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Friday, January 25, 1991 - Page updated at 12:00 AM

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State Investigates `Dream-Home' Plan -- Callers Ask Attorney General Whether Secretive Program Is Pyramid Scheme

The state attorney general's office is investigating a new real-estate program that promises, ``You can buy your dream home, with no money down, no cash out of your pocket.''

Investigators say they have received numerous telephone calls from people asking whether the program is a pyramid scheme, which would violate state law.

The Tacoma-based program, Excel Exchange Inc., invites people to community meetings but insists they first sign statements promising not to repeat what they hear.

Attempts to attend and then report on the sessions for this article were stymied by that requirement.

At one meeting (a participant provided a tape recording to The Seattle Times), a company representative enthusiastically described how a home could be purchased even by people with bad credit or inadequate income to qualify for a mortgage.

An unidentified wealthy investor or investors, called ``Mr. Moneybags,'' actually buys the homes. The people who move into the homes buy them from the Mr. Moneybags by paying them off in 100 payments within a year.

The home-buyers can receive ``credits'' that substitute for payments by feeding more people into the system. Company representatives call these referrals ``brothers'' and ``friends.''

The first 16 referrals are worth three payments each. People recruited by those 16 are worth one payment each. If everybody recruits new people at the required rate, the home will be paid off with credits alone - no cash.

Before the home is paid off, though, the buyer must pay Excel Exchange 10 percent of the value of the house. The investor, Mr. Moneybags, also must pay a fee to Excel Exchange. It is unclear from the presentation exactly when or how these payments are made.

Excel Exchange is being marketed around Western Washington and as far away as Spokane. In a presentation, one speaker said the company plans to go national.

Excel Exchange calls its method the ``RLD Formula,'' which one representative said means Real Love Development or Real Live Dream. The initials also are those of the program's founder, Robert L. Darnall of Tacoma.

Darnall's system has been touted through word-of-mouth, fliers and telephone tape recordings, but there is no

way to telephone an office and speak to someone. Organizers have held up to five meetings in one day, and some of the meetings, held in schools, libraries and community centers, have drawn hundreds of people.

The speaker at one session said Excel Exchange organizers ``invite the closest scrutiny.''

``This is not a multilevel marketing program, but it is a program that works two levels down, by referrals,'' he said.

Assistant Attorney General Donna Fisher said the attorney general's office has received numerous phone calls from Seattle, Tacoma and Olympia. She said she could not discuss her investigation in detail because she was not sure what type of organization Excel Exchange is.

But, she said, ``we generally tell consumers that . . . if something sounds too good to be true, it probably is.''

Darnall did not return telephone messages and could not be reached for comment.

Excel Exchange's organizers say in presentations, ``We keep the attorney general's office advised of everything we're doing.''

Fisher said she received material on the program once. But, she added, ``we never give out approval . . . of businesses. It's not a function we provide.''

Investigators are examining whether Excel Exchange violates any provisions of the state Consumer Protection Act, including the law against pyramid schemes, Fisher said. A program is a pyramid scheme if it:

-- Requires people to make an investment to get in;

-- Rewards recruiters with money or something else of value;

-- Starts the same cycle with new recruits.

Fisher said she is not sure how Excel Exchange or investors (Mr. Moneybags) benefit if people walk away from the homes. Potential buyers are told they can move out of the homes with no financial loss. Investigators also wonder where the investors get cash to buy the homes, Fisher said. One speaker described a series of loans and investments Mr. Moneybags makes to get that cash but conceded in his presentation, ``People always say, `Where's the real cash flow in this?' '' Similar questions led some people to violate their promise not to repeat what they heard at the meetings.

``This game is designed to collapse,'' said Robert Moore of Seattle, whose friend asked him to attend a session and tell her whether it sounded legitimate. Even if it is not a pyramid, he said, he doubts the local real-estate market could supply the program's unending need for homes.

Excel Exchange was incorporated in November but has no registered agent (the original agent retired Jan. 8) and no listed board of directors. A toll-free telephone number triggers a tape announcing new meetings. The telephone line is often busy.

Still, organizers warn people at the meetings not to share details with friends, because the friends might ``close their minds to it'' before attending a meeting.

``Someone might complain to the attorney general's office that you're out there saying . . . anyone can have a free home,'' one speaker said. ``We can't let that happen, because this is too good, and we don't want you fouling yourself up and losing your opportunity.''

Copyright (c) 1991 Seattle Times Company, All Rights Reserved.

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