New Illegal Pyramid Scheme In Pa. Draws A Warning

Posted: May 09, 1987

The state attorney general is warning residents of the Philadelphia area to avoid putting money into a rapidly spreading investment game called "the airplane."

"The state Bureau of Consumer Protection has been getting an increasing number of reports of (the game) in Southeastern Pennsylvania," Attorney General LeRoy S. Zimmerman said yesterday, calling the airplane game an illegal pyramid scheme that has been appearing in various guises for decades.

It operates this way, according to Zimmerman: Participants are asked to pay a fee of $2,200 for a "seat" on an imaginary airplane. As more players are brought in, the participants move up from their original places as passengers, to flight attendant, co-pilot and, finally, to pilot.

The player who graduates from pilot receives a payoff of $17,600, the amount contributed by the eight new passengers.

"The problem with this and every other pyramid and chain-letter scheme is that it cannot be sustained for long," Zimmerman said. "While some early participants do receive the promised payoff, it's impossible for the pyramid base to keep expanding rapidly enough to continue paying off."

Authorities said a number of clubs were reported to be operating in Philadelphia, Bucks and Montgomery Counties, some with entry fees as low as $1,000.

"There's a frenzy among people," said one woman who was contacted but refused to join. "It's going like wildfire, but I think that in a week or two people will start to realize they've lost their money."

The woman said the airplane club really was a scheme within a scheme,

because jittery investors had the option of auctioning off their seats to earn back their investments and more.

A nervous co-pilot, for instance, worried that new players may not come in, can sell the seat to the highest bidder. It could go to a passenger wanting to quickly move up, or to an outsider.

An outsider, then, could jump ahead of people at the bottom of the pyramid and beat them to the payoff. "One woman bought a co-pilot's seat for $3,600," said the woman, who did not want to be identified.

Zimmerman said the airplane game violated the state's Unfair Trade Practices and Consumer Protection Law. Participants face civil penalties of $1,000 for each violation, he said.

The Bureau of Consumer Protection has filed three lawsuits against airplane-club operators in the Pittsburgh and Scranton areas. "But despite our actions, the scheme appears to be spreading to other areas," Zimmerman said.

Jack L. Lewis, a spokesman for the attorney general, said the scheme was discovered in Pittsburgh in January and in Scranton in February.

The Bureau of Consumer Protection won preliminary injunctions against those operations, and the operators face fines, Lewis said. Earlier this week, the bureau sued another airplane club in Scranton.

Action is pending against a club in Allentown, where a bureau agent attended a meeting and was solicited.

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