Multimillion-Dollar Scam Exploits Women

Nov. 1, 2002 -- They call themselves Women Helping Women, but prosecutors say they should be called Women Fooling Women.

So far, eight Sacramento, Calif., residents, including soccer moms and grandmothers, have been charged with felony fraud, accused of operating a pyramid scheme that authorities believe cheated as many as 10,000 women out of thousands of dollars each.

"They preyed on friends and friends of friends for their own wealth," said Sacramento Deputy District Attorney Mary Simmons. "They got wealth and wealthier from this scheme from people who could ill afford to invest in it."

Dangerous Dinner Parties

According to authorities, the Sacramento group invited women to so-called dinner parities in local shops and suburban homes and promised them the opportunity to make big money.

"You went to a house, there was dinner, there was guests," said Shelby Weigant, one of two sisters recruited by a trusted friend. "It wasn't like behind a shack with some man in a trench coat. It's a home with other women that have kids and have families."

At the parties, new participants were shown a chart and offered an opportunity to buy in at the "appetizer" level for $5,000 each.

As new members joined, the women were told they would be bumped up the chart, course by course, until they reached "dessert." At the point, they were told they would become the "birthday girl" and receive up to $40,000.

Against the Odds

But, coming as no surprise to pyramid experts, new members never moved beyond the "soup or salad" level and never received the big cash payoff.

"The odds are predetermined from the beginning that 90 percent will lose," said Robert Fitzpatrick, president of Pyramid Scheme Alert, an organization that monitors these fraudulent programs, and co-author of the book False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes . "It's a massive transfer of money from the losers to the perpetrators."

Eight women investing at the bottom of the pyramid would have to recruit eight times that number, or 64 women, to get the payoff. Those women, in turn, must recruit 512 new people. The numbers keep climbing exponentially until investors dry up and the pyramid crumbles.

"They're very smart women who started this," said Weigant. "They got all this money and people like us, innocent people, are now without money."

Fraud Within a Fraud

That unsustainable structure is what makes pyramid schemes fraudulent. But, authorities here say the "dinner parity" pyramid was a fraud-within-a-fraud, because organizers were allegedly manipulating the results.

Police say the organizers were enjoying more "birthday" payoffs than the other members.

"In one case, 15 birthdays in a six-month period," said Sgt. James Lewis of the Sacramento County Sheriff's Department, "which is a pretty significant amount of money."

The women charged in the case maintain other women who assured them it was legal sold them on the program.

"To their way of thinking," said Bill Portanova, the defendants' attorney, "they were involved in nothing more sinister than a man's poker game."

Prosecutors, who fear such schemes could be in every state by now, hope a few felony convictions in this case may discourage other victims from being seduced by such appetizing offers.

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