There are no free lunches, no easy money. Yet people often become victim of ‘double-your-money’ or ‘earn-lifetime-income’ schemes. Here’s how to identity and avoid such MLM schemes
Nothing comes free in this world, especially money. The universal truth is you need to earn your money by hard labour all the time and there are no shortcuts to double it in the shortest span of time. Therefore, even if your near and dear ones tell you he/she will double, triple, quadruple your money within a few days/months, politely reply to them that it is not possible and what they are advocating is a pure 'get-rich-quick' type of scam.
How does one judge whether a scheme is genuine or a scam? It's simple. Check the interest rate being offered by banks, especially public sector banks like the State Bank of India, Union Bank of India, Bank of Baroda, and so on. At present, these banks pay 4% interest a year on savings bank accounts. Second, check the interest rate on the public provident fund (PPF). Currently the Employees' Provident Fund Organisation (EPFO) controlled interest rate on PPF is at 8% and for the Employees' Provident Fund (EPF) it is 9.5% per annum. Many people consider investment in EPF/PPF as the best and safest debt instrument.
The interest rates offered by banks and EPFO are an indication of the viable minimum and maximum expected returns on investments. In other words, you could say that your investment should give you a safe return of a minimum 4% and a maximum 9.5%, at least in 2011.
Therefore, anyone or any scheme that offers you more than this must be looked at very carefully and a thorough scrutiny must be done before investing one's hard-earned money. Unfortunately, this happens rarely, as most of the time the person approaching you with a high-returns scheme is either your close relative or a friend, whom you find difficult to say no. Remember, all scams, frauds that have happened in the past are known to have spread through the link of near and dear ones.
The first rule on investments is that if you do not understand how the instrument works don't sink your funds into it. This applies to all schemes that promise 'guaranteed income' and 'fast and huge returns' within a short time. In financial investment terms all such schemes are huge risks.
Now let's see how a multi-level marketing (MLM) company operates. An MLM, or pyramid selling scheme, typically requires you to pay upfront charges for either joining the scheme or buying a product or service (like collector's items or software, training programmes, e-zine etc). As more and more people join the MLM scheme, a member hopes to recover the upfront charges and then earn sizable profit through binary income. However, history tells us that all such MLM companies have failed miserably and vanished with investors' money after running out of new recruits or investors (a new 'bakra'?). Most of the time, the person who recruited many others himself becomes a victim of the scheme.
First, the agents, distributors, panellist and customers of the MLM companies try to convince the new recruit with bogus claims about earning huge money. If the recruit does not seem interested, they introduce terms like lifetime income and royalty payment through binary activity. All MLM agents pretend to help you earn big money. Unfortunately, it is he who ends up with the money, leaving more than a few penniless. When the binary income plan fails, recruits have had to go into hiding from the newer entrants.
This has happened so many times before, that MLM operators have found it necessary to advertise in order to allay the fears of new recruits, often engaging sellable brand ambassadors in the popular media. This is the "Fake it, till you make it" system, that's common among MLM operators.
Another important aspect is that once someone gets involved with an MLM company, he begins to strongly advocate it, irrespective of whether he likes it or not, and even if his inner self says it is wrong. The reason is he doesn't want to come out as being fooled by someone, and will pretend to have made a 'smart' choice by buying into the MLM scheme. So most agents will tell you that they are always right and they know everything and all others (who are not joining his MLM) are morons.
In addition, MLM systems are a massive net loss for a country, as they distract people from doing real productive work. All products or services sold through an MLM network are either worthless, or not beneficial to common people. The products offered under the pretext of herbal medicine, cure from diseases, medicine or collector's items such as gold coins, are often useless. In fact, the medicines sold under the garb of herbal products may even harm you and endanger your life. It is the same with other products as well.
The Moneylife team decided to look for other MLM schemes that are proliferating across the country. We found that a large number of companies, with varying degrees of legitimacy, many of them with a global footprint, are raising money or selling obscenely expensive products, by creating a high-reward matrix that is built on luring new distributors/depositors/buyers into the scheme. More importantly, each of them grows by roping in people who enjoy high public trust, such as doctors, bankers, reputed sportspersons, government officers, senior corporate executives, or their spouses, and sometimes even god-men.(Read more Money Chain )
Remember the GoldQuest scam? It was a chain-marketing scheme that used to sell limited edition gold coins, figurines or watches for Rs30,000 to Rs35,000. According to news reports, in May 2008, after receiving 8,277 complaints of cheating from many people, especially from South India, the Chennai police arrested GoldQuest's managing director and six other employees. The company ceased to exist, leaving 2.66 lakh of its independent representatives without any commission. Finally, last year the Supreme Court appointed Justice KP Sivasubramanian as settlement commissioner of a one-man commission, for the GoldQuest case.
