MMM Slips Tentacle Into Romania Trade

BUCHAREST -- Russia's notorious MMM pyramid investment scheme has arrived in Romania, just as the head of the country's own collapsed money-spinning pyramid fund faces the verdict of a fraud trial.


Local company Orion SA -- which promises spectacular returns on investments -- is linked to MMM, Radu Oprea, head of the markets unit at the National Securities Commission, said Thursday.


"Orion is a tentacle of MMM," Oprea said.


Orion advertises heavily in local newspapers for its redeemable notes but has escaped the local regulatory regime because the notes are not technically securities, Oprea said.


Although the notes carry the face of MMM founder Sergei Mavrodi, Orion denies he owns the Romanian company. Mavrodi was detained when MMM sank last year but now sits in Russia's parliament.


"The owners of this company are three Russians. It is not Mavrodi," Orion manager Mioara Ionescu said.


"Our Russian owners from Moscow gave us the tickets. They were printed by Mavrodi in London. We have never seen Mavrodi in person, only his face on the tickets," she said.


Critics said MMM was a classic pyramid scheme, using income from new investors to buy back shares from old investors at ever-rising prices. The game ended when investors stopped buying new shares and cash supplies dried up to buy old shares back.


Oprea said authorities feared the scheme could be another Caritas, the Romanian pyramid scheme which collapsed last year with $1 billion worth of deposits from 4 million Romanians.


Caritas boss Ion Stoica was to face judgment Friday in a fraud trial brought by the Transylvanian city of Cluj over a tiny fraction of the money lost in the Caritas morass.


Like Caritas -- which promised eightfold returns in the space of three months -- Orion advertises a 19 percent return on investments in 11 days. It says 10,000 lei ($5) invested on June 5 would be redeemable June 16 at 11,900 ($5.95).


With inflation running at 300 percent in 1993 and a spectacular fall in the leu currency since 1989, Romanians are avid seekers of high interest rates.


"We have warned the population," Oprea said. "That's all we can do. We can't do anything against Orion. Its activity escapes our control."


"We have to do something," Oprea said. "The danger is that people might lose confidence in securities trading."


Bucharest newspapers have pounced on the Orion story, calling it a "Russian-roulette" game for gullible Romanian investors vulnerable to get-rich-quick schemes in the post-communist era.


Bulgaria last month banned the import of the same coupons.