Private school MD appeals against fines over pyramid scheme

The managing director of a now-closed private school, who was convicted of promoting a pyramid scheme in 2015 that made about $2 million in revenue, is appealing against fines totalling $120,000.

The Global Edupreneur Program (GEP), which recruited "consultants" for the Harriet Education Group (HEG), lasted less than a year and involved 96 participants. Between December 2007 and September 2008, the participants were appointed as so-called consultants after they paid fees for training and a licence to recruit other consultants, as well as students, for the various courses run by HEG.

Consultants promoted to "country managers" could earn additional commissions on the income of the people they recruited.

In one instance, a participant paid $22,080 to the school after he was promised a $10,000 commission for every GEP recruit. After recruiting two consultants, he agreed to take up the position of country manager, for which he paid an additional $35,200.

The prosecution contends that HEG made a profit of more than $200,000 from the scheme. The defence argues that it suffered a loss of about $178,000.

After a trial in 2014, managing director James Chua Hock Soon and his two companies, HEG and Harriet International Network (HIN), were found guilty under the Multi-Level Marketing and Pyramid Selling (Prohibition) Act.

Chua and HEG were each fined $50,000. HIN, used to receive money relating to the scheme, was fined $20,000.

Appealing against the convictions yesterday, defence counsel Philip Fong argued that no offence was committed as the GEP was a type of scheme prescribed by law to be excluded from the definition of pyramid selling.

He argued that it was not merely about recruitment but also sold a commodity, namely, a programme that teaches entrepreneurship and marketing.

But Deputy Public Prosecutor Hon Yi argued that under the law, it is not allowed to earn commissions from recruitment, as opposed to the sale of goods. He said GEP "repackaged" recruitment into an education package.

The case has been adjourned to a later date for further arguments.

A version of this article appeared in the print edition of The Straits Times on April 04, 2017, with the headline 'Private school MD appeals against fines over pyramid scheme'. Print Edition | Subscribe