Dinner Clubs Pyramid Schemes
Dinner clubs use such euphemisms as "appetizer" and "entree" for levels of participation.
The pyramids which are misnamed as circles operate like this: The organizers portray the program as a progressive dinner party or birthday party. Eight people begin on the bottom rung as "appetizers" who contribute $5,000 each at a birthday party for the top person, or the dessert.
Between those levels are four soup-and-salad people and two entree people. Once the dessert person birthdays, or gets their $40,000, everyone moves up a notch: the entrees become desserts and split into two other tables, and eight more appetizers are needed for both tables.
Statistics show that only 10 percent of people who put up the money ever get a return. Once the pyramid reaches a certain stage, there are always too many people to be paid off, and the pyramid collapses. The key to the downfall of such schemes is that it eventually and inevitably requires about eight times more participants who put money in than actually receive it.
As if having a history provided respectability, they state that the plan originated 11 years ago in Toronto, Canada by a group of women to create money for charity. The concept was apparently so successful that the women realized they could use it to help each other. From Canada, the plan moved to Washington, then to Texas and beyond. It is now spreading across Great Britain faster than hoof in mouth disease.
Federal, state and local government officials say that not only are the various gifting circles illegal pyramid schemes, but as many as 90 percent of the overall members won't ever get "dessert", the top level in which participants can receive thousands of dollars beyond their initial investment.
Successful participants adamantly disagree.
Dismissing the possibility of personal gain on a large scale, participants insist that they give their $5,000 as gifts to offer psychological, spiritual and financial support and empowerment to other women. The schemes also purport to help charitable causes and women who are trying to escape an abusive husband or who have children with medical needs.
They say they have no expectation of one day being at the top, where they might be fortunate enough to have a "birthday" and receive their $40,000 dessert.
This is the reason the gifting circle is not a pyramid, they say. The group is about love and growth, the $40,000 payoff is incidental.
So whenever police issue an advisory stating the criminal aspect of the clubs and the potential of financial loss they are inundated with calls from residents insisting, often abusively, that they are participating in gifting clubs and not pyramid schemes, which are illegal.
"I believe in it and I am not going to stop doing it," one lady said. "So there, arrest me."
They're very convincing that this is just women helping women and it's nobody's business but theirs. They make it a very wholesome, good thing when in fact they're simply taking other people's money.