The scam I stumbled upon on my holidays

Even on his holidays Tony can't escape the scammers. This time, it's the Greek take on a classic pyramid scam.

My recent holiday should not be of great interest to lovemoney.com readers. The trip to Greece went smoothly – with only one minor strike problem – and the sun shone all the time. End of postcard.

But there was one experience which was not in the Rough Guide to Greece – a pyramid sales operation I found in the middle of almost nowhere.

We were travelling around Greece using public transport, or at least what remains of it after the austerity measures. Our bus pulled into a car park of a country restaurant/hotel in the countryside and we were told to get off and wait for another bus for our destination. It would arrive in 20 minutes. 

On the way to the bar for a quick drink, I noticed a dozen or so people in what seemed to be a seminar held in another part of the restaurant. I don't understand more than the odd word of Greek so I had no idea what the speaker was saying.

I did, however, look at the presentation slides – happily in English. These came from one of those companies that claim its food supplements can shed all those excess kilos – probably in this case from eating too many large Greek meals and pastries.

I may be intruding into lovefood territory when I say that these powdered food replacements taste awful and have - in common with many diet plans – a low chance of success.

Do they have pyramids in Greece?

But the diet food itself was only a small part of the message as the “made in USA” slides made clear. The emphasis was on making money, and making it fast, a subject that must be even more fascinating in hard-up Greece.

For this was a pyramid sales operation – identical to those which hit the UK in the 1970s and 1980s when audiences of hard-up people were told they could make a fortune by selling a range of items including household cleaners, jewellery, health drinks as well as diet plans.

If it had stopped there, no one would have noticed. It went further. For the real money was not from selling stuff, but – and this is the pyramid (sometimes called multi-level or network marketing) bit – by recruiting others to sell the goods.

This was the emphasis on the Powerpoint presentation. Anyone could sell diet food via a shop or a website – the secret was to get others to do the selling and skim money from what they made. The people running the meeting had already bought into the process and they now had to find more people to carry on, others whose joining would present them with earning opportunities.

It's the very opposite of a low-cost flat management structure. It's very multi-layered. You take a part of each sale from those you sign up who, in turn, have to find others to recruit because the main money comes from the “downline” (recruits) rather than your own sales. In turn, you have to give part of all your earnings (from your own sales and from the sales of those you recruit) to the upline who convinced you to join.

You can build layer upon layer. It's the opposite of an online auction where it's the seller who has the goods and the buyer who wants them. Layers are often named after precious stones (diamond, emerald, pearl) or after expensive metals (platinum, gold, silver).

Items sold in this way can be expensive – a bottle of washing up liquid can cost four to five times a similar substance sold normally. Instead of a soap company selling to the supermarket – two profit margins – you can have eight or ten layers, each taking a substantial cut.

The numbers don't add up

The maths just doesn't work out. Suppose the pyramid works with each person finding five more sellers. You bring in five and each of those finds another five – that's 25 plus you (26) so far. Easy. But move down the line and you soon reach very large numbers. When the originator has six layers operating, there are 15,625 sellers, plus the originator. That's the size of a town.

The figures become even more absurd. At 12 layers, it becomes 244,140,625. This all assumes that the organisation stays intact – most will suffer a large number of drop outs – and that there are enough people around for these huge numbers. Add three more levels and you need more than 30 billion, or four times the world's population.

And because the numbers make little sense, those in at the start have a second income stream – selling memberships and whatever the organisation promotes.

Whatever they are called and no matter what they are selling, these plans only work for those at the top of the pyramid, known as Pharaohs, who can repeat their message to gullible – or, given the state of Greek finances, desperate - audiences.

I don't know how long the meeting lasted for – two hours is the standard – or how many people signed up for this food sales “opportunity”. Thankfully the bus arrived on time and took us to our destination.

Have you ever been duped into a pyramid selling scheme? Let us know your experiences in the comment box below.

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