Maryland officials said yesterday they will crack down on the "Circle of Gold" pyramid operation, a get-rich-quick scheme that has swept through suburbia's black middle class, luring $100 investors with the possibility of a $200,000 return.
"Our policy regarding the Circle of Gold is that it's illegal and if anyone is participating in it, we will take whatever steps necessary . . . and proceed against them," said Jeffrey Werner, Maryland's assistant attorney gernal for consumer protection.
U.S. Postal authorities said yesterday that they also planned to step up investigations into the popular pyramid scheme, similar to a chain letter, that they say violates federal mail fraud statutes. Promoters "can make all the statements they want about how legal it is, but chain letters have been illegal for some time," said one official. "We are going to pursue this Circle of Gold."
A District of Columbia consumer protection official estimated that as many as 30,000 people may have invested locally in the pyramid operation and said he would recommend that the corporation counsel follow the strategy pioneered by Maryland officials and thwart the scheme by obtaining blanket injunctions.
Werner, who last spring successfully obtained a statewide injunction against two "Circle of Gold" promoters under state lottery statutes in Frederick County Circuit Court, said yesterday that Maryland investor-promoters whose activities were detailed in The Washington Post's Sunday editions would receive a stiff warning.
"We will notify the people mentioned in the article by sending them a copy of the outstanding injunction and tell them that any further activity in the Circle of Gold would be in violation of it and could make them liable for contempt of court," he said.
The "Circle of Gold" is similar to the Ponzi scheme of the 1920s that lured lower-middle-class workers desperate for riches. But this California-bred version is aimed at doctors, lawyers, business-types, government workers - respectable members of the middle class who host parties where they serve Chablis and hors d'oeuvres and pitch the scheme to friends and associates as a sure-fire way to get rich.
Investors are urged to buy a list with 12 names and addresses for $100 and recruit two new memberes, each of whom also invest $100. Members pay half their $100 investment to the person who sold them the list, mail $50 to the name on the top of the list and put name on the bottom.
As new members are recruited and their names move to the top of the list, participants believe they can receive $50 bills from a multitude of perfect strangers. But such pryamid schemes usually break down, with original investors making money as those on down the line, whose pockets are inevitably picked, find it harder and harder to sell the lists, say authorities.