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Newest Illegal Pyramid Scheme Going Up And Up, But Not Away

March 23, 1987 GMT

Undated (AP) _ ″Airplane,″ the newest twist on the age-old illegal pyramid scheme, is turning up in communities around the nation, and authorities are urging unsuspecting players not to be taken for a ride.

″On these pyramid-type schemes, for the most part, the victims are just about as greedy as the promoters,″ said Spencer Barasch, associate general counsel for the state Securities Commission in Oklahoma, where dozens of ″Airplane″ games have sprung up.

‴Airplane’ is like an Oklahoma tumbleweed drifting down the street.″

There are variations, but a typical ″Airplane″ game is started by a ″pilot″ who persuades two people to pay him an entry fee to be ″co- pilots.″ The fee reportedly has been as high as $1,500, but typically is $100.

The co-pilots, in turn, recruit two players each. These four, who also pay the fee, become ″flight attendants″ and each recruits two ″passengers,″ again for $100.

When a plane is full - say, with 14 entries - the pilot has $1,400 and the pyramid splits in half, with the co-pilots becoming pilots, flight attendants becoming co-pilots, and passengers becoming flight attendants. Newly recruited passengers pay the pilot $100 each, and the pyramid continues splitting and growing.

Of course, the longer the pyramid is running, the more difficult it is to find willing players. Those not yet pilots would lose their money when the pyramid collapses.

Such games are called pyramids because a few moneymakers at the top are supported by lots of money-payers at the bottom.

Where the game got started is a mystery, but it has been reported in Miami; Tampa, Fla.; Oxford, Miss.; Rochester, N.Y.; Toronto; Los Angeles; Montreal; Indiana; Colorado; Tennessee; Georgia; South Carolina and Texas.

″The ‘Airplane’ differs from other multilevel pyramid deals in that it doesn’t have a common promoter,″ said Barasch. ″It’s just a lot of little airplanes. It’s spreading by word of mouth.″

The game grew so popular at the University of Oklahoma that Barasch’s commission sent a cease-and-desist order to the inter-fraternity council and asked it to distribute the order to all fraternities.

″The people I talked to said it has been going on in the dorms for a couple of months,″ said Linda Lynn, a reporter for the Oklahoma Daily, the student newspaper.

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One student, a freshman who declined to reveal his name, called the game a rip-off after his airplane folded and he lost his $50 entry fee.

″It’s not guaranteed at all, it’s totally by chance,″ the student said. ″It was really popular and everyone was doing it. I didn’t even think about what I was doing. When I thought about it, I realized I had messed up.″

″Airplane″ was a rage earlier this month at the University of Florida in Gainesville, where students saw it as a way to make money for spring break.

As many as 1,000 students may have been involved, police said. There were no arrests, although such schemes are punishable by up to a year in prison and a $1,000 fine in Florida.

″It is starting to fizzle,″ said Gainesville police Lt. Alan Morrow. ″It’s getting bad publicity and people don’t want to lose money. Fads come and go on campus.″

But more than just college campuses are involved.

Police in Stanton, Calif., broke up an ″Airplane″ game at a custom car shop March 12, and cited 132 people under a city code against running gambling establishments. Police recovered $9,000 in cash and books and receipts, said police Capt. Leonard Haworth.

Authorities find the games difficult to combat. Players are not cooperative because they fear losing their investment, and many people see nothing wrong with it.

Investment can be small, and those who get in early can make money.

″But when you look at the cumulative effect and the way these people are defrauded, there is definitely a public interest reason for shutting them down,″ Barasch said.

″It’s a gamble, but it’s not sold that way,″ he said. ″The only way these things can succeed is for people to sell them in a misleading manner.″

The U.S. Postal Service, which polices pyramid schemes such as chain letters, is aware of the game but has no jurisdiction because the mails are not used, said Pete Wheeler, regional chief of inspectors in Newark, N.J.

So stopping the games is left to local and state authorities, who are hoping the fad will fade. And those like Barasch have advice for those thinking about joining such a game: ″Our motto in Oklahoma is, ’if it sounds too good to be true, it is.‴