February 2, 2002

Candidate's Campaign Fundraising:
MLM or Pyramid Scheme?

An Associated Press story originating from Mobile, Alabama on February 1 reported that Jim Zeigler, a Republican planning to announce his candidacy for the state auditor position on February 9, was ordered by the attorney general's office to immediately halt his fund-raising campaign, labeling it a pyramid scheme.

Zeigler's fund-raising program called "$top the Wa$te Inc.", pays commissions to campaign workers who recruit other campaign workers.  He calls it a direct marketing approach.  But Assistant Attorney General Bill Garrett said the payment plan violates Alabama's Deceptive Trade Practices Act, and ordered the program halted and funds from the "pyramid scheme" returned to the donors.

The Deceptive Trade Practices Act prohibits selling or offering to sell, either directly or associated with the sale of goods or services, a right to participation in a pyramid sales scheme.  Violation is a misdemeanor.

Zeigler, an attorney, agreed to temporarily suspend the fund-raising activity, pending a hearing.  He says it is free to join his plan, and that Garrett's interpretation of the law is "clearly erroneous".

Jack Skinner, Zeigler's donor coordinator, told Associated Press reporter Garry Mitchell that "networking is a proven method" to raise money.  "It's not an endless chain concept.  No one has tried this."  He explained to Mitchell that a person could earn $2,000 in commissions by raising $12,600, for example, recruiting 126 people donating $100 each.  He said, "it's not a get rich scheme."  He told Mitchell it would "cut the strings" attached to a political candidate by special interests.

Zeigler told Mitchell that politics is "too dependent on big donors" and his method would allow more citizens to participate in fund-raising.  His donations started on December 1 with two people and he now has 36 "independent fund-raising coordinators."  He added, "we expect to have over 1,000 paid part-time campaign workers by the June 4 Republican primary."

According to Mitchell's article, Zeigler's plan calls for coordinators to raise or donate $100 once, and recruit two independent fund-raising contractors who each do the same.  You quickly earn $200.  You then earn dozens of $5 and $25 checks totaling $2,000, starting from a $100 base, according to Zeigler.

Money goes to the "$top the Wa$te" fund and Zeigler's auditor campaign.  A former Public Service Commission member, Zeigler told Mitchell he came up with the "untested" fund-raising plan because he had been outspent in his previous campaigns.

Original Source: Associated Press (by Garry Mitchell), February 2, 2002