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Last Updated: Monday, 19 December 2005, 17:52 GMT
OFT acts against pyramid scheme
Pyramid
The people at the apex can earn from all the people below
A businessman using unlawful practices to run a pyramid scheme aimed at the Asian community has been hit with a High Court injunction.

The VIP Club, run by Gurdeep Singh, offered discounts on leisure and travel in return for a joining fee of 1,695.

The club also offered large commissions to people who introduced new members.

But the Office of Fair Trading (OFT) told the High Court that Mr Singh was repeating practices from a previous scheme which he had promised to stop.

His former operation, the OMI Club, had fallen foul of several sets of regulations governing false advertising, unlawful lotteries and consumer protection, and Mr Singh had given the OFT an undertaking to stop his activities.

Among the problems were high-pressure sales techniques, a refusal to allow people to cancel their purchases, and activities which amounted to a pyramid scheme.

Fresh complaints about the VIP Club from members of the public and trading standards officers led the OFT to take further action.

These clubs use slick, high pressure sales presentations to deceive the public about the benefits of becoming members
Christine Wade, OFT

The High Court has now granted an interim injunction, which bans Mr Singh from operating his businesses in this way till a full court hearing can be held.

Mr Singh, whose business offices are in Colchester, had been running his club in London, the West Midlands and the North West of England.

Misleading claims

His principal technique was to invite people to high-pressure sales seminars, lasting up to six hours, in prestige hotels.

Although there was a product - the offer of discount holidays - the main selling point was the chance to get others to pay up in exchange for part of their joining fee.

The claims made about both the OMI and VIP Clubs were misleading, the OFT said, suggesting that members could earn 99,000 in just ten months.

It added that Mr Singh had a record of making it difficult for people to change their minds and back out, as fair trading regulations required.

"These clubs use slick, high pressure sales presentations to deceive the public about the benefits of becoming members," said Christine Wade of the OFT.

"New members were encouraged to recruit family and friends based on misleading promises that they would enjoy large discounts on travel services and have the opportunity to earn large amounts of commission."

Mr Singh's main aim was to get his audience to join and pay up their membership fees very quickly.

During these seminars he claimed he had already signed up 10,000 members.

That implies that he may have raised nearly 17m.

But a spokesman for the OFT said it had no evidence that this claim was true or that such a sum had in fact been collected.




SEE ALSO:
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Watchdog warns of phoney lenders
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