Schemes targeting college students get smarter

Social Affairs

Published: 18 Mar. 2012, 23:30

Schemes targeting college students get smarter

Last year, the exposure of college students becoming victims of companies’ pyramid marketing schemes was big news. Now the schemes have evolved and are becoming more discreet.

After worrying about how to pay for his college tuition, one 23-year-old college student surnamed Kim was attracted to a position as a marketing assistant at a private language academy in May 2011. He was informed that he would get paid according to how many students he recruited to the academy.

Kim said he was told by the hagwon, “Fast profits are guaranteed and if you accrue a lot of points, you may become a regular worker,” so he took the position.

The hagwon also told him that if he invested 2.65 million won ($2,353), he would be paid higher wages. So Kim borrowed money from a bank introduced by the hagwon supervisors, then invested in the academy. But though he brought four to five students a month to the hagwon, he was only paid 80,000 won. Kim quit the job after two months and asked the hagwon to return the money he had invested in it. But he was promptly told, “If you can’t find someone to replace you, we cannot return it.”

“I still have a 1.4 million won loan that I haven’t been able to pay back,” Kim admitted. “I can’t even tell my parents, so I am very stressed.”

Since the summer of last year, police cracked down on companies employing the pyramid marketing schemes where new members are forced to buy thousands of dollars worth of useless items - usually after borrowing money from banks - and are then told to sell them.

The existing members would then share the profits. The workers are housed as cheaply as possible in prisoner-like conditions and brainwashed to believe they will someday be rich if they persevere through the hardship. Eventually, they are told to lure classmates or friends into the companies, who become the new, lowest-level slaves.

On Friday, 26-year-old Park and two other conspirators were detained by police for receiving 80 million won through luring college students into the pyramid marketing scheme. They had recruited 18 students through a job-search Web site, promising them “If you pay 5 million won, we will provide the rights to sell cell phones, and bonuses will be given depending on sales records.”

Now, companies have cleverly evolved their pyramid marketing schemes in order to evade the law. According to door-to-door sales regulations, companies need to register with the Fair Trade Commission first. Proving that a pyramid-scheme company is not registered is a direct means to prosecute them. However, gathering enough evidence is a difficult task.

Furthermore, these companies do not keep accounting books to conceal transfer of money from lower-ranking members to higher ranking members, and membership is not large enough to attract societal concern.

In the case of the language academy that lured college student Kim, the police began pre-investigation in November 2011 but eventually dropped the case due to lack of evidence.

By Lee Sang-ho, Hong Sang-ji [sarahkim@joongang.co.kr]