Seven people gathered in a plush Washington hotel suite Thursday night to learn how to turn a $1,000 cash investment into $32,000.
Frank Neer, 28-year-old rock concert promoter from Boston, pointed to an array of charts, showing how the $1,000 would grow by getting friends to contribute to what he called the "Business Pyramid."
The plan is effectively a chain letter, but Neer claimed that face-to-face cash exchanges would eliminate legal problems normally associated with mail fraud statutes.
Three unnamed Washington lawyers had given "three green lights" to the plan, he said. "We don't fear the law . . . But we don't want the press learning this program."
Neer noticed that two of his prospects were taking notes.
"Uh, you two wouldn't happen to work for a newspaper,would you?" Neer asked, smiling faintly.
Upon learning that two reporters were present, Neer and his partner Marty Feeley folded up their charts and ended the presentation of the get-rich-quick scheme they say has raced through New England like gold fever over the last few months.
Operating first from the Mayflower Hotel and most recently from a suite at the Guest Quarters on Pennsylvania Avenue NW, Neer and Feeley said they have sold their "program" to 14 people here, mostly recruited from several trendy downtown Washington bars over the last two weeks.
"If ever there was a city that appreciates the dollar and the teamwork it takes to reach a goal, it's Washington," Neer told one group.
Until Thursday the two made thrice-daily presentations.
The "program" works as follows: The investor contributes $1,000 and then recruits two friends, each of whom gives $1,000. The original investor keeps $500 from each of his recruits; the other $500 from each of them goes to the person whose name appears at the top of a six-name list.
Theoretically as the name move to the top of the list through each new round, investors stand to make $32,000.
To avoid mails, the transactions should take place in person or the $500 should be sent in shoeboxes by United Parcel Service, according to Neer and Feeley. Explained Neer:
"Now, if someone called me up and said, 'Frank, I've got $500 for you, come and get it,' I'd say, 'I don't know who you are, but you've just become my best friend.'"
The Business Pyramid is one of hundreds of derivatives from the classic pyramid scheme of the 1920s began in Boston by an Italian Immigrant named Charles Ponzi. The victims at the end of the pyramid scheme are often lower middle-class workers desperate for riches.
Neer and Feeley said that their "program" was different and perfectly legal. They said no one had filed a complaint. It would work, they said, because it would be "controlled and managed." Asked later who would manage the program once original investors had recouped their money, Feeley said he would simply start again.
The partners aimed their early marketing efforts at the clientele and staff of such downtown Washington bars as Flap Rickenbacker's, Sarsfield's, Marshall's and Pierce Street Annex Drinking Establishment.
Questioned later about the lawyers in Boston and Washington who Neer had offered the opinion that the Business Pyramid was entirely within the law, Feeley declined to be specific.
A lawyer familiar with chain letter regulations maintains the mails "need only be ancillary to the enterprise." If cash is deposited in a bank account and a bank statement is sent through the mail, that could be sufficient to apply mail fraud regulations to the enterprise, said the lawyer.
"We only sell to seller," said Feeley. "Sellers," he explained, are investors who are motivated to include like-minded friends who in turn will not break the chain by failing to resell the "program."
"This isn't for kids who wash dishes . . . pimps or junkies," he said. "It's not meant for them. We don't want those kinds of people.
"Someone with a dull government job who sits behind a desk all day need not apply," said the first Washingtion investor, John Greer, 29, a bartender at Flap Rickenbacker's who invested $1,000 and stand third in the line behind Neer and Feeley to collect on the Washington's pyramid.
When Feeley decided to export the business to Washington, he called Greer, an old friend and classmate at the University of Rhode Island. Greer said he was astounded recently in Boston where he watched $5,000 to $6,000 change hands over a table in a matter of minutes from investors involved in the pyramid.
Greer says he's already made back his original $1,000 investment by selling to two others. "It looks like it's going to work for me," he said. "But we're in the middle of the flow. There are a lot of bigger fish than us (in Boston)."
"I do this fulltime. Nobody has ever given me a job where I can make as much money as this," said Feeley.