Crooks start small

Probably the biggest loss we’ve ever seen a consumer experience followed the Eurextrade Ponzi scheme that collapsed in February this year. As well as people who had cashed in insurance policies and savings schemes, others who had taken bank loans and some who had borrowed from friends and family we heard of one victim who, we were told, “sold two houses and Range Rover” in order to “invest” in that scam.

Luckily, a few people were stopped from losing so much by Good Samaritans who intervened. An acquaintance who works for a large financial institution told me that she was approached by several clients who asked to cash in policies and she flatly refused. No, she told them, you can NOT have you money now that you’ve told me what you’re planning to do with it. Strictly speaking she was probably breaking the rules by denying them access to their savings but she had sufficient care for her fellow human beings that she took the risk. Hopefully they now realise how grateful they should be to her.

Some people lost significant amounts investing in the other Ponzi schemes like Felmina Alliance and “Oil of Asia”, clones of Eurextrade. Ironically we even heard of victims of Eurextrade that then jumped to the next scam and lost even more. Some people don’t seen capable of learning form experience.

Many others have lost smaller amounts, but nevertheless have still lost significantly, by joining a variety of pyramid schemes that promised wealth and prosperity but in fact only existed to benefit the founders, the people at the top of the pyramid.

However not all losses are as high. Many of the problems we hear about are of a much smaller value. For instance we received a message recently saying this:

“Can one report someone to small claims if they owe you P150. I sold this guy a second hand wardrobe at P450, he gave me P300. Now he is refusing to pay me because he says the truck damaged it!”

This is a dispute over a mere P150. Is it really worth the bother? Isn’t it simpler just to forget about it?

Another recent problem followed a wedding in Mahalapye. A reader hired various items from a wedding organiser and paid a refundable deposit of P300 to cover any damage to the items while she had them. No damage was done and the owner picked them up after the wedding, promising to repay the P300 as soon as possible. That was in March. To date she still doesn’t have her P300 back.

To make this worse, the owner of the company has made endless promises both to the reader and to me that the payment will be made but these appear to have been no more than lies. She’s come up with various excuses including one about being “a bit low with cash”.

Despite this they continue to advertise their services on Facebook, posting comments about other large weddings they’ve organised and even comments from happy customers. Unless they’ve made all of these comments up, then they are clearly still operating and taking money from other customers. I simply don’t believe that they don’t have P300 to repay our reader.

But it’s only P300. Is it really worth the bother? Isn’t it simpler just to forget about it?

We heard from another reader who entered into an informal saving scheme last year. Ten women all apparently contributed P1,000 per month for several months to one who held the money on their behalf. Some of them have now taken out their contributions but one apparently has not. Despite asking repeatedly she tells me that she’s not received a single thebe back. This is made more awkward because she now lives overseas and even worse, none of this was put in writing. No contract, no receipts and no records of anything at all.

I’ve had various conversations with the woman holding the money and she’s being remarkably evasive. Her last comment to me was that she’s talking to her lawyer because she thinks I’m going to name her, despite never threatening to do this. Meanwhile she’s ignoring the debt she owes this woman. Maybe I SHOULD name her.

But it’s only P9,000 to a woman who can afford to save P1,000 a month and who can afford to live in the UK. Is it really worth the bother? Isn’t it simpler just to forget about it?

No, as I’m sure you agree, it’s not simpler to forget about it. There’s a principle at stake. People should honour their obligations. If necessary they should be MADE to honour them. Just because it’s not as much as “two houses and a Range Rover” that doesn’t make it acceptable.

Luckily we have the Small Claims Court now that covers the smaller end of the market, covers the problems that most of us face. If you have a dispute valued up to P15,000 they can intervene on your behalf, No lawyers so no legal bills, no suspicious legal insurance schemes, just you and your story along with any evidence you have and they’ll step in and give you some rapid justice.

However the Small Claims Court is only useful if people use it. Only if people take the time and make the effort to go there will it be as useful as it can be. Only if we take the time to go there over issues that some might think are trivial will it be really useful.

Who knows, if we don’t stop these crooks from stealing P150 or P300, sooner or later they’ll graduate to the P9,000 level scams. Later they might even be running a multi-million Pula scam like Eurextrade. Let’s stop them now while we have the chance.

Felmina Alliance - has it died?

Various report suggest that Felmina Alliance, an obvious Ponzi scheme has collapsed. But didn't we all know this was going to happen sooner or later, like with all Ponzi and Pyramid schemes? All such schemes eventually run out of gullible victims. It happened with TVI Express, it happened with Eurextrade, now destiny has caught up with Felmina Alliance.

