It is not just a Rs. 1,000-crore scam involving 1,000 cases and 14 major companies. Officers probing the multi-level marketing and money chain operations in the State over the last two years are surprised by the ‘creative’ ways in which people have been cheated.
The ‘creativity’ of fraudsters involves selling products of suspect quality and prices that are jacked up 200 to 250 times in many cases.
During a search, a team of police officers came across a 750 ml bottle of fruit juice, which was being sold for Rs. 2,250 whereas an equivalent drink in the open market would cost between Rs. 30 and 50.
A team of officers from the Crime Branch (Economic Offence Wing) Kozhikode seized a product that was priced by its manufacturer at Rs. 341 but was being sold for Rs. 2,400 by a direct marketing company.
The vendor of these products is a link in the long marketing chain and will claim before his or her customer that the fruit juice (or any other product) is much cheaper than is available in the open market because the middle man has been eliminated through the direct marketing scheme.
He or she will even claim that no money has been spent on advertising the product so that that benefit too accrues to the buyer.
The naïve buyer believes the seller because the labels and packaging of the products are not the type he or she deals with during routine shopping. For example, beauty products and health drinks dominated the spectrum of products sold by a leading direct marketing company in Kerala.
“One of the difficulties in fighting cheats operating direct sales schemes is that the State government has little control over the quality of the products, mostly health drinks and food supplements,” an officer said.
Money chain promoters thrived on gaps in regulatory mechanism and the naivety or sheer greed for money among them.
Though the schemes appear as simple operations, they are quite complex so much so that a former IPS officer, who is an advisor to the Union Ministry of Corporate Affairs, in one of his recent recommendations expressed the apprehension that even the government machinery investigating money circulation and multi-level marketing schemes are not aware of the nature and scale of the operations.
Money circulation activities have been banned by the Prize Chits and Money Circulation Schemes (Banning) Act 1978. The Ministry of Corporate Affairs has suggested that a provision in Act should be revised as: “No individual or company or firm or business association, in any form, shall run a scheme that induces enrolment of new members by offering benefits or commission, by whatever name called, to upline members in a pyramid out of the action or performance like sale or purported sale of goods by the downline members”.
