The High Court’s Taichung branch yesterday found executives of a company in Miaoli County guilty of earning NT$7.9 billion (US$263 million at the current exchange rate) in estimated illegal profits by selling porcelain urns through a pyramid scheme.
The court sentenced Ching Yu Enterprise Co (慶云事業) chairman Chen Ching-yun (陳慶雲) and his wife, general manager Chou Shu-fen (鄒淑芬), to three years and two years in prison respectively, and ordered them to pay a fine of NT$50 million on top of their illegal profits.
The couple had been acquitted in the case by the Miaoli District Court, but were convicted for financial irregularities and illegal marketing practices by the Taichung court, which found they violated the Supervisory Regulations Governing Multilevel Marketing (多層次傳銷管理法).
Between 2009 and 2014, Chen and Chou advertised in central Taiwan that it was “easy to become a multimillionaire” by selling their white porcelain urns and funeral packages, investigators found.
An investigation was launched in 2014, after members complained that the pair had defrauded them of money.
Prosecutors said that the urns were sold through a pyramid scheme, in which members moved up the hierarchy by recruiting friends and relatives.
By October 2014, the company had signed up 100,000 members, selling 170,000 porcelain urns at NT$46,000 each, prosecutors said, adding that the urns were intended for human ashes, but members used them as flower vases, cooking pots and decorations.
Material and production costs were only NT$2,000 for each urn, or 4.3 percent of the sales price, investigators said.
People people had to pay NT$1,000 and buy up to three urns to join the scheme and would receive a NT$8,000 reward if they signed up new members, who in turn were enticed to pull in more members.
Investigators said they had attended the company’s meetings and found that Chen and Chou instructed trainers to tell those who signed up that they could move up the hierarchy very quickly.
The couple promised people who had recruited their own networks of new members that they could earn NT$6.5 million in no time, the investigators said.
Overturning the district court’s verdict, the High Court judges said the lower court had failed to take the company’s pyramid scheme into account when it described the case as sales transactions between sellers and customers.
The case can still be appealed.
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