It's just a shame that the gullible lost their money. It's scandalous that so many people willingly tried to dupe their friends, neighbours and family.

Questions and answers

There are some questions that keep on coming up, questions that readers keep on asking us, questions that we need to answer over and over again. It’s time to answer them again.

Q. Is it possible to get a degree based on “life experience”?

Several readers have asked this recently. They want to get a degree to help them get a better job, a promotion or to get them onto the Board of a national institution or company. Instead of getting a qualification the hard way, they get the idea instead that they can do it over the internet based on their life experience. They seem to think that because they’ve been working for a long time this is a shortcut to getting a Bachelor, Masters or Doctoral degree. This is made a lot easier for them because of the large number of seemingly legitimate web-based “universities” with impressive names like Rochville, Belford, Ashwood, Headway and Mcford. In fact they’re all fakes.

All of these fake universities offer their degrees for no more than a credit card payment and claim you can get your fake degree within days of payment. No examinations, no coursework, no dissertations, the only work you have to do is type in your credit card number. They are as fake as the degrees they offer, as fake as the people who buy these bogus qualifications.

In fact most of the popular fake universities are all part of a single organization operating out of Karachi in Pakistan. You can see a list of these Pakistani fakes on our blog.

So the answer is no, you can’t get a degree this way. No real university offers degrees based on life experience.

Q. Can you trust import car firms?

It depends on the firm in question and how they operate. You have to consider where the car is when you buy it. If the car is on a forecourt here in Botswana then at least you see it, sit in it and take it for a test drive. You can get your friend the mechanic to take a look at it for you.

However the more risky type of business is the online car importer. These show you the details of a car on the web while it’s in storage in another country. In these cases how can you evaluate the car before you buy it? You can’t take it for a test drive, you can’t inspect it, you can’t even be sure that the car you choose is the car that’ll be delivered. Given that all of these companies demand full payment before they ship the vehicle, what can you do if they send you the wrong car? What action can you possibly take? You have the wrong car and strangers in a foreign land have your money.

I’m skeptical about whether buying a car from overseas is a good idea. I would only ever suggest you buy a car you have driven yourself and that has been inspected by someone you trust to act on your behalf. Even then you need to ask about how the vehicle will be maintained if it’s come from a country far away. Friends of mine still drive a fancy 4x4 from Japan whose radio still talks to them in Japanese. Nobody seems to be able to fix that. Do you want that?

Q. Should I stop paying for my store credit purchases?

No. Never. No matter how the store has behaved, however badly they have let you down, even if you think the world is going to end, don’t stop your credit repayments.

The critical thing to understand about buying items on credit is that once you sign the deal you are committed to making the payments for the entire duration of the deal. There will be no getting out of it. The items you bought are entirely unconnected with the payments you make. Think of it like this. If you’d got a loan from your bank to buy a computer and that computer was later stolen, would you be entitled to stop repaying your bank loan? Of course not, the bank would have you in court within moments. It’s the same with store credit. If you stop repaying you’ll be the one in trouble.

If a problem occurs with your purchases complain vigorously to the store and demand they fix it. Give them no other option. Just keep paying them what you agreed to pay.

Q. Is there such a thing as “passive income”?

Only if you are exceptionally wealthy and exceptionally lucky. “Passive income” is a term used by multi-level marketing companies and their cousins, pyramid schemes, to catch you in their net. They suggest that once you’re in their scheme large amounts of money will just flow to you as if by magic from the people you recruited and the pyramid of gullible fools who they recruited beneath them.

Of course this is nonsense. Multi-level marketing companies like Amway and Herbalife confess in the statements they are forced to disclose each year in the USA that the VAST majority of their distributors make no profit at all. As for the victims of pyramid schemes, they’re just screwed.

Q. Can I make money from High Yield Investment Plans?

No. HYIPs are just fronts for Ponzi schemes. They promise you astronomical financial returns from your investments but they lying, it’s not true. Any money you get will be from the “investments” of later victims. What they want, and what you won’t get back, is your initial payment. They’ll pretend to give you massive interest payments and they might even give you a few small trivial payments to keep you happy but remember this: they still have your initial payment and they plan on keeping most, if not all, of it.

Q. Are emails from strangers offering me money, jobs or love genuine?

No. Don’t be silly.

Scamability

I’m not the only one who simply doesn’t get it, who doesn’t understand why people fall for scams. Other people are also mystified.

At a recent event in Francistown the Commissioner of Police, Thebeyame Tsimako, is quoted as saying:

“I just do not understand if Batswana are slow to learn or they just do not want to learn that con-artists exist and they are there to rip them off of their hard earned cash and property”.

