Criminal charges have been filed against two men--one from Woodland Hills, the other from Canyon Country--accused of operating an illegal pyramid scheme in the San Fernando Valley, Los Angeles City Atty. Jim Hahn announced Friday.
Arthur Scott Bart, 38, of Woodland Hills, and Terry William Madigan, 38, of Canyon Country are charged with one count each of conspiracy and operating an endless chain scheme as a result of a Los Angeles Police Department undercover sting operation.
Each endless chain scheme count is punishable by up to one year in jail and a $1,000 fine. The conspiracy charges could merit a year in jail and a $10,000 fine.
Endless chain schemes resemble monetary chain letters, said Deputy City Atty. Mark Lambert, a prosecutor in the Consumer Protection Unit.
The chains are a distribution of property contingent on a participant paying money and involving more people in the scheme.
When the chain collapses, Lambert said, the people at the top of their pyramids make money from the underlings.
An telephone tip to the Foothill Division July 5 triggered the sting operation on Bart and Madigan, police said.
An anonymous man advised the Foothill vice supervisor of a pyramid scheme meeting scheduled for that evening at a roofing materials warehouse on Sheldon Street in Sun Valley, authorities said.
Four officers attended the meeting under the guise of wishing to become participants in the scheme, police said. The officers claim Bart solicited them by saying they could buy a square in the pyramid for $2,000.
During the meeting, about 50 participants were told that a participant had just won $16,000, the officers said.
After the initial meeting, three of the officers were invited to a subsequent meeting with Madigan, held July 7 in his office on Osborne Street in West Hills, authorities said.
The officers allege that they were also solicited by Madigan to join the pyramid during that meeting.
Instead, Madigan was arrested and booked at the Foothill Division station.
Bart and Madigan are scheduled for arraignment Dec. 27.