Introduction
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| Arlan Galbraith, head of Pigeon King International, a Ponzi scheme that victimized 1000+ farmers of over 20 million dollars. (credits: CTV) |
Initially Galbraith claimed that the pigeons are to be sent to the Middle East as racing pigeons. And millions of dollars had already been invested with Galbraith's operation. Many of those recruited were Amish farmers.
Individual investors not only paid Galbraith for the "breeding stock" (for hundreds of thousands of dollars), they also spent large amounts of money, 100K or more building the barns to house the pigeons being bred. It is believed that over 1000 breeders have dealt with Galbraith, and the largest investor put in over 1 million dollars. Total money invested is believed to be about 20 million.
Dave Thronton of CrimeBustersNow started raising the alarm in September 2007, calling PKI a Ponzi scheme. His warning was not heeded, and he was in return, accused of operating "extortion front".
Initial Suspicions
Real trouble started in December 2007, when Better Farming magazine (covering Ontario Canada farmers) featured PKI in an article and raised some serious questions. Within two weeks, US State of Iowa Attorney General's office issued a warning that PKI may be fraudulently offering a business opportunity. Galbraith's answer can be summarized as "I didn't want to do business in that state any way." In the next several months, multiple US states also banned Galbraith.
Sometime in 2007 or 2008 Galbraith's story about where the birds are going changed to "we're selling the pigeons to Asia as food squabs". Sometime during 2007/2008 Galbraith also offered "rural economic contract" investment that promises to pay back 18% annually, further raising suspicions.
Collapse of PKI
All these investigations and warnings had its effect. New enrolles stopped coming. In June 2008, Galbraith filed for bankruptcy and PKI also declared bankruptcy, along with a feed supplier company also controlled by Galbraith. Galbraith admitted that he had no market lined up for the pigeons, and all the pigeons he paid for were paid with money from the existing investors. Thus proving beyond a doubt Galbraith operated a Ponzi scheme.
Galbraith told all the breeders that they are on their own: do whatever they want with the birds. This lead to a raid on PKI headquarters lead by the SPCA for fear that Galbraith will let all the pigeons starve to death. SPCA provided some feed while urged various Ontario farmers to euthanize the birds, and $90K was spent in Ontario to do so. No figures were available in other areas.
One thousand breeders across 14 US states and 4 Canadian provinces have barns full of pigeons that are useless. Police initially had no idea how to proceed, and kept insisting there's nothing criminal to investigate, and they are willing to let the civic procedures (bankruptcy and all that to proceed). However, the outcry was so loud, CBC did a special report in November 2008.
The TV investigation galvanized police into action. Criminal case started in January 2009, and it took police investigators another 12 months (January 2010) to finally conclude that it really is a Ponzi scheme. Some of the victims initially were hesitant to help the police as they fear it may jeopardize their chances of recovering some of the money through PKI and Galbraith's bankruptcy proceedings.
Galbraith blames "fear mongers" for spreading lies about him and his business. He claims he was building a processing plant for the squabs and it would have been ready in a few years. However, since he had no outside sales and no firm contracts for the pigeons (or squabs, depending on which version of the story you heard), but is merely moving the money around, it is a Ponzi scheme. His former protegee (a salesman) claimed that Galbraith never considered the squab idea seriously, and it's all propaganda.
Galbraith was formally charged with fraud and bankruptcy fraud in December 2010. Authorities have revealed that Galbraith sent a lot of money to other companies that he controlled before the bankruptcy filing. However, the other cases have yet to be resolved, and it is STILL pending in court as of June 2012.
In 2010, 60 Minutes also profiled the PKI case (albeit, somewhat short) as its coverage on Ponzi schemes.
What were PKI's warning signs?
The PKI had multiple warning signs during its operations:
1) The product has no real market
Pigeons raised for meat are very different breeds from pigeons raised for racing or other purposes, much like your typical Thanksgiving turkey is bred to have huge breasts compared to a "heritage bird" (which is more... naturally proportioned). People did not study the market for birds, thinking all pigeons are alike. They are not.
The market *sounds* reasonable, but a closer study would have shown that real market for such birds does not exist.
2) The "business model" doesn't make sense.
What sort of business would sell you a pair of breeding pigeons for up to $500, then buy back hundreds, perhaps THOUSANDS of offsprings for up to $50 each, every week, for period of TEN YEARS? Why doesn't he do the breeding on his own, if he has the market? What can YOU do, that he can't?
Judging from this, the only thing you have that he wanted is YOUR MONEY.
3) Money circulation / entrepreneurial chain
As there is no market for the product, the participants are basically paying each other, with Galbraith as the sole perpetrator and organizer. Just trace the money. Add the two together, and it's a Ponzi scheme.
One thing makes PKI unique: PKI is a Ponzi scheme that was presented as a business opportunity, not an investment. However, if you trace the money, you realize that the pigeons are used as a money transfer mechanism.
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ReplyDeleteI gave you some additional info about the financial side of the story in ...
ReplyDeletehttp://www.realscam.com/f17/any-one-have-historical-stuff-pigeon-king-international-1394/index4.html#post64825
I used that forum thread since it INITIALLY asked for that type of info. :)
Quick note: I just realized that Arland Galbraith was sentenced to 7 years in March 2014. FINALLY!
ReplyDeletehttp://www.betterfarming.com/online-news/pigeon-king-sentenced-more-seven-years-55247