New sports stadiums, constant downtown development, a gorgeous opera house—a booming economy has been kind to Seattle. Exterior gloss isn't the only proof, however. Beyond the feverish lure of online trading and the plethora of help wanted ads lies another golden prospect, one that's existed since the early 1900s but has drawn in thousands of converts since last spring. Yes, the pyramid scheme is back, this time specifically geared to attract women. And despite the threat of arrest, an Internal Revenue Service audit, or even broken family ties, it's estimated that over 5,000 women statewide belong to one pyramid—or "gifting group"—alone.
Gifting groups attract women who yearn for sisterhood along with their piece of the monetary pie. You can hardly blame them; the gatherings are organized like modern Tupperware binges or '80s-style lingerie parties gone upscale. They offer opportunities for mingling, sipping wine, and, best of all, making some quick cash. But with these types of pyramid groups, a lot more is at stake. The allure soon dissolves into a typical get-rich-quick fiasco in which the inevitable always happens: Novices lose money, and lots of it.
Meg (not her real name) was skeptical when her accountant invited her to a "women's charity meeting," even though the woman told her she'd made $40,000 in two months. "She was just so pushy about me coming to a meeting," Meg remembers. "I made her prove she'd made the cash, and she showed me a huge shoebox full of bills." In South Seattle, Meg entered a room of 75 women, most of them older and extremely wealthy "real-estate types."
"It was a total scam," Meg says. "The chart they showed us was a total pyramid. They're in such denial about what they're doing. They would sit there and tell me that if I gave money, I'd be helping other women get their own small fortune. It's a hard sell; these women are slick."
To join a pyramid group, a recruit must invest a flat fee, around $2,000 on average. Many groups call this a "gift," hoping to find a legal loophole. But by law, giving money with the intent to gain profit is an investment—which means it's taxable income. It's also a determining factor in whether a group qualifies as an illegal pyramid, which could bring up to 10 years in prison and a $2,000 fine.
Once in the pyramid, a person must convince eight other people to sign up, each donating $2,000. That bumps the recruiter up a level. Of the $16,000 collected, a small portion goes to the recruiter, while the majority goes to the members at the top of the pyramid. The upper echelon may cash out or reinvest when their "birthday gift" (highest-level gift) comes. But when the group cannot continue recruiting fresh faces for the bottom level—an inevitability, since a population is finite—the pyramid crumbles.
In the end, Meg didn't join. She saw women withdrawing thousands of dollars on their credit cards without telling their spouses or children. Some pyramid groups have been stagnant for months, while their members remain hopeful that they, too, can quit their jobs someday.
Why are these groups targeting women—and winning? Perhaps it's the camaraderie, or maybe just good old-fashioned gullibility. Attorney General's Office spokeswoman Janice Marich is appalled. "When you can justify stealing from family and friends, it's a sad state of affairs," she fumes. "These are not charities; give me a break. They are a truly vulgar operation designed to deceive. If you truly want to help, why not pick a real charity?"
In her five years at the Attorney General's Office, Marich has never seen pyramids as rampant as they've been in 1999. "Perhaps it's an indicator of good times," she says. Though the number of participants is impossible to track, her office receives a heavy volume of inquiries. But few come forward to file official complaints.
Seattle consumer rights attorney David Green says that's because people are reluctant to share their humiliation with friends, let alone their lawyers. And despite the state Consumer Protection Act, it's difficult to sue a pyramid overlord for monetary losses. "By the time you've lost your money, the trail is usually cold," Green explains. The underground status of pyramid meetings (which usually take place in private homes) makes it hard to investigate them.
In the end, Marich says pyramids take care of themselves. "The victims and the perpetrators are usually one and the same," she claims. Mathematically doomed, those who've received $40,000 have gotten each dollar from a friend of a friend of a friend, and when the collapse comes, only the top-level members get away unscathed. The rest languish, their investments and trust in shambles. Some sisterhood.