Private school loses appeal against pyramid scheme conviction
The High Court dismissed on Tuesday (Sept 26) the appeals of a now-closed private school and its managing director against their convictions for promoting a pyramid scheme that generated $2 million in revenue over a two-year period.
The Global Edupreneur Program (GEP), run by the Harriet Education Group (HEG) between 2006 and 2008, involved 96 participants. They had to pay training and licensing fees to join the programme as consultants or managers. Some of them testified at the trial that they took out bank loans to cover the fees.
They were promised commissions for recruiting new participants for the scheme or for HEG's educational courses.
Global managers were entitled to a 15 per cent overriding commission on the income earned by the people they recruited. If promoted to country managers - after passing an interview and paying additional fees - the overriding commissions grew to 30 per cent.
In one instance, a participant paid $22,080 after he was promised a $10,000 commission for every GEP recruit. After recruiting two consultants, he took up the offer of a country manager position, paying an additional $35,200.
HEG's business collapsed after its university partners pulled out, following police investigations into reports filed by participants.
HEG, its managing director James Chua Hock Soon and another company, Harriet International Network (HIN), were found guilty under the Multi-Level Marketing and Pyramid Selling (Prohibition) Act after a trial. Chua and HEG were each fined $50,000. HIN, used to handle money relating to the scheme, was fined $20,000. All three appealed to the High Court against the convictions.
It was the first case under the Act to be heard by the High Court in over 20 years. The last case, in 1994, involved a company selling motivational programmes.
The defence argued that the GEP was a franchise scheme and prescribed by law to be excluded from the definition of pyramid selling.
Justice Chan Seng Onn, in a written judgment, said it was unnecessary for him to rule on whether the GEP was a franchise scheme. In any event, regardless of whether it was or not, the GEP did not satisfy the conditions that would qualify it for exemption.