He went on to say that:

“Drama Programmes like Itshireletse on BTV are very informative as they always warn people against such cases, but it seems that some of the people just watch these programmes for entertainment and do not want to get the message.”

He has a point. Despite the educational efforts of the Police Service, banks and organizations like Consumer Watchdog people continue to fall for scams and con-artists.

Part of this is simply human nature. We’re all, to varying degrees, greedy and lazy. If someone, often a total stranger, approaches us with a way of making a quick buck without actually doing any work we fall for it. We want something for nothing. The trouble is that no matter how tempting this might be, it doesn’t make it true. What’s worse is these schemes DON’T actually involve us doing nothing to earn these wonderful rewards. Instead the thing they want us to do is hand over money, sometimes large quantities of it.

I confess that it keeps on surprising me that we are approached by people for advice about these issues. I can only assume that everyone who comes to us is a new victim, or hopefully just a potential victim. I can’t imagine that anyone who’s read about the scams and cons we’ve reported in Mmegi and on our blog and Facebook group can then fall for them. Doesn’t a distant memory of reading about something similar emerge when they receive that email, SMS or invitation from a gullible friend?

We were asked recently about a so-called “investment scheme” called Felmina Alliance. A reader had received an email out of the blue suggesting that she visit their web site and extolling the virtues of their scheme. The web site makes it clear that they really are offering some remarkable results. For instance they say that: “interest of 1.6% per business day is paid on all account principals from $5,000.00 and above.” An interest rate of 1.6% doesn’t sound much but that’s EVERY DAY. If this is true and you take their option of reinvesting the first day’s interest ($80) back into your “investment” the interested is “compounded”. The second day’s interest is then not based on $5,000 but $5,080 so the interest is bigger, $81, then $82 and so on. After just a month, if this is true, your daily interest will be $127 and your total “investment” will have increased to over $8,000. If this is true after 90 days you’ll have a pot of nearly $21,000. After the minimum investment period of 180 days you’ll have accumulated $87.000.

If it’s true.

Of course this ISN’T true. It’s all a lie, carefully crafted to part you from that initial $5,000.

Did I mention that at no point does this scheme explain how it might earn this sort of money and guarantee a fixed interest rate. In turbulent economic times how can any legitimate scheme offer this? Did I also mention that this company is registered in Panama and has directors who run a range of other such schemes?

It’s no surprise that all over the web there are posts from people who claim to be getting a return from Felmina Alliance. I found a site that has posts from people reporting that they invested the minimum amount of $100 and are getting a dollar back here, two dollars there. Of course this might all be true but even if it is they’re forgetting something. Felmina Alliance still has their $100. That’s the nature of a Ponzi scheme. All those $100 investments are used to pay the rewards of earlier investors who want a dollar here, two dollars there. If the organizers just pay out 50 $1 payments from each $100 investment they still have $50 to spend on booze and floozies. If only 1 in 10 of the “investors” posts a comment on the internet and only 1 in 10 of them attract one more customer the scammers are making money.

The saddest thing for me is not just that people are losing money from this sort of scheme, it’s that there are willing victims who are convinced it’s working. Felmina Alliance give contact details of people here in Botswana who are their local representatives. I contacted one and he couldn’t explain how the scheme works either. All he could do was direct me to other people, presumably more closely connected with the scheme, who offered a variety of incredibly vague explanations about how the scheme made money. Nothing specific, nothing detailed, nothing concrete. No genuine evidence at all that it works. Presumably because it doesn’t?

The thing that saddened me was the emotional commitment I could sense from this local representative. I made it perfectly clear what I thought of these “High Yield Investment Plans”, that they promise a great deal but without any actual evidence or foundation and sent him evidence to support this but he stills seems just as committed. It’s sad because there will, one day, come a point when he realizes he’s been wasting his time and money. He reminded me of the people I’ve met in the past who are members of a religious cult like the Scientologists. They construct a brick wall of self-justification to protect their self-confidence.

Curiously, despite being one of their national representatives, he has only been an investor with them for a matter weeks. How easy is it to earn such a role?

Perhaps this is a good lesson for us all about how easy it is to fall for a scam and then to keep convincing yourself that you couldn’t have been that silly? The real lesson is constant, unceasing and vigilant skepticism. It’s either that or disappointment, depression and debt.

The Voice - Consumer's Voice

Dear Consumer’s Voice #1

I would like to ask why micro lenders when you ask for the balance of your loan they will give you a lesser amount than the settlement amount! My balance is P20,000 but when I called to say I want pay up the whole balance, they said the amount goes up! What is happening here! I thought when you pay up, even at furniture shops, the amount would rather decrease. Is this fair to the consumer?

