People v. Knop

619 N.E.2d 203, 249 Ill. App. 3d 605, 188 Ill. Dec. 839, 1993 Ill. App. LEXIS 1309
CourtAppellate Court of Illinois
DecidedAugust 20, 1993
DocketNo. 2—91—1202
StatusPublished

This text of 619 N.E.2d 203 (People v. Knop) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
People v. Knop, 619 N.E.2d 203, 249 Ill. App. 3d 605, 188 Ill. Dec. 839, 1993 Ill. App. LEXIS 1309 (Ill. Ct. App. 1993).

Opinion

JUSTICE QUETSCH

delivered the opinion of the court:

After a bench trial, defendant, Edward Knop, was convicted of promoting a pyramid sales scheme (Ill. Rev. Stat. 1987, ch. 38, par. 17 — 7 (now 720 ILCS 5/17 — 7 (West 1992))) and was sentenced to two years’ probation. On appeal, defendant argues that the evidence did not prove him guilty beyond a reasonable doubt. We affirm.

In 1987, defendant founded and promoted BEK Marketing, Incorporated (BEK). On August 28, 1987, the State filed a complaint alleging that defendant knowingly offered to sell the right to participate in BEK, allegedly an unlawful pyramid sales scheme. Initially, the circuit court of Carroll County dismissed the charges on the ground that defendant acted in reliance on a judgment of the circuit court of Cook County holding that Unimax, Incorporated, on which defendant patterned BEK, was not an unlawful pyramid sales scheme. This court reversed the dismissal (People v. Knop (1991), 199 Ill. App. 3d 944), holding that the circuit court order was not an official interpretation of the pyramid sales statute and thus that defendant’s reliance on the order was not an affirmative defense to the charge (see Ill. Rev. Stat. 1991, ch. 38, par. 4-8(b)(4) (now 720 ILCS 5/4-8(b)(4) (West 1992))). The circuit court reinstated the charge and the case went to trial.

The State’s first witness was Dave Reed of the Illinois State Police. On August 19, 1987, Reed was relaxing off duty at Thulen’s Pub in Savanna. Several people, including defendant, were discussing forming a club to buy products and services. As attendance was light, they decided to reconvene on August 25.

At about 8 p.m. on August 25, Reed returned to the tavern. Present in a group were defendant, Beverly Knop (then defendant’s wife), and several other people. Reed listened as defendant lectured the group. Defendant stated that a person could join the buyers club for an initial fee of $50, representing $14 annual dues and $36 for the first month’s dues. Upon joining the club, each buyer would sell at least three new memberships for the same $50 fee. The proceeds would go to BEK. After selling three or more memberships, the buyer would be placed into the “matrix,” becoming eligible to receive monthly royalties at some future date. In turn, each of the original buyer’s recruits would sell at least three new memberships, repeating the original process. Reed’s understanding of the plan was that this process would repeat itself with “[e]ach of those three to sell three and so on to infinity, I guess.”

After he heard this much of the discussion, Reed sat down at the meeting. He expressed interest in joining and asked defendant if the plan was legal. Defendant said the plan was perfectly legal; it had been checked out in several States. Reed asked who would take care of financial matters, including his dues; defendant said that Beverly Knop handled all the books.

Reed requested information about the club. Defendant handed him a brochure. At trial, Reed identified State’s exhibit No. 2 as an accurate copy of this brochure. The brochure describes BEK Marketing as a subsidiary of BEK Enterprises, Incorporated. A page headed “Golden Opportunities, ‘Sweeping the Nation’ ” states that “Pre-Paid Legal Services assets exceed $44,789,000, Now that’s the kind of company you like to do business with.” A map shows in which States Prepaid Legal Services does business. Nothing in the brochure elaborates the relationship, if any, between Prepaid Legal Services and BEK.

The next section of the brochure is entitled “The American Dream Test.” This section informs a prospective member that joining BEK can save money and that the program “could give you $25.— $50 — $100. dollars [sic] or more for your $1 dollar [sic].” The “American Dream Test” asks “Do you think you could interest 3 or 4 friends or others to join the program? It is not a must that they join. It will help you if they do.” If the answer to the previous question is yes, “then I’ll show you the program.” After a member signed the program agreement, “I’ll go one step further — would you let the company give you a $20 dollar [sic] bonus every time you interest a person and they [sic] sign the program agreement?” The reader learns that if he has answered all the questions “yes,” he has passed the American Dream Test and is on the way to improve his life financially and to obtain “a chance to become financially independent.”

On the page after the “American Dream Test” is a schedule of seminars starting June 15, 1987, to “promote subscribers [sic]/ marketers/coordinators.” The seminars would be directed by BEK, officers of two Iowa businesses, and two “coordinators” from Prepaid Legal Services.

The next five pages of the brochure inform prospective members of the opportunity to save money from various wholesalers and manufacturers and to obtain tax-sheltered life insurance through a Free-port, Hlinois, firm. Under the heading “CLINTON, CAMANCHE” are reprints of advertisements from various businesses, including the Penthouse Restaurant, Dick’s Auto Sales, Wall Street Antiques, and Heritage Motors. Underneath each advertisement is the signature of a “New Subscriber.” The Savanna Moose Lodge is also listed as a “New Subscriber,” with its secretary providing the “New Subscriber’s Signature.”

Next in the brochure is a page informing prospective members that they can “save significant money” by buying from manufacturers and wholesalers through BEK. After explaining how the buyers club works, this page states:

“Our design is that our members, is [sic] realizing what a tremendous bargain their membership is, will want to tell others about BEK. Word of MOUTH is the best form of advertising. In recognition of this, BEK has designed a unique marketing plan that enables you to share in the success of BEK as you tell others about it. It’s easy as 1-2-3., Introduce three people to BEK and you’re on your way. This is what we call the MATRIX MARKETING PLAN. Your monthly bonus checks can eventually pay your membership fee and earn income.”

After reprinting merchandise advertisements from various sources, informing people that membership in Prepaid Legal Services could save them money (as it did for defendant), and advertising BEK’s purported new group medical insurance plan, the brochure moves to a one-page description of the “Multi-Level Marketing Plan 3 x 9 Matrix.” This page promises prospective BEK “Marketers”— those who sell subscriptions to the buyers club — of the bonuses that they can achieve by recruiting new members, who in turn would recruit new members, and so on further “downline.” There are nine levels or “generations” and a marketer’s bonuses increase with each level he reaches. The bonuses are summarized in a table entitled “GOAL TO EARN MORE and BUILD IT BIGGER Fabulous Bonuses.” The bonus schedule pays “6% on all 9 levels.”

Immediately above the table are the following lines:

“MULTI-LEVEL MARKETING PLAN 3x9 MATRIX
*Each marketer must sign in at least three people to qualify for the commissions.
*More than three AUTOMATICALLY goes in your down-line.

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Cite This Page — Counsel Stack

Bluebook (online)
619 N.E.2d 203, 249 Ill. App. 3d 605, 188 Ill. Dec. 839, 1993 Ill. App. LEXIS 1309, Counsel Stack Legal Research, https://law.counselstack.com/opinion/people-v-knop-illappct-1993.