Senate Bill sb2648

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    Florida Senate - 2005                                  SB 2648

    By Senator Garcia





    40-1602A-05

  1                      A bill to be entitled

  2         An act relating to pyramid promotional schemes;

  3         amending s. 849.091, F.S.; deleting a provision

  4         declaring pyramid sales schemes to be a lottery

  5         and providing a criminal penalty for

  6         participating in such schemes; creating s.

  7         849.09105, F.S.; providing definitions;

  8         prohibiting establishing, promoting, operating,

  9         or participating in pyramid promotional

10         schemes; providing limitations; providing

11         construction; preserving the Attorney General's

12         authority to bring certain actions; authorizing

13         the Attorney General to issue certain orders,

14         bring certain actions, and impose certain civil

15         penalties; requiring notification of persons

16         named in certain orders to a right to a

17         hearing; providing for waiver of such right

18         under certain circumstances; providing

19         requirements for such orders; providing for

20         granting certain injunctions, restraining

21         orders, or writs of mandamus under certain

22         circumstances; providing for appointment of a

23         receiver or conservator for certain purposes;

24         authorizing a court to enter certain additional

25         orders for certain purposes; prohibiting a

26         court from requiring the Attorney General to

27         post a bond; requiring the Attorney General to

28         collect certain costs and attorney's fees in

29         addition to fines and penalties; providing

30         criminal penalties; providing an effective

31         date.

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    Florida Senate - 2005                                  SB 2648
    40-1602A-05




 1  Be It Enacted by the Legislature of the State of Florida:

 2  

 3         Section 1.  Section 849.091, Florida Statutes, is

 4  amended to read:

 5         849.091  Chain letters, pyramid clubs, etc., declared a

 6  lottery; prohibited; penalties.--

 7         (1)  The organization of any chain letter club, pyramid

 8  club, or other group organized or brought together under any

 9  plan or device whereby fees or dues or anything of material

10  value to be paid or given by members thereof are to be paid or

11  given to any other member thereof, which plan or device

12  includes any provision for the increase in such membership

13  through a chain process of new members securing other new

14  members and thereby advancing themselves in the group to a

15  position where such members in turn receive fees, dues, or

16  things of material value from other members, is hereby

17  declared to be a lottery, and whoever shall participate in any

18  such lottery by becoming a member of, or affiliating with, any

19  such group or organization or who shall solicit any person for

20  membership or affiliation in any such group or organization

21  commits a misdemeanor of the first degree, punishable as

22  provided in s. 775.082 or s. 775.083.

23         (2)  A "pyramid sales scheme," which is any sales or

24  marketing plan or operation whereby a person pays a

25  consideration of any kind, or makes an investment of any kind,

26  in excess of $100 and acquires the opportunity to receive a

27  benefit or thing of value which is not primarily contingent on

28  the volume or quantity of goods, services, or other property

29  sold in bona fide sales to consumers, and which is related to

30  the inducement of additional persons, by himself or herself or

31  others, regardless of number, to participate in the same sales

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    Florida Senate - 2005                                  SB 2648
    40-1602A-05




 1  or marketing plan or operation, is hereby declared to be a

 2  lottery, and whoever shall participate in any such lottery by

 3  becoming a member of or affiliating with, any such group or

 4  organization or who shall solicit any person for membership or

 5  affiliation in any such group or organization commits a

 6  misdemeanor of the first degree, punishable as provided in s.

 7  775.082 or s. 775.083. For purposes of this subsection, the

 8  term "consideration" and the term "investment" do not include

 9  the purchase of goods or services furnished at cost for use in

10  making sales, but not for resale, or time and effort spent in

11  the pursuit of sales or recruiting activities.

12         Section 2.  Section 849.09105, Florida Statutes, is

13  created to read:

14         849.09105  Pyramid promotional schemes prohibited;

15  penalties.--

16         (1)  For purposes of this section:

17         (a)  "Appropriate inventory repurchase program" means a

18  program by which a plan or operation repurchases, upon request

19  and upon commercially reasonable terms, when the salesperson's

20  business relationship with the company ends, current and

21  marketable inventory in the possession of the salesperson that

22  was purchased by the salesperson for resale. Any such plan or

23  operation shall clearly describe the program in its recruiting

24  literature, sales manual, or contract with independent

25  salespersons, including the disclosure of any inventory that

26  is not eligible for repurchase under the program.

27         (b)  "Commercially reasonable terms" means the

28  repurchase of current and marketable inventory within 12

29  months from the date of purchase at not less than 90 percent

30  of the original net cost, less appropriate set-offs and legal

31  claims, if any.

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    Florida Senate - 2005                                  SB 2648
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 1         (c)  "Compensation" means a payment of any money, thing

 2  of value, or financial benefit conferred in return for

 3  inducing another person to participate in a pyramid

 4  promotional scheme.

 5         (d)  "Consideration" means the payment of cash or the

 6  purchase of goods, services, or intangible property. The term

 7  does not include the purchase of goods or services furnished

 8  at cost to be used in making sales and not for resale or time

 9  and effort spent in pursuit of sales or recruiting activities.

