Cheers for money winners drown out pyramid fears

November 20, 1994|By Dan Thanh Dang and Joe Nawrozki | Dan Thanh Dang and Joe Nawrozki,Sun Staff Writers Sun staff writer Glenn Small contributed to this article.

WASHINGTON -- The tall, thin man wearing cowboy boots and jeans stood in front of the crowd with palms pointed heavenward. One by one, a woman slapped $100 bills into his waiting hands, whipping the congregation into a near-religious frenzy.

But this wasn't a church. This was a third-floor banquet room in a New York Avenue hotel, where the faithful had gathered to witness the latest payoff in the wildly popular pyramid game that is sweeping the Baltimore metropolitan area.

The room sparked with energy from the players -- doctors, lawyers, grandmothers, college students, business people, engineers, accountants, teachers and others. While Maryland officials have warned that the scheme is illegal and risky, these hopefuls were into the magic of the moment.

As the count reached $11,000, the assembly became a choir: "Eleven thousand one hundred! Eleven thousand two hundred! Eleven thousand three hundred!"

At the $12,000 climax -- the thin man's reward -- the crowd burst into cheers and whistles.

Another winner had "cashed out." In two other nearby banquet rooms, the same scene was being played out by hundreds of others. It goes on night after night at hotels throughout Washington, where the players believe they're beyond the reach of Maryland law and mathematical probability.

Byron L. Warnken, a law professor at the University of Baltimore, said the public should not be surprised at the enormous popularity of the game and those who take the risk to break the law.

"People look at this as a victimless crime," Mr. Warnken said. "Even people who are anti-crime. They bring their own judgmental values into it. People are fearful of crimes against persons and not particularly concerned about this.

"We can't fund enough police officers, prosecutors and judges . . . we can't put resources on this. If you have murders, rapes and robberies to deal with, you don't have the manpower" to enforce the law against pyramid schemes.

In Maryland, Virginia and 44 other states, organizing or recruiting players into a pyramid scheme is illegal, no matter where the payoff is made. It's punishable in Maryland by as much as a year in jail and a $10,000 fine, and state Attorney General J. Joseph Curran Jr. has warned residents not to participate.

The Baltimore County Police Department is conducting two lTC investigations into the pyramid game. One focuses on widespread allegations that sworn officers have participated in the scheme. The other is a criminal investigation to identify organizers behind the pyramids.

Asked about his officers' possible involvement in the game, Police Chief Michael D. Gambrill said, "I don't dispute that."

But he added: "This is not a witch hunt. We're not looking to haul thousands of people in front of the [judge]. We're looking at the people who profited and organized this."

Even with an investigation, he said, "The chances of losing money are greater than being caught."

The most common scheme works this way: Each player puts up $1,500 and recruits at least one other player into the game. The players are organized into "pyramids" of 15. When a pyramid is full, the player at the top collects $12,000. The pyramid then splits in two, and the players at the bottom have to pull in more players to fill out their pyramids. Each time someone cashes out, eight more players must be recruited.

Other variants involve investments of $500 with a $4,000 payoff and $3,000 with a $24,000 payoff.

Joel Morse, a financial economist who teaches at the Merrick School of Business at the University of Baltimore, agreed with Chief Gambrill's assessment of the game's risk factor.

"These things are terrible investments," Dr. Morse said. "Once the chain expands, the pool of potential suckers evaporates. The inevitable failure of one link in the chain is transmitted to other participants, and they stop making their payments."

A former FBI gambling expert said players who consider the pyramid scheme safe and legal are misinformed or deluding themselves.

"It's a scam," said William L. Holmes, who is on the board of directors for the Compulsive Gambling Center in Baltimore. "The individual that starts out the scheme will send out feelers to bring people out by making all sorts of promises. It would take the entire population of the state of Maryland for everyone to make what they promise."

But at the Days Inn in the nation's capital Wednesday night, the pyramid players weren't worried about theories and statutes. They wanted to strike it rich.

A 55-year-old Columbia businesswoman said she has cashed out in two previous pyramids for a total of $24,000. She said her husband and daughter each have cashed out once. Her son and daughter-in-law have cashed out twice, and now, she said, her mother and brother-in-law are on their way to cashing out.

Like others interviewed at the gathering, she agreed to speak only on condition of anonymity.

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