How to Help Yourself
This is the final piece of a five part series on Arlan Galbraith Pigeon King scheme. The other four other posts were: What is New in Family Farming?, Why being a Sucker Seems So Right, Pigeon King and Testimonials, and How Will Pigeon Scheme End?
We have learned that even when we see a Ponzi scheme for the illogical economic mess that it is, it still remains an attractive - as Charles Ponzi said about his own scheme: Many people who would not gamble can be tricked into experiencing the same hedonistic delight by dressing the scheme up as an "investment". The narcotic of gambling made all the more toxic by its illicit masquerade as an "investment" drives all Ponzi schemes, and pyramid schemes.
If you have come to the conclusion, as many people have including the Attorney General of Iowa, that Arlan's PKI is an illegal Ponzi scheme and you have a contract with Arlan what can you do?
What follows is general legal information and should not be taken as legal advice. Your own circumstances are different, and it would be unwise of you to rely upon an article even written by a lawyer as a substitute for purchasing legal services.
There are at least four legal methods you can use to try to get some of your money back from Arlan, before the whole scheme blows up.
State Business Opportunity Laws
In 26 States, there are Business Opportunity Laws - which regulate the relation between the seller of a business opportunity and the purchaser. Here is a helpful and short checklist from the FTC:
Look at the ad carefully. If it claims buyers can earn a certain income, then it also must give the number and percentage of previous purchasers who achieved the earnings.
Get earnings claims in writing. If the business opportunity costs $500 or more, then the promoter must back up the earnings claim in a written document. It should include the earnings claim, as well as the number and percentage of recent clients who have earned at least as much as the promoter suggested. If it's a work-at-home or other business opportunity that involves an investment of under $500, ask the promoter to put the earnings information in writing.
Study the business opportunity's franchise disclosure document. Under the FTC Franchise Rule, most business opportunity promoters are required to provide this document to potential purchasers. It includes information about the company, including whether it has faced any lawsuits from previous purchasers or lawsuits alleging fraud. Look for a statement about previous purchasers. If the document says there haven't been any previous purchasers but the seller offers a list of references, be skeptical: the references probably are phonies.
Arlan doesn't have a disclosure document, for either a franchise or business opportunity. He is likely violating many of the states Business Opportunity Laws, much in the same way Interlake Chemicals of Manitoba did.
Here is the list of the 26 regulatory agencies which control, in one way or another, Arlan's type of contract, the sale of a business opportunity. (Don't be put off by the name, it is simply a technical legal term.)
A group of individuals from any state ought to make complaints to the correct regulatory authority: your complaint will be that Arlan didn't register and has no disclosure document. You should obtain counsel to help you draft the complaint so that you are not ignored. You also want to make a complaint to the FTC -the FTC routinely acts to shut down business opportunities which do not have or give out the required disclosure documents.
Canadian Competition Bureau and Misleading Advertising
Although several Canadian Provinces have similar business opportunity laws, embedded in their franchise laws, no Canadian Province has the equivalent of the US Regulatory schemes.
However, at a Federal level, misleading advertising is both a criminal and civil offense. Arlan has been advertising his scheme to the public for a number of years now. In particular, he represents both that his company is debt free and that PKI intends to repurchase the pigeons back from the farmers.
If the Arlan scheme is a Ponzi scheme, then both of those representations are false, and knowingly false.
Unlike the US regulatory world, in Canada a group of individuals can directly petition the Competition Bureau to investigate a scheme. But the petition must be done correctly and with affidavit evidence. Again, you will need to obtain counsel familiar with the Misleading Advertising provisions in the Competition Act to help you draft your complaints.
Good luck with all your efforts.
Related Posts: What is New in Family Farming?, Why being a Sucker Seems So Right, Pigeon King and Testimonials, and How Will the Pigeon Scheme End?
Read More From BizOp News
April 17, 2008
How will the Pigeon King Scheme End?
Dave Thornton, of CrimeBustersNow, has written some amusing "retrospective" pieces on Arlan Galbraith's Pigeon King scheme. But how in general does a Ponzi scheme end? What causes there to be a run on the bank?