Unfortunately, there is no legal provision in India to curb MLM schemes. However, Singapore, the headquarters of Speak Asia Online Pte Ltd, which hit the headlines recently, does have strict laws on MLMs. Under the Singapore Multi-level Marketing and Pyramid Selling (Prohibition) Act, all persons who participate in multi-level marketing or pyramid selling are treated as offenders who had committed an offence. This is because the participants would have played an active but destructive role to attract others into the scheme. The Act believes that this is the best way to deter potential promoters of such schemes.
According to the Ministry of Trade and Industry, Singapore, a conviction under the Act will result in a fine of up to $200,000 or imprisonment for a term not exceeding 5 years, or both. The fines are for:
1. Promoting or participating in a multi-level marketing, or pyramid selling, scheme or arrangement.
2. Registering a business which is designed to promote multi-level marketing, or pyramid selling scheme or arrangement.
3. Registering a company which proposes to promote multi-level marketing, or pyramid selling, scheme or arrangement.
In addition, the Singapore Act empowers a Court that convicts a promoter or participant of a multi-level marketing or pyramid selling scheme an additional penalty of an amount not exceeding the amount or value of any benefit which the promoter or participant has received. This additional penalty ensures that the Act serves as an effective deterrent to potential offenders.
However, since the Indian government has not taken any stand on the legitimacy of such network marketing or MLM companies, such schemes get replaced with other schemes and the entire cycle is repeated because the allure of instant riches through such Ponzi schemes is everlasting.
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RTI activist Sanjay Shirodkar has been working to bring Mumbai International Airport Ltd (MIAL) under the RTI Act, since 2007. MIAL has resisted all orders, even going to the High Court on the matter. Shockingly, the public Airports Authority of India (AAI), which has a stake in the company, has defended the private agency. Similar battles are being fought in Bangalore and Delhi
One day, while waiting at the Chhatrapati Shivaji International Airport for his cousin to arrive, Sanjay Shirodkar noticed a number of cars belonging to various 'embassies' parked outside. He asked security agency personnel and designated traffic police why the cars were allowed to park there for such a long duration, when other vehicles were not permitted to stop there for more than a few minutes, only allowing travellers to alight. But he got no answer. Mr Shirodkar was also hassled about the high price charged for mineral water at the airport stalls. That was back in 2007.
Mr Shirodkar proceeded to write a letter to the Mumbai International Airport Ltd (MIAL) as well as the Airports Authority of India (AAI) seeking information under the Right to Information (RTI) Act, about the mineral water price policy. He received a reply from the deputy general manager of AAI, quoting an internal note from the legal department, saying that "MIAL will not come under the purview of the public authority and thus the provisions of this (RTI) Act will not be applicable to MIAL.''
Mr Shirodkar says, "I was shocked that the public department, the AAI, which has a 26% stake in the public-private partnership (PPP) and has allowed the use of 2,000 acres of its land-which amounts to at least Rs50,000 crore-was actually protecting the private agency, MIAL, instead of monitoring it and ensuring that it performs its duty transparently, and it was encouraging the agency to keep information away from the public domain.''
Undeterred, Mr Shirodkar invoked a second RTI query on 15 November 2007 with regard to the rules for parking of vehicles. He asked:
> Is parking free for all embassy vehicles at all airports in India? If yes, then please give a copy of the government resolution (GR) or any such notification to show this.
> At which furthest point can embassy vehicles be parked from the terminus?
> Is there any privileged parking facility for embassy vehicles when the ambassador/high commissioner is in the car, or for the staff of the embassy as well?
> Please provide a list of all embassy offices and their respective official number plate details (by which they are recognise for privileged parking, if applicable).
The reply from AAI on 26 December 2007 said that embassy vehicles could go only up to the designated VIP area where they can park free of charges. This implies that they were not permitted to park outside the airport terminal for long durations.