Let’s begin with the basics. Micro-lenders don’t lend people money because they’re kind and charitable people. They do so solely so they can charge interest on the amounts borrowed, that’s what the business is all about. The same can even be said for furniture stores. Here’s a startling fact. Most furniture stores aren’t really furniture stores, they’re moneylenders. Furniture is just an excuse to lend money to people and earn lots of interest.

Micro-lenders want every thebe of interest they can charge you and if you try and stop them getting it you’ll certainly upset them. That’s why, when you’ve agreed to pay them interest and then try and change your mind, they’ll charge you a penalty for denying them that interest. You’ll probably find that it says this, or at least implies it, somewhere in the agreement you originally signed with the lender.

However there is a VERY strict rule regarding settlement amounts. The “in duplum rule” is a rule that courts may apply whenever a case relating to debt reaches them. It says that at the time of settlement of a debt the amount of interest charged may not exceed the capital amount outstanding. If you owe them P10,000 the court will not allow them to charge more than another P10,000 on top.

This rule has been used many times in our courts so the next time a micro-lender tries to charge you an outrageous amount for settling a debt you should demand he takes you to court. The irony is that in this sort of case you’re safest in court.

Dear Consumer’s Voice #2

I have 2nd year credits at the University of South Africa and 6 to 7 years life and work experience in accounting. From your experience with lots of conversation and assistance with your clients, how does one go about getting a genuine and accredited University that converts life and work experience into a degree?

There are a few out there that are not bogus and accredited, but difficult to get them and be assured this is the right one. I have used my credits and experience to form a company for myself and now finding myself not getting enough time to complete my 3rd year.

Please assist me on this, if you know any genuine Institution, please inform me, it would highly be appreciated.

I'm sorry, I don't know where you got the idea that you can complete your degree with "life and work experience". This simply doesn't happen. There are no genuine universities that offer credit for such experience in completing courses. Real universities require coursework, exams, dissertations and research projects. They don’t just give away their degrees because you either ask them to, possess life experience or offer them money.

While I honestly respect your commitment to starting a business based on your experience, you cannot get qualifications this way.

Consumer Alert

We’ve heard from various people who asked about an “investment scheme” called Felmina Alliance. They’ve been told of amazing returns that can be made on modest initial investments. For instance they claim that you can earn 1.6% interest every day on an initial “investment” of $5,000.

That’s simply a lie. It doesn’t sound much but 1.6% per day, if it’s compounded, equals an annual interest rate of over 1,600%. There is no investment scheme in the world that can truthfully offer that, there never has been and there never will be. Anyone who says so is either a fool or a crook. Or both.

Felmina Alliance, a Ponzi scheme?

In comes an email asking for advice. Is this a scam?

"Hello,

How are you today? I hope this message finds you in good health and spirit.

My name is Howard Jefferson. Marianne is my sister, we are investing together.

The company we have been investing with for a long time now is called Felmina Alliance. Their business is based on online trading in its various forms.

Being their customer for years now we've never had a delayed or canceled interest payment. This is in our view what makes this company different from the rest.

We've done my own due diligence on them. The company provided all the company incorporation files and other important documents related to their business. In addition to that, I've talked to them over the phone on numerous occasions. Their customer support representatives were always there to help me with anything.

Further, the safety of the investment is guaranteed by a reputable investment bank and a certificate of deposit is issued on all deposits of $500 or above.

Last but not least, there are no hidden or account maintenance fees nor any other catches.

Initially, I got in with a minimum investment of just $20 to test the waters, so to say. Now my
investment is 6 digits.

You can invest and withdraw your interest via direct bank wire transfer.

Please follow the link below to join:

http://www.felmina.com/?ref=howard

If you are interested, simply open an account by filling out a simple form on their website and write back to me so that I could guide you through the rest of the setup process.

I can also send you a copy of my bank account statement to show you that Felmina does pay its customers.

You can leave me your phone number and the best time to call and I will be happy to call you back.

Do not hesitate to contact me if you have any questions or need help with anything.

Yours,

Howard Jefferson"

You can see their web site for yourself here.

This is what they offer:

It sounds good, for an investment of $5,000 they offer you 1.6% interest per day, but what does that actually mean?

It means that after 180 days your initial amount of $5,000 has increased to a staggering total of $87,064. If you kept it with them for a year you would have $1,641,245. That's an annual return of nearly 33,000%.

Can you believe that? Is that possible?

No.

If this was true then banks, pension schemes and the Greek government would be doing it.

This is probably a Ponzi scheme of some sort. No investment scheme in the history of investment schemes has offered that sort of return. That's because this is a straightforward lie. What they want is your $5,000. They plan to keep it.

See here for details of similar schemes we've covered and here for what the BBC had to say on the subject.