within weeks, this employer will disappear with the money. For such is the modus operandi of a typical multi-level marketing, ponzi or pyramid scheme. Such schemes flourish across India (a Rs 1.5 lakh crore worth fraud, by 2011 estimates) but are especially popular in southern states, including Andhra Pradesh.

“These schemes have caused much hardship among the poor, unemployed and gullible, even deaths, in Andhra. Investigations show hundreds of crores lost to such schemes where promoters disappear,” says DIG V.C. Sajjanar, former head of the economic offences wing of the state police. Sajjanar was instrumental in carrying out raids against Japan Life India, a pyramid scheme that looted Rs 4,000 crore.

“Under a ponzi scheme, Rs 5,000 cr was collected from unsuspecting rural folks in just one district.”

An Andhra law banning MLM schemes—the AP Money Circulation Schemes (Prohibition) Act—is India’s oldest, dating back to 1965. Yet, entire communities and families still routinely end up bankrupt to them. “Under one scheme, Rs 5,000 crore was collected from unsuspecting rural people in just one district. The promoters then vanished,” says S.V. Krishna Mohan, who brings out a magazine, Pelli Patrika, to assist people whose marriages are in crisis. His connection with fake get-rich schemes may seem tenuous, but a frequent reason for quarrelling couples, he finds, is MLM schemes. “Fraudulent ventures brainwash one spouse into putting pressure on his or her family to enrol. I see marriages break down over it all the time,” he says.

Critics say MLM plans typically mimic business models of large companies like Amway. In response to AP investigations, the FIPB has launched a fresh probe into the firm’s business. “Yet, the probe seems oriented to regulate such firms rather than impose a ban as we demand,” says Mohan. Amway is registered as a direct-selling company. It is, however, subject to two ongoing police investigations in Andhra as well as a PIL in Hyderabad. “The models of Amway, Japan Life, Southern Wonder, Green Glory, PACL and others are really the same as the smaller ponzi schemes. Smaller ponzi schemes are inspired by larger frauds,” says Sajjanar. Fresh approvals for direct selling firms are on hold.

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