GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

S	1 

SENATE BILL 29*

Short Title:  Increase Penalty/Pyramid Schemes.	(Public)

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Sponsors: Senators Jordan and Gulley.

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Referred to:  Judiciary.

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February 3, 1997

A BILL TO BE ENTITLED
AN ACT TO INCREASE THE PENALTY FOR THE ESTABLISHMENT OF PYRAMID DISTRIBUTION PLANS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 14-291.2 reads as rewritten:
"§ 14-291.2.  Pyramid and chain schemes prohibited.
(a)	No person shall establish, operate, participate in, or otherwise promote any pyramid distribution plan, program, device or scheme whereby a participant pays a valuable consideration for the opportunity or chance to receive a fee or compensation upon the introduction of other participants into the program, whether or not such opportunity or chance is received in conjunction with the purchase of merchandise.  A person who establishes or operates a pyramid distribution plan is guilty of a Class H felony.  A person who participates in or otherwise promotes a pyramid distribution plan is deemed to participate in a lottery and is guilty of a Class 2 misdemeanor.
(b)	'Pyramid distribution plan' means any program utilizing a pyramid or chain process by which a participant gives a valuable consideration for the opportunity to receive compensation or things of value in return for inducing other persons to become participants in the program; and
'Compensation' does not mean payment based on sales of goods or services to persons who are not participants in the scheme, and who are not purchasing in order to participate in the scheme.
(c)	Any judge of the superior court shall have jurisdiction, upon petition by the Attorney General of North Carolina or district attorney of the superior court, to enjoin, as an unfair or deceptive trade practice, the continuation of the scheme described in subsection (a); in such proceeding the court may assess civil penalties and attorneys' fees to the Attorney General or the District Attorney pursuant to G.S. 75-15.2 and 75-16.1; and the court may appoint a receiver to secure and distribute assets obtained by any defendant through participation in any such scheme.
(d)	Any contract hereafter created for which a part of the consideration consisted of the opportunity or chance to participate in a program described in subsection (a) is hereby declared to be contrary to public policy and therefore void and unenforceable."
Section 2. This act is effective when it becomes law and applies to offenses committed on and after that date.