Friday, October 26, 2012

This Is NOT Ladies Night Out

The first time I heard my girlfriend mention the "Gifting Table," I thought she was planning a women’s conference or another fundraising event.
"The Gifting Table" is now the subject of a massive Federal Investigation. 
I was sitting nearby, working on my computer while she led a phone conference from the small desk in her living room. "Well, soup and salad is doing really well,” she explained to the other women on the call. "I think we'll get more women to come in if we just make more calls. Yes, right, it's all about the appetizers." I really didn't think much about it. The conversation and weekly meetings at her home, and the homes of her other "lady friends," seemed to be leading up to some important goal they were all working on together. She was genuinely enthused about the project and seemed to enjoy the constant work she was putting into it.

At the time, I didn't know that everything she and the other women were doing was illegal and the subject of a massive Federal investigation.

Long before the recent and initial arrests of well-to-do Connecticut women involved in the Gifting Table, the previously mentioned girlfriend explained to me that, "Tuesday night is for my ladies' group." It wasn't negotiable. It was every Tuesday and it was set in stone. "Like ladies’ night out?" I asked. "No," she said quickly. "It’s a women’s empowerment group. We get together to help one another and support women." Then she would go back to working on the talk she would give at that week’s meeting, emailing messages of encouragement and reminders to her group, or getting my advice on "The Question" the group would ask each week via email to spark discussion: "What title would a reality show about your life be called?" "If you could, what would you tell your 16 year old self?"

Fantastic! What a great way to network, share ideas, vent, and break through glass ceilings. Or so I thought.

During her frequent conference calls, one theme kept repeating itself: dinner preparations. Usually these conversations would happen around supper time. So the repetition of words like "appetizers," "soup and salad," "entrée," and especially "desert," made my mouth water. Something about that dessert sounded like it was going to be very special. One day I gave in and asked, "Am I going to this event you’re planning?"

She stared at me, bewildered. "What event?" she asked. "The one you keep talking about with the ladies and all the food," I said. "You keep mentioning appetizers and soups and salads and entrées and deserts, so I thought . . ." She held up her hand which, for reasons I can't explain, actually made me stop talking. "You're not supposed to know about that," she said sternly. "It's for women, not for men. I can’t talk about it. I've been sworn to secrecy. But, it's not an event. Just go on like you never heard anything and promise me you won’t mention it to anyone."

I started to protest because she was constantly on the phone talking about it right in front of me. "I don’t care what you heard," she said. "It’s my business and it has to stay that way. None of the other women tell their husbands or boyfriends about it either. The men know nothing and it has to stay that way or it won’t work."

Well that was awkward. Trying to lighten things up a bit I asked, "Is this a secret world takeover by women? Because if it is, you don’t have to hide it. Speaking for men everywhere, you can all just take control now. We’re done." She smiled and said softly, "We’re working on something."

Yes they were. Months later, after hundreds of phone calls and the ongoing Tuesday night meetings, I stumbled upon an alert from the Connecticut Department ofConsumer Protection. It warned of women getting involved in something called the "Gifting Table." What caught my eye was the mention of those same words, "appetizers," "soup and salad," "entrée," and "desert."

The alert explained that the Gifting Table is an "illegal pyramid scheme" which is defrauding women out of their money. With that one article all the pieces fell into place. Now, having been privy to so much inside information, I saw how the whole thing worked.

After the recent arrests of several Connecticut women involved in the "women's empowerment group," a statement by US Attorney DavidFein and IRS Special Agent William Offord, explained that the "Gifting Table is configured as a four-level pyramid, with eight participants assigned to the bottom row (called 'appetizer'), four participants assigned to the third row ('soup and salad'), two participants assigned to the second row ('entrée'), and one participant assigned to the top row ('dessert') . . . To join a Gifting Table, new participants were required to pay $5,000, typically cash, to the Dessert, that is, the participant occupying the top position on the pyramid. The $5,000 payment, which was fraudulently characterized as a gift, secured the new participant a position as an Appetizer on the bottom row. Participants moved from the bottom row of the pyramid and progressed through a Gifting Table by recruiting additional people to join. When eight new participants joined a Gifting Table, each having made a $5,000 'gift' to the person occupying the Dessert position at the top of the pyramid, the Dessert left the Gifting Table and kept the $40,000 paid by the eight new participants. That particular Gifting Table was then split, with the two participants occupying the Entree position on the second row moving to the top position (Dessert) of two new pyramids. The other incumbent members of the Gifting Table moved up a row on one of the two newly-formed pyramids, and the search for 16 new participants began. The success of the Gifting Tables depended on new participants joining and making the $5,000 'gift.'"

I immediately showed my girlfriend the Consumer Protection Alert. After reading it she rushed into another room and shut the door. She was on her phone and computer for a long time. I didn't hear anything until the next day. "Oh, this kind of bad publicity happens a lot," she told me. "It doesn't mean anything. The IRS has approved it."

Huh? "Well, what about your friends that you've brought in?" I asked. "Are they really going to make their money back?" She was adamant. "Absolutely."

From the conversations I had been hearing lately, she was riding high in the dessert level, receiving a Tony Soprano like envelope stuffed with $5000 cash every time a new woman joined at the appetizer level. The women would get together on Tuesday night and applaud the new member as she handed the cash over to my dessert girlfriend. "Do you report the income to the IRS?" I asked, knowing she was about to profit $35,000. "No," she said emphatically. "It's considered a gift so we don't have to report it. We’re just women trying to help each other. That’s all."

She was dug in deep. By that point, she had used one of the $5000 dessert payments she received to join another group. She was now a member of two Gifting Tables.

I was concerned for her and had a lot of questions. Why are members of the group keeping it a secret?  Why are new members instructed not to tell their husbands about the “investment” and to get the money from bank accounts or other sources that their men would not notice missing? Why are all the documents explaining how to run a Gifting Table kept locked away and only on paper, never electronically? Has no one looked beyond the deception and greed of the scheme to objectively see that the "Bernie Madoff" math of the thing can't work?

Eventually, the answers became obvious. As one of the recently arrested women said in an email to her Gifting Table friends, members must "keep silent and under the radar."

The truth is that schemes like the Gifting Table are illegal because they are mathematically impossible to sustain. And the bigger they get, the more unlikely it is that lower members will get their money back. According to the IRS 200 women in Connecticut - smart, accomplished, professional women with husbands and kids - have lost at least $1,000,000 because their "friends" recruited them into Gifting Tables.

What makes it even worse is that the Gifting Table creates a situation where women of merit are breaking lots of laws. Women at the dessert level, as US Attorney Fein stated, "enrich themselves at the expense of other participants. (They) use the pretext of 'Gifting Tables' as a way to avoid paying taxes on the substantial illegal proceeds of their scheme."

But it doesn't stop there. Remember all those phone calls and emails? Fein has gone on to charge these Connecticut women with "multiple counts of wire fraud." He explains that, "each of these charges carries a maximum term of imprisonment of twenty years," and that, "the charge of conspiracy to defraud the IRS carries a maximum term of imprisonment of five years. The charge of filing false tax returns carries a maximum term of imprisonment of three years."

Outside of those arrested, dozens of other "dessert" women in Connecticut are now on the Fed's radar. The US Attorney finished his statement warning that, "the investigation into this scheme and others like it in Connecticut is ongoing and will remain an important priority for my office and IRS Criminal Investigation."

So if you get invited to a "Women's Empowerment Group" featuring "appetizers," "soup and salad," "entrees," and especially, "dessert," watch your wallet and prepare your kids to talk with mommy through a glass wall.

To report financial fraud crimes, please visit the Federal Government's anti-fraud Website.

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