10         (e)  "Current and marketable" excludes inventory that

11  is no longer within its commercially reasonable use or

12  shelf-life period; was clearly described to salespersons prior

13  to purchase as seasonal, discontinued, or special promotion

14  products not subject to the plan or operation's inventory

15  repurchase program; or has been used or opened.

16         (f)  "Inventory" includes both goods and services,

17  including company-produced promotional materials, sales aids,

18  and sales kits that the plan or operation requires independent

19  salespersons to purchase.

20         (g)  "Promote" means contrive, prepare, establish,

21  plan, operate, advertise, or otherwise induce or attempt to

22  induce another person to participate in a pyramid promotional

23  scheme, including a pyramid promotional scheme run through the

24  Internet, e-mail, or other electronic communications.

25         (h)  "Pyramid promotional scheme" means any plan or

26  operation by which a person gives consideration for the

27  opportunity to receive compensation that is derived primarily

28  from the introduction of other persons into the plan or

29  operation rather than from the sale and consumption of goods,

30  services, or intangible property by a participant or other

31  persons introduced into the plan or operation. The term

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    Florida Senate - 2005                                  SB 2648
    40-1602A-05




 1  includes any plan or operation under which the number of

 2  persons who may participate is limited either expressly or by

 3  the application of conditions affecting the eligibility of a

 4  person to receive compensation under the plan or operation, or

 5  any plan or operation under which a person, on giving

 6  consideration, obtains any goods, services, or intangible

 7  property in addition to the right to receive compensation.

 8         (2)  No person may establish, promote, operate, or

 9  participate in any pyramid promotional scheme. A limitation as

10  to the number of persons who may participate in or the

11  presence of additional conditions affecting eligibility for

12  the opportunity to receive compensation under a plan does not

13  change the identity of the plan as a pyramid promotional

14  scheme. It is not a defense under this section that a person,

15  on giving consideration, obtains goods, services, or

16  intangible property in addition to the right to receive

17  compensation.

18         (3)  Nothing in this section may be construed to

19  prohibit a plan or operation, or to define a plan or operation

20  as a pyramid promotional scheme, based on the fact that

21  participants in the plan or operation give consideration in

22  return for the right to receive compensation based upon

23  purchases of goods, services, or intangible property by

24  participants for personal use, consumption, or resale so long

25  as the plan or operation does not promote or induce inventory

26  loading and the plan or operation implements an appropriate

27  inventory repurchase program.

28         (4)  The provisions of this section do not preclude,

29  preempt, or prohibit the Attorney General from proceeding

30  against any plan, operation, or scheme or any person involved

31  

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    Florida Senate - 2005                                  SB 2648
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 1  with such plan, operation, or scheme under any other provision

 2  of law.

 3         (5)  If it appears to the Attorney General that any

 4  person has engaged in any act or practice constituting a

 5  violation of any provision of this section, or any order under

 6  this section, the Attorney General may:

 7         (a)  Issue a cease and desist order, with or without

 8  prior hearing, against any person engaged in the prohibited

 9  activities, directing such person to cease and desist from

10  further illegal activities;

11         (b)  Bring an action in the circuit court to enjoin the

12  acts or practices to enforce compliance with this section or

13  any order under this section;

14         (c)  Impose by order and collect a civil penalty

15  against any person found in an administrative action to have

16  violated any provision of this section, or any order issued

17  under this section, in an amount not to exceed $10,000 per

18  violation per person. The Attorney General may bring actions

19  to recover penalties pursuant to this paragraph in circuit

20  court. All civil penalties received shall be deposited in the

21  General Revenue Fund; or

22         (d)  Bring an action in the circuit court under the

23  criminal laws of this state.

24         (6)  Any person named in a cease and desist order

25  issued pursuant to this section shall be notified of his or

26  her right to file, within 15 days after the receipt of the

27  order, a written notice for a hearing with the Attorney

28  General. If the Attorney General does not receive a written

29  request for a hearing within the time specified, the cease and

30  desist order shall be permanent and the person named in the

31  order is deemed to have waived all rights to a hearing. Every

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    Florida Senate - 2005                                  SB 2648
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 1  such order shall state its effective date and shall concisely

 2  state its intent or purpose and the grounds on which such

 3  order is based. Any person aggrieved by a final order issued

 4  pursuant to this section may obtain a review of the order in

 5  the circuit court.

 6         (7)  Upon a proper showing, a permanent or temporary

 7  injunction, restraining order, or writ of mandamus shall be

 8  granted and a receiver or conservator may be appointed for the

 9  defendant or defendant's assets. In addition, upon a proper

10  showing by the Attorney General, the court may enter an order

11  of rescission, restitution, or disgorgement directed to any

12  person who has engaged in any act constituting a violation of

13  any provision of this section or any order under this section.

14  The court may not require the Attorney General to post a bond.

15  In addition to fines or penalties, the Attorney General shall

16  collect costs and attorney's fees.

17         (8)(a)  Any person who establishes, promotes, or

18  operates a pyramid promotional scheme commits a felony of the

19  third degree, punishable as provided in s. 775.082 or s.

20  775.083.

21         (b)  Any person who participates in a pyramid

22  promotional scheme commits a misdemeanor of the first degree,

23  punishable as provided in s. 775.082 or s. 775.083.

24         Section 3.  This act shall take effect upon becoming a

25  law.

26  

27  

28  

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31  

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