Recall what we have learned in the first three days investigating what was behind the Iowa Attorney General's concern that Arlan's PKI is a Ponzi scheme.
First, even sophisticated business people can be deceived by an attractive Ponzi scheme, because at first, the returns look like the real thing. Second, your gut instinct about the scheme being a fraud will be trumped by "reason", which after the fact will look like bad and magical thinking. Finally, the use of testimonials in the form of cheering, emotional testimonial revivals will often overwhelm an individual's gut feeling of wrongness.
But like all viral madnesses, eventually the Ponzi scheme shudders to an end.
The poorly constructed schemes limp along until someone finally complains to the regulators, who then drain the last bit of resources from the scheme by installing a receiver. But the clever schemes always have a way out.
Many people erroneously think that a Ponzi scheme comes to an end when there are no more recruits. Some commentators go to mathematical extremes to show how a particular scheme must run out of recruits.
These calculations are simply errors: the clever Ponzi scheme always entices a large portion of the investors to "re-invest" their "winnings". In principle, with a high enough re-investment rate, a Ponzi scheme could continue with minimal recruitment.
Arlan says that he has 700 investors, which he claims is a fraction of the possible interest in his scheme. He also claims his company to be debt free - despite being indebted to some 700 individual unsecured creditors. I trust that the falsity of the first statement is transparent.
How did the delightful Ponzi scheme end in Boston? Did the regulators step in, after listening to and evaluating complaints from investors? No, in part because Ponzi had "lent" money to various state, police, and bank officials so they could "invest" in his securities.
Did Ponzi run out of recruits? No, despite imitators and fake securities being redeemed, Ponzi was branching out from Boston into other areas before his scheme collapsed.
So what brought to an end to the collective madness?
Remember Ponzis was offering an incredible return - 50% in 60 or 90 days. He claimed to be using the money to redeem foreign postage stamps into US postage stamps - there was a theoretical arbitrage opportunity here. The opportunity was only theoretical and Ponzi never engaged in it on a commercial basis. Since he wasn't doing this, what was he doing with the money?
Banking it. Earning a normal return of 5% yearly. Think about this signal. Ponzi claims to have discovered a risk free money making arbitrage system, but doesn't invest his own money in it - he uses banks instead. Oh, oh not a good reputation signal is it?
What about Arlan? Recall, in the CBC interview Arlan was asked whether he has eaten squab, any of these birds that he is breeding as "Hinterland Squabs". No, he hadn't. Ah, crow doesn't taste so lovely?
There is another way the PKI scheme could end. Arlan's liabilities could disappear. From Lancaster Farming, we read more about the health conditions of Arlan's flock.
Two recent quarantines of a pair of pigeon facilities in northern Pennsylvania have been linked to a growing and increasingly scrutinized pigeon breeding company based in Canada.
On Nov. 7, the Pennsylvania Department of Agriculture (PDA) quarantined the farm of Robert Leister of Wellsboro, Pa. after some pigeons from his farm were found to be infected with tsittacosis, a bacteria that causes respiratory illnesses in birds and is transmittable to humans.
Chris Ryder, PDA spokesman, said the department made the discovery after Leister noticed some of his birds were sick and he requested PDA test them for infection.
Ryder said he was unsure how many birds tested positive for the illness. But the birds were later traced back to a large 10,000-pigeon "holding facility" in Turbotville, Pa., which is owned by Pigeon King International of Waterloo, Ontario, Canada. That facility was quarantined on Nov. 19 after Ryder said additional tests had to be taken to prove Leister's birds came from there.
Arlan couldn't be expected to buy back sick birds could he? Poof, and overnight his liabilities are quarantined and the breeding company shut down for health reasons. Arlan flies into the sunset with a trunk full of cash. Neat, eh?
Tomorrow, in the final post, we will discuss possible remedies.
Related Posts: What is New in Family Farming?, Why Being A Sucker Seems So Right, and Pigeon King and Testimonials.
