What is New in Silver Bars?
The White Collar Crime Prof Blog has a brief description of an International Pyramid Scheme, and the Department of Justice's press release on the Pyramid scheme can be read here.
Unfortunately, these short descriptions of the New Millenium Group scam don't capture the mystery of the scam.
The Department of Justice simply reports: "In July 1998, Dompier launched an investment opportunity through his business, The New Millennium Group (NMG), headquartered in Roseburg, Oregon. Dompier told potential investors that if they invested $98 with his company, he would provide them with a one-ounce bar of silver and commission checks totaling $15,853.50 over a fourteen month period. Dompier utilized the internet, direct mail, and a number of promoters he had in the United States and England to sell the scheme. In reality, the program was a pyramid scheme as NMG had no legitimate business activities, and Dompier paid initial investors with funds obtained from investors who later joined the NMG silver program." (my emphasis)
The story, told in the Court documents, is far more interesting. Let's look more carefully at the allegations from the trial brief.. There is the advertising letter, the reliance on legal advice, the rogue operator, and then mysterious loss of funds to Nigerian scam criminals.
First, read misleading advertising letter that Dompier wrote. The letter is an absurdity. How could anyone reasonably believe that they would receive commissions for buying a piece of silver, as it turns about $98 for a $6 ingot of silver? And the value of these commissions, $15,853.50 over fourteen months. For many, the absurdity of the letter is the end of the story. But how do we explain the attraction of the scheme to some 4000 participants? Even if they are completely stupid, what bastardization of reasoning took place?
Unlike a number of Ponzi schemes, there is no attempt to explain the economic transactions or viability of a scheme which returns $15,853.50 for the entry price of $98.00. No arbitrage of international stamps, no wealth donors to charity wanting to stay anonymous, and no internet surfing for ads. Nope, simply sign on the dotted line and send your $98 in, and wait. Course there is the little matter of the "automatic renewal" option. What is that you say? Oh yes, if you just check off the "automatic renewal" your commission check will automatically be "re-invested". To quote: "Choose the automatic purchase option to purchase another Silver Ingot from your first level check. When you choose this option, you will continue receiving $15,853.50 every two months for as long as you continue this option. Plus you will save the difference between your $94. 50 check and the cost of another Silver Ingot."
So very clever individuals believed that for a low risk of $100, the possible gain of $16,000 every two months, was a rational bet. After all in two months, they would find out whether they won their bet or not.
Next up on the list, is Dompier's attempt to provide himself with a due diligence defence. That is, he attempted to obtain a legal opinion that he could rely upon stating his network marketing scheme was legal. Unfortunately, for him, both his lawyers told him that the scheme was clearly fraudulent. Oops.
Faced with two legal opinions, several angry AG's, Dompier did the only thing a man could do: he expanded into Britain and Europe, using an agent named Simon Hill. This part of the project brought in another $1.5 million, but it is unclear how much Simon Hill retained in fees for his work.
Finally, Dompier is alleged to have lost $200,000 to some Nigerian fraud criminals. Hmm, maybe. It is not unknown for fraud criminals to be gullible, but I would have those funds traced. I would not be surprised if the Nigerian fraud turns out to be non-existent.
Dompier is to be sentenced in June, 2007.