This set Mr Shirodkar thinking about public-private partnerships which have become the backbone of several large-scale (read, large money), development infrastructure projects. More so in the case of airports, which are sensitive areas in the context of the threat of terrorism, how was MIAL flouting the basic rules on parking? He, therefore, decided to find out what concessions MIAL enjoyed from the state and central governments.
In an RTI query, dated 17 November 2007, Mr Shirodkar requested information from a number of related government departments at the Mantralaya state headquarters, including the General Administration Department (GAD), and whether AAI had offered/provided any discounts/concessions/exemptions/waivers to MIAL on interest free debt, entry taxes, property tax, lease of land, stamp duty and registration charges, change of land use, octroi and road cess, if any.
All departments kept mum for months, till a fortnight back, when the GAD replied stating that "MIAL has been given a stamp duty concession of Rs250 crore and it operates on 2,000 acres of government land.'' Now, is this not sufficient premise for MIAL to come under the RTI Act, with such "substantial funding from the government," Mr Shirodkar asks.
Interestingly, in the case of the Delhi airport, which is also privatised under the banner of Delhi International Airport Pvt Ltd (DIAL), Lt Col Anil Heble (retd), an RTI activist and resident of Delhi, filed two applications on 12th June and 15 June 2006 with the public information officer (PIO) of the Ministry of Civil Aviation for information related to the construction of a new security wall in place of the existing wall in Shahabad Mohamadpur village.
The PIO, Ministry of Civil Aviation, forwarded the applications to various PIOs of the Airports Authority of India, New Delhi. When Lt Col Heble did not receive any reply, he filed a complaint with the Central Information Commission on 19 July 2006.
The bench of the then central information commissioner (CIC), Dr OP Kejriwal, ordered that DIAL abide by the provisions of the RTI Act. The decision read: "The Commission heard both sides. DIAL responded saying that they were not a public authority as they held a 74% stake in the joint venture company set up by GMR. On making further inquiries, the Commission was told that the government had a 26% stake in DIAL.
"The Commission is of the opinion that a holding of 26% is quite substantial for any company and therefore, Section 2(1) which states that any body owned, controlled or substantially financed is a public authority, is applicable to DIAL and hence it is bound by the directions of RTI. The Commission therefore directs DIAL to provide for the directions of the RTI. This must be done within 15 days of the issue of the order.''
Mr Shirodkar had made a similar appeal to the CIC. The order of 11 June 2008 was predictably, ditto as in the case of Mr Heble. "In an identical case, in respect of Delhi International Airport Pvt Ltd (DIAL) the Commission vide its decision dated 17 January 2007 has observed that a shareholding of 26% is quite substantial for any company and therefore Section 2(1) is applicable to DIAL…'' Accordingly, MIAL "is covered under the definition of public authority and is therefore directed to furnish the information asked for within 15 days from the date of issue of the decision.''
In yet another case, Bangalore resident Benson Isaac also appealed to the CIC regarding the Bangalore International Airport Pvt Ltd and on 14 May 2008, KK Mishra, state information commissioner, Karnataka, gave a ditto verdict.
But, MIAL did not take the CIC's order lying down. Advocates Duttmenon Dunmorrset filed a writ petition in the Delhi High Court in 2008, challenging the decision of the CIC, and pleading that it be exempted from the provisions of the RTI Act since it has 74% stake in the PPP. The High Court recently directed the matter back to the CIC, Sushma Singh.
As of 16th May, Sushma Singh has sent the copy of the GAD's official reply to Mr Shirodkar; and has asked MIAL to reply on the 26% "substantial'' stake by the AAI in MIAL and that MIAL is using 2,000 acres of land belonging to the government.
This is just the tip of the iceberg in PPPs that have become an integral part of India's progress. Check out www.ppp.gov.ie for an idea of the magnitude of such projects. Surely, we need transparency, and not official secrecy, as has been the case since the days of the British Raj.
(Vinita Deshmukh is a senior editor, author and convener of Pune Metro Jagruti Abhiyaan. She can be reached at [email protected].)
Reliance was "deeply concerned and surprised" "by the reservoir behaviour and "its deviation from what was envisaged in the Field Development Plan (laid out in 2006)," Reliance senior vice-president (commercial) B Ganguly said in an 30th April letter to the DGH
New Delhi: Reliance Industries (RIL) has countered a report that the oil regulator, the Directorate General of Hydrocarbons (DGH), used to target it for falling gas production from the KG-D6 fields, saying the study was done without visiting the fields and the company was not given an opportunity to present its views, reports PTI.
