X-Ray has exposed how the reputations of some of Wales' most respected charities have been used by the organisers of an illegal pyramid scheme to lend an air of legitimacy to their activities, which involve people handing over thousands of pounds in a chain-gifting syndicate.
The programme reveals documents used to promote the scheme, as well as evidence that the charities' good names are associated with signing up.
People are scared to speak out against the schemes, which are gripping whole communities, for fear of reprisals when the pyramids inevitably collapse, but one Monmouthshire resident agreed to be interviewed if her identity was concealed. She told X-Ray reporter Jessie Swinburn that she and her family had felt harassed by people pressuring them to take part.
"My daughter's been approached by two different people, one for three thousand pounds and one for one hundred pounds. She was avoiding phone calls from a certain person just because she knew she was trying to get her to join."
The scheme, known as 'Key to a Fortune: The Give and Take Syndicate", is promoted to new members as a quick and easy way to make tens of thousands of pounds. X-Ray discovered that the scheme, which is thought to have begun in Bristol, arrived in Wales over the summer and rapidly spread through the south-east, becoming established in Monmouthshire, Caldicot, Newport and Caerphilly.
Recruits hand over £3,000 in cash and encourage two people to join behind them. The money is exchanged at clandestine meetings and promoters suggest that a return of over £20,000 is achievable once enough people are signed up, but schemes like this are banned under consumer and gambling legislation, leaving organisers and participants open to criminal charges.
Mathematicians estimate that 88% of people involved in a pyramid scheme will lose out. And because it is impossible to continually sign up enough members to sustain the payments, there will always be more losers than winners.
Trading Standards teams have warned it's illegal. Two pieces of legislation make chain gift schemes an offence: the Gambling Act of 2005, which came into force on 1 September 2007, and the Consumer Protection from Unfair Trading Regulation, passed by the House of Lords on 26 May 2008.
But there are concerns that the message is being ignored as organisers say that the system they've arranged has the backing of solicitors. Monmouthshire Trading Standards Manager Phil Glanville told Jessie that one of his team received a poison pen letter warning her to "keep her nose out" after she wrote an article highlighting the illegality of the scheme.
He told Jessie: "I can only assume it's because they're already in the scheme and they don't want it to collapse, because they think they are going to make money out of it. Bad publicity will drive people away."
As Jessie reports, no-one was prepared to publicly defend the system, although there is debate on internet forums where people are arguing the case for and against. Anonymously, people are prepared to defend its legality and to name charities which have received payments.
According to the evidence, organisers donate £600 from every payout pot to a registered charity and, as X-Ray discovered, the acknowledgement letters are presented to new recruits as evidence that the scheme is legitimate.
X-Ray discovered a number of prominent charities had received cheques totalling several thousand pounds from a group calling themselves "G&T Charity Group". Among them was Ty Hafan, the Children's Hospice in Wales.
Chief Executive Ray Hurcombe told Jessie, "Ty Hafan, as any other charity, lives on its reputation and we can't afford for our reputation to be tarnished by being involved in anything that is other than a legitimate fundraising activity. These cheques came to us completely unsolicited.
"It's completely reprehensible that somebody could use our good name without consulting with us, and if they had consulted with us, we certainly would not have endorsed this type of fundraising activity."
Other charities affected include the Noah's Ark Appeal at the Children's Hospital for Wales in Cardiff, who say they have returned the money and are "totally opposed to pyramid selling schemes and deplore the way in which they seek to legitimise their activities by donating to charities".
St David's Foundation Hospice said they are taking legal advice regarding returning the money and wouldn't want to comment further at this time. The vice chairman of Caldicot Youth Group resigned his position after they received payments from G&T Charity Group. The charity has since decided to return the money received.
Wales Air Ambulance said since the matter is under investigation by Trading Standards Officers, it would be inappropriate to comment further at this stage. They will now be working with their auditors and will conduct out own investigation and act appropriately upon those findings.
For some, pyramid schemes are synonymous with the "Hearts" and "Women Empowering Women" schemes which damaged communities in south west Wales in 2001. At the time people were concerned that friends and neighbours were turning on each other as the system inevitably collapsed.
Today's pyramid scheme members risk a criminal record as well as losing money and damaging relationships, but the fact that some of Wales' best-loved charities are being used to promote an unethical and illegal way of making money is the most outrageous aspect of the scheme.
Solicitors acting on behalf of "G&T Charity Group" contacted the programme to say that their clients refute the allegation that the activities of the Give & Take Charity Group are illegal. They say their clients are aware of Section 43 of the Gambling Act 2005 and before they began operating they took Counsel's opinion.
They say their activities involve the distribution of prizes amongst participants by the playing of games of chance at participants' homes to which the public do not have access , or through the winning of competitions. They say they've been operating since January and have made significant donations to 238 different organisations, including charities, schools and relief funds."
