Guardian International Travel CEO charged on fraud
When considering the legality of MLM scams and pyramid schemes, even when it’s blatantly obvious by the business model itself that something dodgy is going on, people are often quick to cite the apparent lack of interest shown by the relevant authorities.
Often this lack of action is seen as proof that the particular MLM in question is legal. I mean if it wasn’t, then why haven’t the authorities busted down the doors right?
A recent case in Louisville, Kentucky in the US illustrates how, even after six years have passed since the company opened its doors, and despite just under three years of operation, it is possible that the law can and will eventually catch up to those running blatant money games.
In this instance, the company in question is Guardian International Travel (GIT). As I mentioned, GIT was founded in 2005 by Swainson Hawke (also known as Ronald Scheetz) and William (Bill) Humes and ran from February 2005 to January 2008.
Despite the length of time passed since GIT closed its doors, late last month both Humes and Hawke were arrested for their part in committing ‘mail fraud and aiding and abetting each other in what prosecutors described as a Ponzi scheme’.
Mail fraud and a ponzi scheme? Hmm, those are some pretty serious charges to lay against an MLM company. So what is the basis of such allegations?
Well, one look at Guardian International Travel’s compensation plan pretty much tells you all you need to know.
Describing themselves as a ‘direct sales company‘, GIT’s primary products were a series of condo cards that were allegedly sold at 1/3rd of their claimable price.
That is to say that if the card had a value of $300, you were sold it by GIT at a discounted price of $100.
If that alone wasn’t enough to leave you asking ‘how?’, the real dodginess starts when you look at GIT’s ‘guaranteed returns’ on their condo cards.
By masking what was essentially an investment as a condo card purchase, Guardian International Travel promised a return to the purchaser of up to 500% over a set period of 22 months.
For example, if I
invested purchased a condo card from GIT for $200, each month I would be mailed a small incrementally increasing cheque which, at the end of 22 months would add up to a total of $1000. Minus a $25 admin fee, this works out to be a 500% return on my investment condo card purchase.
Guardian International Travel allowed anyone to purchase their condo cards along with their guaranteed returns but capped the amount able to be
invested purchased at $25,000 a month.
Now with the condo cards already paid for, this return money had to come from somewhere and… well, with new
investors members coming on board every month, the ponzi scheme picture becomes all too clearer.
The only explanation is that over a period of 22 months, new members (and old members
investing more money into GIT purchasing more condo cards) were funding the existing investment card purchase returns.
The final piece of the pyramid’esque puzzle came in the form of a guaranteed 110% return on what GIT called referrer fees. These referrer fees were paid out if someone recruited someone else to GIT and paid for their
investment condo card purchase out of their own money.
The basic idea here was to introduce an additional income stream to cover paying out existing investment returns but this component of GIT was marketed as a debt solution.
If you owed someone money, simply buy them a condo card and let GIT pay off the rest of the balance over 22 months. Not only that but you’d also get a 110% return on your initial investment and actually make money whilst solving your debt problems.
With all this money seemingly materialising out of nowhere, is it any wonder Guardian International Travel eventually collapsed?
As you can see, any rational person should be able to look at business opportunities like Guardian International Travel and instantly see them for what they are. Yet, despite this it’s taken authorities (in the United States no less) six years to crack down and arrest Hawke and Humes. This despite the fact that GIT shut its doors back in 2008, three years ago.
Currently Hawke and Humes are out on $10,000 bail and I’ll try to follow the case and publish updates as they happen.
In the meantime, the next time someone tries to argue that there’s absolutely nothing wrong with a seemingly questionable business model because the authorities haven’t taken any action, you might want to think back to this particular case.