Reliance was "deeply concerned and surprised" "by the reservoir behaviour and "its deviation from what was envisaged in the Field Development Plan (laid out in 2006)," Reliance senior vice-president (commercial) B Ganguly said in an 30th April letter to the DGH.
"Our concern is also evident from the fact that we have moved to bring in a more experienced partner in the form of (UK's) BP, who brings with it the best deep-water experience globally," he wrote, adding that Reliance plans to discuss the reservoir performance with BP to find a solution to the problem.
The DGH had commissioned independent consultant P Gopalkrishnan to give a report on the reasons for gas output from the Dhirubhai-1 and 3 fields in the KG-D6 block falling to 42 million metric standard cubic metres per day (mmscmd) from 53-54 mmscmd in March 2010, instead of rising to the projected 61.88 mmscmd.
In his letter, Mr Ganguly gave a point-by-point rebuttal of Mr Gopalkrishnan's finding that the "shortfall of gas production is due to non-drilling of the adequate number of wells."
"While the DGH-appointed consultant has reached certain conclusions on the performance of the D-1 and D-3 fields, we as operators were neither approached nor afforded an opportunity to discuss any of the field issues with the consultant," he wrote.
"The consultant had not even visited the field to apprise himself of the actual conditions and field performance," he said. "The conclusions are further contrary to the facts and information provided by us from time-to-time to the DGH."
The DGH is using this report to make Reliance carry out the impossible task of drilling two wells by next month and another nine by the fiscal-end. This despite the fact that each well takes up to six months to be completed and there was a very small weather window available for drilling in the Bay of Bengal.
The regulator is mulling over the action it can take against Reliance for failing to meet this commitment, sources said.
Mr Ganguly stated that Reliance neither had access to the consultant nor was the full report prepared by Mr Gopalkrishnan ever provided to the company.
"From the conclusions that have been conveyed to us, it seems that the consultant either has not been provided or has not considered all reservoir/production data or it would not have been difficult for him to appreciate some very obvious reservoir pressure trends in the field that contradict the conclusions reached by the consultant," he wrote.
Mr Ganguly stated that Reliance, BP and its existing 10% partner Niko Resources of Canada will "discuss the reservoir performance in detail and come up with most optimal solutions."
"These solutions would include identification of well locations and interventions in the existing wells," he said.
The Dhirubhai-1 and 3 fields in the eastern offshore KG-D6 block are producing 41-42 million standard cubic metres per day of gas, as against to the planned output of 61.88 mmscmd, due to a fall in reservoir pressure and water ingress in wells.
At a meeting of the management committee (MC) of the KG-D6 block on 2nd May, Reliance pleaded for putting in place a technical committee comprising global experts to advice on the best way forward on the issues facing the fields.
The DGH and oil ministry choose to ignore Reliance's call and 'advised' Reliance to drill two wells and complete a similar number of wells drilled previously by the first quarter of 2011-12 fiscal (June-end).
Also, they wanted another nine wells to go onstream before the end of the fiscal in March 2012.
The DGH representative, according to the minutes of the meeting, remarked that any additional well will take three years from the date of approval for the well location by the MC and, therefore, the additional production from these wells is unlikely to commence before 2014.
Sources said Reliance suggested at the meeting that instead of additional wells, those wells showing an increasing trend in water production could be considered for work-over jobs.
The firm said it has already planned work-over jobs in six wells.
At the meeting, Niko rejected the DGH's suggestion to drill wells outside the main reservoir channel as economically unjustified.
Reliance-Niko, the source said, explained that they have complied with field development plan (FDP) in all respects except for the drilling of a few wells.
They also provided the technical reasons related to the reservoir complexities, with reservoir behaviour being different from what was envisaged/considered at the time of the 2006 FDP, leading to delayed drilling of wells provided for in the FDP.
The DGH representative, according to the minutes, remarked that Reliance has drilled wells in the main channel area where 40% of the reserves are present and additional wells will have to be drilled in the remaining 60% of the outside channel area.
Reliance explained that all the existing 18 production wells are in the main channel area, as envisaged in the FDP.