Expertise in Pyramid and Ponzi Schemes; Public Speaker; Consultant; Expert Witness


Personal statement:

“My expertise in pyramid and ponzi fraud as a consultant, public speaker, analyst, and expert witness stands on a foundation of 20 years of work as a trade association executive and strategy consultant with major corporations. The industry consulting practice focused on business model analysis, channel management and distributor marketing strategies. It is precisely these three elements of business that are distorted and manipulated in fraudulent multi-level marketing and pyramid schemes. My experience in industry with distribution channels prepared me to distinguish disguised scams, marketing fraud and misuse of independent distributors from legitimate direct selling programs.

“On this foundation was later added 20 years of direct research, field experience and rigor of working on than more than 25 court cases focused on how pyramids and Ponzis disguise themselves as legitimate direct selling businesses. My expertise in this specialized field of pyramids and multi-level marketing includes correspondence and consultations with thousands of pyramid scheme participants and collaborations with journalists, attorneys and regulators. It involves tedious deciphering of pyramid pay plans, historical knowledge of pyramid prosecutions in the USA and internationally and fluency in the history of pyramids and Ponzis. It requires familiarity with state and federal anti-pyramid scheme statutes, competency in reading SEC filings and a solid foundation in basic math and statistics (in the end, all pyramid schemes employ math trickery).  Technical knowledge and field experience are tempered with a mature sensibility for human folly.

“Pyramid and Ponzi scheme analysis defies conventional classification and has no distinctive professional titles or academic letters.  I am among the pioneers in this emerging field of work and study. The Main Street pyramid schemes that proliferate today emerged on a large-scale less than 40 years ago. They gained a major foothold in the economy and became a powerful and corrupting force in government aabout 20 years ago. As in other areas where fraud or abuse spring up, law enforcement, public awareness and academic inquiry lag years behind.

“Additionally, the study and official recognition of this new form of fraud face extraordinary resistance and denial. No area of business or society is more disguised, obfuscated and legally parsed than pyramids and Ponzi schemes. A formidable force of K-Street lobbyists, attorneys and politicians serves as a bulwark of protection.  This  new form of fraud does not conceal itself but rather masquerades as legitimate business. In the brave new world of ponzi-based businesses, calculated deception is a core competency, massive consumer losses correlate to higher company profit, the unsustainable “endless chain” is claimed to be a business model and the false promise of “unlimited income” is called an incentive. 

“As a result, inadequate or often outdated knowledge or understanding prevails among regulators, academia and the media on the nature of Ponzis, endless chains, bubbles, “exponential” expansion or “closed markets.”

“Official inattention to pyramid fraud has produced dire consequence in recent years. The pyramid scheme – disguised as market-based growth of housing values – spread from real estate to the mortgage, banking and insurance industries and nearly destroyed our economy. The largest hedge fund in America proved to be a lethal Ponzi scheme that wiped out fortunes and nearly ruined Wall Street’s credibility, yet escaped media inquiry and regulatory oversight for more than a decade.

Today’s perpetrators often parade as paragons of goodness or, as sociologist Edward Ross described the rising class of white collar fraudsters a hundred years ago, “the pure and kind hearted, loving in their families, faithful to their friends and generous to the needy.” Today, he would add, “civic minded” and “influential in politics.” As the scandals of Enron and Madoff shockingly revealed, some of the most egregious Ponzi offenders sit comfortably and arrogantly at the tables of the highest powers in the land.

“Ponzi and pyramid perpetrators employ the dark arts of arcane terminology and mystical math. Some lure and fleece their victims with destructive mind control methods. They cultivate shame, fear and denial among the victims, resulting in few complaints and objections but rather cult loyalty, which the schemers then cite as evidence of their legitimacy.

“Analysis and exposure of pyramids and Ponzi, therefore, involves offending the powerful and influential who profit from pyramid frauds even if they do not directly perpetrate them. Among the legions of pyramid scheme victims, my work frequently provokes loud and woeful cries of denial and sometimes hate mail and angry threats directed at me personally, as well as heartfelt and profound gratitude from others.

“Finally, perhaps the greatest defense today of all Ponzis and pyramid perpetrators, which my work combats, is the assertion made famous by Bernard Madoff, “How could it be illegal if the government has never prosecuted me or even investigated my business?”  Concerning law enforcement against pyramids and Ponzis, the regulatory environment today – tragically is rife with conflicts of interest, revolving-door financial ties and gross incompetence. The story of this regulatory incompetence and betrayal of public trust on Wall Street was shockingly documented in the book by Madoff whistle-blower, Harry Markopolos, “No One Would Listen.” In fact, the situation relative to Main Street pyramid schemes is worse than he depicted. Whistle blowers and analysts are now targets of SLAPP lawsuits by perpetrators seeking to stifle free speech and inflict financial ruin with legal fees. Many are also harassed by government agencies, perhaps fearful of exposure of their laxity in law enforcement duties and failures to uphold public trust.”

ROBERT L. FITZPATRICK
2016