COMMERCIAL Crime Bureau officers and the Consumer Council are looking into the operation of one of Hongkong's lucrative pyramid selling organisations, following an investigation by the Sunday Morning Post. During the four-week investigation into Study Methods International, a reporter posed as a potential employee after learning the company was using misleading advertising schemes to lure individuals into trick interviews for jobs that did not exist. Applicants would schedule interviews for advertised positions - such as public relations executive, marketing executive and even professor - only to be later asked to spend $39,000 to buy the right to sell a study course. ''It works every time,'' said Ms Nita Sakhrari, a newly-recruited licensee to SMI. ''That announcement is always in the newspapers, it's been there for over six months, and there are absolutely no positions available. The second they find out you're not interested in buying the $39,000 licence, and truly interested in a full-time position, they suddenly want nothing to do with you.'' During the one-hour ''interview'' - attended by about 20 applicants - no information was given about the jobs, the interviewees were not asked to reveal personal backgrounds and resumes were not collected. Mr Mark Knight, a civil servant at Police Headquarters, was one of many to fall victim to the Study Methods scheme. After going for an ''interview'' for an advertised teaching position, Mr Knight wrote a letter of complaint to the Labour Department, saying ''after blatantly false advertising . . . this company enticed qualified and experienced individuals on false premises to attend a presentation that we did not know about . . . with false information of high part-time salaries''. During the meeting, interviewees are told they can easily earn about $100,000 per month. Buying the $39,000 licence gives ''licensees'' the right to sell the Study Methods product. This is a $8,500 learning course, including study cassettes and booklet, which teaches individuals how to improve their reading, concentration and memory skills. Within private operations of the company, participants adhere to a highly complex system of commission networking, which is infinitely profitable for those members at the top of the pyramid. Under the present ordinance - Chapter 355 Pyramid Selling Prohibition of 1980 - companies are strictly prohibited from pyramid selling if all characteristics of the ''pyramid selling scheme'' are proven. But, according to an internal Government report, Hongkong's legal system is ineffective at stopping this controversial system of sales, which is strictly deterred in other jurisdictions. The report warns: ''The existing Pyramid Selling Prohibition Ordinance, Cap. 355, has proven totally ineffective in combatting undesirable schemes operating in Hongkong - which are designed to obtain money from young and gullible members of the public - because these schemes do not fall within the definition of a 'pyramid selling scheme' under that Ordinance.'' Chief Inspector Kenneth Reed, of the Commercial Crime Bureau, said although he considered SMI to be pyramid selling, proving all the stipulations necessary for prosecution would be difficult. As outlined in the report, operations which fall within the definition of a pyramid selling scheme have been able, through minor changes to the schemes, to avoid being trapped by the Ordinance. ''As a result, there has not been a solitary prosecution under the Ordinance since its inception and undesirable schemes continue to operate unabated, despite regular complaints received by the CCB,'' the report said. The report contained an official proposition the Ordinance be repealed and the British model be adopted in part. Regarding the company's advertising, Chief Inspector Reed was equally frustrated. ''We can't do a thing about that. False advertising in Hongkong is perfectly legal,'' he said. According to an international arbitration law firm in Hongkong, which spoke on condition of anonymity, Study Methods was in clear violation, even under the present Ordinance. But, as Chief Inspector Reed said, the problem in pursuing a prosecution lay in the wording of the Ordinance. ''As far as the first part, we've got them. But once you get down to the second part of the Ordinance, proving the pyramid selling scheme becomes really difficult,'' he said. An SMI licensee who brings in other individuals as licensees receives a percentage of the $39,000 licence fee. If the new recruit in turn brings in another individual, he or she will get the commission, while the original licensee will also receive a percentage as an indirect commission. With no written rules or regulations to define this complex pyramid, inside payment schemes become tangled. ''Don't say anything, but you can receive $2,000 if you send in your friend if she buys a licence,'' said Ms Ivy Chan, a licensee and full-time employee, to the reporter posing as a client. Ms Ivy Lam said Study Methods employed a ''follow-up'' scheme, with all going through the learning course. ''What happens is I call my past clients who have taken the course, and I kind of let them know they can make money if they refer other people to me. For instance, I had a teacher take the course, and now she sort of works for me, recruiting all her students to the Study Methods courses. Each time she sends someone in, she makes me and herself a commission.'' The company, which was set up less than two years ago, has a large office in Causeway Bay's Windsor House, and is expanding to a second office. ''We are currently looking at additional office space in the Causeway Bay area. Our second office needs to be about double the size of the existing one because we are really crowded here,'' said Mr Jeremy Du Mughn, sales manager of Study Methods. ''We are even in the process of setting up offices in Macau and Taiwan. The Taiwan office should open by the end of May,'' said Ms Pauline Tong, Study Methods' office manager. ''Along with our sales manager, Jeremy, five other licensees came over from South Africa to test the potentiality of Hongkong's market. In the beginning, they were working from their rooms at Hongkong's Hilton hotel. It didn't take long for them to realise there was an incredible market here for our services,'' she said. When told the company was being investigated by the Sunday Morning Post, Ms Tong said: ''I do not agree that we are pyramid selling. We have a simple two-step method. As for false advertising, let me explain. Right now we are advertising for a marketing position, when we really don't have the post. But if we ever meet the right candidate, then we will create the post. We stress the importance of joining as a licensee because we want to be fair and let people make a lot of money.''