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Window Manager
Brian Livingston
Browser, beware: PayLine's scheme promises headaches, not fat payments

INTERNET SURFERS, BEWARE: A new Web site is signing up thousands of members at $200 each, even though its promises are financially impossible. ThePayLine.com pledges that members will receive free airline tickets to any destination in the world and that 50 percent of the company's revenue from newer members will be paid out to older members as "commissions" (see www.thepayline.com).

Double or nothing. Applicants first enroll by submitting their e-mail addresses. They must then pay $200 to become members. But under PayLine's policies, payers are entitled to no benefits until they become "qualified" members by persuading two other people to buy in.

Newer members, by definition, always begin as "unqualified" members. Mathematically speaking, this means that more than 50 percent of PayLine's paid members (at any given point in time) are entitled to nothing.

Inevitably, the number of people who are willing to pay for new memberships will be exhausted. When that happens, the majority of members will be left empty-handed.

Money from thin air. In a telephone interview, PayLine's president, Richard Robles, stated that more than 100,000 people have enrolled by providing their e-mail addresses to his Web site.

To get benefits, an enrolled party must send $200 within two weeks of the site's Feb. 15 launch. Let's say only half, or 50,000, of those who enrolled actually pay. PayLine's owners receive $10 million in revenue.

As you recall, no more than half of the paying members are ever qualified at any given time. PayLine would (in theory) pay out $5 million in commissions to as many as 25,000 qualified members.

The PayLine site promises you a commission, "up to $500 per day," for every member who pays after you enrolled. But more than 50 percent of all paying members, being unqualified, would receive nothing.

Miles to nowhere. On top of the commissions, PayLine claims that it will credit qualified members with one airline travel mile for every new, paid membership after you enroll. "Every membership" includes not just people you recruit but every PayLine member who sends in money.

PayLine claims that its travel miles will be redeemable for actual airline miles.

Let's assume that 50,000 people pay and 25,000 of them become qualified members. These 25,000 members would supposedly earn the equivalent of 62,500 round-trip airline tickets between San Francisco to New York.

After paying commissions, PayLine would have $5 million in revenue left to buy 62,500 airline tickets. But it's hard to believe that the company could fulfill its obligations with only $80 per round-trip to spend.

In typical pyramid schemes, many participants lose money. In the PayLine deal -- because of its absurd payout promises -- it is likely that most members will receive absolutely nothing.

Asked about his figures, Robles said he can purchase airline tickets in blocks of 500 for about $200 each. He conceded that PayLine has no contracts with any airline carriers although the logos of several airlines are prominently displayed on his Web site.

Enrollees have received instructions to mail in their fees before March 1. But the address to which they're told to send the money is not an office. It's merely a private mailbox. And only nonrefundable forms of payment -- cashier's checks and money orders -- are accepted, not credit cards.

When asked about his true headquarters, Robles said, "The company's actually physically located in St. Kitts."

The island nation of St. Kitts and Nevis is a tax haven in the Caribbean. According to the Organization for Economic Cooperation and Development (OECD), an organization of 29 industrialized nations, St. Kitts is a "noncooperative country" that has weak regulation of money laundering (see www.oecd.org/media/release/nw01-11a.htm).

I recommend against mailing a cashier's check to that drop box or any like it.

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Go to www.iwsubscribe.com/newsletters and click Window Manager to receive this column every Monday, free via e-mail.


Brian Livingston's latest book is Windows Me Secrets (IDG Books). Send tips to brian_livingston@infoworld.com. He regrets that he cannot answer individual questions.



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