Opinion on Several Questions on the Application of Law for Criminal Cases of Organizing or Leading Pyramid Sales Schemes
People's courts, people's procuratorates and public security departments of all provinces, autonomous regions and directly governed municipalities, PLA military courts and military procuratorates, branch courts of the Xinjiang Uygur Autonomous Region higher people's court for the production and construction corps, the Xinjiang Production and Construction Corps Procuratorate and Public Security Bureau:
The following opinion on the applicable law in criminal cases of organizing and leading pyramid sales activities is made on the basis of criminal law and criminal procedure provisions, so as to resolve issues encountered in recent years by the public security organs, people's procuratorates and people's courts in handling criminal cases of organizing and leading pyramid sales schemes and to punish pyramid sales crimes :
I .Issues Regarding Determination of the Number of Levels and Persons in a Pyramid
Where pyramid sales organizations, in the name of selling goods or providing services, require participants to pay fees or purchase goods or services in order to gain entry qualifications, follow a definite hierarchic order, and calculate pay-outs or rebates directly or indirectly on the basis of developing the number of persons participating, and entice or coerce participants to continue getting others to join, defrauding them of their property and disrupting the economic social order, and the number of persons participating in the organization is 30 or more and there are three or more levels, the organizers or leaders shall be pursued for criminal liability.
Where multiple pyramid sales organizations are organized or lead, and the number of levels in one or more of the organizations has already reached three or more, the number of persons in each of the organizations may be counted together.
Where the leaders or organizers have, in form, left the original pyramid sales organization, but continue to receive pay-outs or rebates from to original pyramid sales organization, and the original pyramid sales organization has progressed in the number of persons and levels involved, the calculation of the number of persons and levels shall include this development.
In handling criminal cases of organizing or leading a pyramid sales activity, where truly unable to gather testimony of pyramid activity members due to to objective capacity limits, evidence collected and reviewed for veracity in accordance with law such as the records of fee payments, pay-outs, rebates, and audio-visual material, charts of pyramid sales personnel relationships, bank account transaction records, internet materials and appraisal opinions may be taken together to affirm the number of participants, number of levels, and other facts.
II. Regarding Issues of Determination and Disposition of Persons Related to Pyramid Sales Activities
The following persons can be affirmed as organizers or leaders of a pyramid sales activity:
(1) persons who functioned to initiate, plan or guide the pyramid sales activity;
(2) persons who undertook responsibilies such as management or coordination in the pyramid sales activity;
(3) Persons who undertook duties such as publicity or training in the pyramid sales activity.
(4) persons who previously received criminal punishments for organizing or leading pyramid sales activities, or who received administrative penalties for organizing or leading pyramid sales activities within the last year, who again, directly or indirectly, develop participation in a pyramid sales activity with 15 or more persons and 3 or more levels;
(5) other persons with a key function such as the implementation, establishment or expansion of the pyramid sales activity.
Where the organization or leadership of criminal sales pyramid activity was carried out in the name of a work-unity, persons who were appointed by the work-unit who only performed professional service type work, shall normally not be pursued for c.riminal reponsibility
III. Issues regarding determination of 'defrauding property'
Organizers or leaders of pyramid sales activities who employ fraudulent tactics such as fabricating or distorting national policies, inventing or exaggerating prospects for business operations, investments or services, concealing the true source of pay-outs or rebates, or carrying out conduct provided for in article 224 of the Criminal Law, and receive unlawful bennefit from participants in the pyramid sales activity's payment of fees or purchase of goods or services; shall be found to have defrauded property. Whether or not the participants in a pyramid sales activity feel they were tricked does not effect the determination of whether they were defrauded of property.
IV. Issues Regarding the Determination of Serious Circumstances
In any of the following circumstances, the organizers or leaders of a pyramid sales organization who meet the requirements of the first paragraph of article 1 of this opinion, shall be found to have 'serious circumstances' as used by article 224 (1) of the Criminal Law
(1) The total number of persons organized or lead to participate in pyramid sales activities reached 120 or greater;
(2) The total fees directly or indirectly received from participants in the pyramid sales reached a value of 2,500,000 or greater;
(3) Previously received a criminal punishment for organizing or leading a pyramid sales activity, or received an administrative punishment within the last year organizing or leading a pyramid sales activity, and again directly or indirectly, develops participation in a pyramid sales activity with 60 or more persons;
(4) causes mental aberrations, suicide other serious consequences to participants in a pyramid activity;
(5) Causes other serious consequences of repugnant social impact.
V. Issues Regarding the Handling of 'Team Payments'
Where organizers or leaders of pyramid sales activities establish hierarchical relationships through the expansion of personnel and requiring persons in the pyramid sales activity to expand it to have others enter, and calculate and make pay-outs to higher ranks on the basis of the lower rank's sales performance, seeking illegal benefits, it is a 'team payment calculation' style pyramid sales activity.
Calculation of pay-outs on the basis of sales performance in a pure "team payment calculation" style pyramid sales activity for the purpose of selling goods is not handled as a crime. Pyramid sales activities that formalistically employ "team payment calculations" but actually are "calculate pay-outs or rebates directly or indirectly on the basis of developing the number of persons participating" shall follow the provisions of article 224 of the Criminal Law, convicting and punishing as the crime of organizing or leading a pyramid sales activity.
VI. Issues Regarding the Applicable Charges
Where the organizing or leading of a pyramid sales activity for the purpose of illegal occupation, simultaneously constituting the crimes of organizing or leading pyramid sales activities and fraudulent fund raising, follow the provisions calling for a heavier punishment in conviction and sentencing.
Where organizing or leading a pyramid sales activity activities constituting the crime of intentional harm, illegan detention, blackmail, extortion, obstruction of public functions, assembling to disrupt public order, assembling to impact a state organ, assembling to disrupt order in a public venue or traffic, are carried out, follow the provisions calling for a heavier punishment in conviction and sentencing.
VII. Other Issues
"Greater than" or "within" as used in this opinion include those numbers.
"Level" or "rank" used in this Opinion refers to the levels of relationship, from the top to bottom, between organizers, leaders and participants in a pyramid sales activity, and not to the personal level of an organizer or leader within the pyramid sales organization.
The calculation of the number of persons and levels inside a pyramid sales organization, as well as the calculation of the organizers and leaders development of the numbers of persons and levels in a pyramid sales organization, include the organizers and leaders, and their levels, within it.
Supreme People's Court
Supreme People's Procuratorate
Ministry of Public Security