Profits that came from thin air

A "pyramid-style" selling scheme which involves no product was suspended by the High Court yesterday after a judge ruled it was an "unlawful lottery".

Sir Richard Scott said the venture run by German-based Titan Business Club was "highly unsatisfactory, highly suspicious and thoroughly undesirable". He ordered that no further "revivalist-style" meetings be held to promote Titan until the court hears a Department of Trade and Industry application to have the organisation wound-up.

The ruling means that a number of new investors could face losing their initial payment of pounds 2,500. Last night one of the Chancellor of the Exchequer's senior economic advisers said he was being paid to restructure the scheme which was introduced to Britain last October. Professor Patrick Minford, one of the "six wise men" who advise the Treasury, said he thought the "snowball plan" run by Titan and which has 9,000 United Kingdom investors could be run on a sustainable basis.

SHV Senator of Hamburg, which runs the venture, said it will be appealing against the ruling. Its lawyer Charles Bucklety said it was an "excellent" scheme which was pioneering a new form of investment.

The Titan programme involves an initial investor laying out pounds 2,500 in cash - though this is rising to pounds 3,000 - once he or she is accepted by a management meeting. The original investor makes money by persuading another person to join. For the first two successful referrals the investor receives pounds 450 each, but for a third person the investor steps up to the status of "senior partner", or "wholesaler", and is paid pounds 450, plus pounds 770. The remaining money - pounds 1,280 - goes back to Titan and its senior staff.

For each of the people persuaded to join who then persuades someone else, the initial investor will receive pounds 770 - which is how investors are supposed to make their profits.

Sir Richard said that Titan was bound to fail one day and those last to join would lose their money. The judged added that he was bound by legal precedent to rule that the scheme was a "lottery" because of its snowball nature and conceded that there had been no fraud or swindle of the public. But despite his concern over the scheme, it would be wrong to appoint a provisional liquidator as the DTI had also sought.

Many investors last night said they were "devastated" by the verdict. Dec Cluskey, of the 1960s chart-topping pop group the Bachelors, said later: "A lot of showbusiness `names' are now members and we love it. Today's judgment is a great pity. I think Titan is one of the best entrepreneurial schemes I have ever seen."

Another investor, a management consultant who wished to be known only as Mr Hussain, said: "There is a great deal of skill in keeping in touch with all your junior partners. We are all professional people ... who are being denied one of the best opportunities to make money to come to this country."

Last night the Liberal Democrat MP David Rendel, who described the scheme as an "iniquitous pyramid-selling scam", welcomed the ruling and said he hope the scheme would be wound up soon.