State authorities recently ended operations of Club Freedom, a direct mail pyramid scheme operated out of State College that allegedly took money from about 220 unknowing, recruited investors nationwide.

The scam, operated as a chain letter and pyramid club hybrid, was allegedly run by State College resident Dayton G. Sauerman and two Bronx, N.Y., residents, Ginger Normoyle and Neil Telafor, said Senior Deputy Attorney General, E. Barry Creany.

In a deal reached with the Bureau of Consumer Protection, the three organizers agreed to shut down operations by stopping further promotions and closing their State College post office box.

Kathy Punt, customer services supervisor for the State College Post Office, said the post office could not confirm the box was closed due to post office policy and privacy laws.

The operators agreed to pay about $49,000 to the individuals they enrolled in the scheme between November 2001 and March 2002, as well as $5,000 in penalties and costs to the state, Creany said.

In return for ending operations and paying $54,000 to consumers and the state, the organizers admitted no wrongdoing in the case. No one involved with the scheme was available for comment.

In this scheme, referred to as a pyramid, consumers invested $200 and were promised up to a $1,500 return, Creany said.

Organizers contacted and recruited individuals to the scheme using direct mail pamphlets. Consumers were asked to buy a place in a matrix of investors and promised a return on the money used to buy positions, Creany said.

The consumers who invested first were supposed to receive the money invested by new recruits.

"It was just one of those 'don't have to do anything to make money' schemes," Creany said.

Authorities first learned of the case in March 2002 when they received a letter from an individual who received a pamphlet but did not buy into the plan, Creany said. After reviewing the case, Creany's office determined the operation was illegal and fell into the jurisdiction of the Bureau of Consumer Protection, which is under the direction of Pennsylvania Attorney General Mike Fisher.

Since they learned of the scheme, the bureau has entered into an Assurance of Voluntary Compliance agreement with the organizers. This agreement is common in these cases because it brings a quick end to the schemes, said Sean Connolly, spokesman for the Office of Attorney General.

Creany said Telafor and Normoyle were the masterminds behind the pyramid, using Sauerman as a front.

He added that his office handles similar cases every one or two years.

Pyramid schemes are illegal under Pennsylvania law because it is impossible for all the people involved to get their money back, Connolly said.

"The pyramid scheme is illegal because those who organize it can initially reap some financial reward, but it is impossible to fulfill those promises because the pool of applicants dries up," he said.

Creany said consumers who buy into pyramid schemes are not totally innocent because they make a choice to join such plans.

"They are not your usual consumer victims," he said.