A Laurel couple was convicted yesterday of violating state securities laws by operating a get-rich "pyramid" scheme that promised "prudent investors" a $160,000 return on a $1,000 outlay.
James Ciotti was found guilty on two counts and Georgia Bridgman was convicted on one count after a four-day jury trial during which witnesses testified they were promised quick cash in return for their investments in a 15-person pyramid. Judge Howard S. Chasanow imposed fines of $5,000 and $2,500, respectively, and gave the defendants two months in which to pay.
According to testimony, a state securities investigator, responding to a newspaper advertisement, uncovered the scheme. Ciotti took out an advertisement that ran for three days in The Washington Post and Bridgman bought a similar notice that appeared in the Washington Star, the evidence showed.
The advertisments listed a phone number, urged readers to call "Mr. Brooks" and promised a $15,000 profit on $1,000 in 35 to 45 days.
Posing as a potential investor, the investigator attended a meeting last July at a dentist's office in Hyattsville. Ciotti, according to testimony, ran the meeting at which he outlined a pyramid built with four tiers of investors -- one on top, then two, four and eight below.
Of each $1,000 invested, $500 would go to the person on top of the pyramid and $500 to the one immediately ahead of the investor, witnesses testified they were told. Ultimately, each investor would get to the top and receive $16,000.
Accompanied by two state plain-clothes police, the investigator attended a second meeting three days later in Clinton. After Ciotti repeated the pitch, arrests were made.
In the first prosecution of a pyramid scheme in Maryland, Ciotti and Bridgman were charged with offering, for sale an unlawful security and with violating a lottery law. Because the lottery prosecution relied on a regulation promulgated by the state securities commissioner, the state was required to prove the defendants knew of the regulation. Circuit Judge Howard S. Chasanow ruled the state had failed to prove that element of its case, eliminating the lottery charge and the prison penalty it carried.
"I was very pleased with that result," said Fred Joseph, their attorney, who had also argued, unsuccessfully, that the securities statue is unrelated to pyramid games, "that Maryland should be required to prohibit this type of gaming device [by law] before people can be prosecuted."
Prince George's State's Attorney Arthur A. Marshall, Jr. had declined to prosecute the case, according to Assistant Attorney General Steven M. Schenning, because he "was skeptical of whether this game constituted a violation" of the law. Marshall could not be reached.
Schenning, who tried the case, said four other persons are scheduled to be prosecuted on similar but unrelated charges in Prince George's County in August.