Up to 1,000 people in the UAE and Oman are fighting an uphill battle after a 'multi-level marketing scheme' has been labelled as a pyramid-selling scam by a Philippines court.
PowerHomes Inc, based in Manila, lured an estimated $2 million from some 4,000 'small investors' all over the Gulf over a two-year period.
Like most pyramiding scams, the investors were promised quick returns, but instead, members were left with a trail of unpaid debts and their primary source of income was the recruitment of new members.
Duped investors are mostly Filipinos, but many Indian nationals were also lured into the scheme. An appeals court in Manila has ordered PowerHomes to stop operations following its failure to register the securities it sells to investors.
PowerHomes said it would file a motion for reconsideration but a company official did not return a call from Gulf News.
One member, a nurse, in Dubai who asked not to be named, said: "I think the pyramid is crumbling at the base, and the money may have already been distributed among themselves. I don't care anymore what they do with it, I just consider it a costly lesson. I shall never fall into the same trap again."
A group leader who recruited hundreds of 'downline' members in the UAE and Oman said: "We have an axe to grind against the PowerHomes management, we are also victims. Our lawyers have already issued a demand letter to PowerHomes. We have many issues against the management."
During its peak, PowerHomes paid commissions in US dollars on a weekly basis to members who recruited new 'investors'. One member in Dubai boasted that he collected a whopping 600 per cent return on his investment in less than three months and showed cheques to prove his claim.
The Philippine National Bank refused to deal with PowerHomes as soon as it learned about the case in 2001. Under PowerHomes's business scheme, an investor became a business centre owner (BCO) or independent representative who can sell the company's referral programme. To become a BCO, a person had to pay $234 as an enrollment fee.
The enrollment entitled the BCO or his immediate family to a computer training course. BCOs also earned by recruiting two investors, each paying $234.
Every new pair entitled a BCO to a $92 commission. The more people the BCO recruits and invests in PowerHomes under him, the higher the BCO's chance to earn and eventually own a house.
The Manila court said PowerHomes had no real product to sell outright and is earning primarily through recruitment, which makes its business scheme illegal.
The trail of unpaid commissions* Investors were promised quick returns, but instead, members were left with a trail of unpaid debts.
* Primary source of income is the recruitment of new members.
* Commissions in US dollars are paid on weekly basis to members who recruited a pair of new 'investors'.
Gulf News
