As part of an out of court settlement with the Commerce Commission the organiser of a scheme known as Perpetual Income Trust, and more recently as Lifetime Income Trust, has given signed undertakings admitting that the scheme is an illegal pyramid selling scheme.

Commission Fair Trading Manager Rachel Leamy said that the scheme was run by an Auckland man, Trevor Smith-Holley, and 3,000 people around the country each paid $47 a month to participate.

The Fair Trading Act prohibits all pyramid selling in New Zealand - there is no such thing as a legal pyramid scheme.

"You do not have to start the pyramid scheme to break the law," Ms Leamy said. "Trying to recruit people into a pyramid scheme is also illegal. In other cases, courts have convicted and fined people involved at various levels of pyramid schemes."

In this case, the Commission has ended its investigation with a settlement and does not intend to take further action against Mr Smith-Holley.

Mr Smith-Holley has given signed undertakings, including:

  • an admission that the Perpetual Income Trust/Lifetime Income Trust breaches the Fair Trading Act;
  • stopping the scheme immediately;
  • notifying all participants that the scheme has been stopped and giving them a copy of a letter from the Commission explaining why the scheme is illegal;
  • not taking part in any pyramid schemes in future; and
  • acknowledging that the settlement does not prevent anyone taking their own action against Mr Smith-Holley, Lifetime Income Trusts Limited or other people involved in the scheme.

In this case for the 3,000 people already involved in Perpetual Income Trust/Lifetime Income Trust to receive the $50,000 per year income promised them, another 1 million people would have to be recurited. For those 1 million people to recover just their costs, an additional 50 million would have to be recruited.

"It is mathematically impossible for any pyramid scheme to work," Ms Leamy said. "It does not matter how you organise the pyramid, most people must pay more into the scheme than they get back. Only the minority at the top can ever make money."

The Commission is concerned that pyramid schemes are common in New Zealand. It is deliberately focusing enforcement action against them. This has included court action, settlements and warnings, and these forms of action will continue.

Media contact: Fair Trading Manager Rachel Leamy

Phone work (04) 498 0908

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its web site www.comcom.govt.nz