Women warned about ‘gifting club’ pyramid scheme

By: K. Michelle Moran | Grosse Pointe Times | Published November 18, 2013

’Tis the season of giving and sharing, and unfortunately, some clever con artists apparently are taking advantage.

Grosse Pointe Farms Public Safety Director Daniel Jensen is warning metro Detroit residents — especially women — about a pyramid scheme that’s been making the rounds across the state, with several recent events in the Grosse Pointes.

Women are being asked to take part in what’s being billed as a “gifting exchange” event, he said. Victims are invited to a party at someone’s house, where everyone brings a dish to pass and some female entrepreneurs might be selling wares such as jewelry or pottery. But during the course of the event, Jensen said, participants are asked to “donate” money to one of the women in attendance because that woman has cancer or is in an abusive relationship or is facing some other dire threat. In exchange for their “donation,” and for recruiting more people into the “giving circle,” Jensen said participants are told they’ll get an unusually high rate of return on their initial “investment” gift.

While parties involving the purchase of items are legal and giving money to someone in need is legal, the organizers of these events have tweaked that formula to create a criminal enterprise.

“Women need to know that this is happening,” Jensen said. “A lot of these types of parties are legitimate. It’s when they want you to recruit people and they tell your money will grow in an inordinate amount of time that it’s a pyramid scheme.”

In classic pyramid-scheme style, the early participants make money by bringing new people into the pyramid, but at some point, as recruitment wanes, the later recruits find themselves not getting a return on their investments and being swindled out of whatever money they contributed in the first place.

These groups are billed as charitable endeavors and opportunities to support other women, but police say that’s just a ruse.

“The reason these are more prevalent now is because it’s the holidays and it’s easier to prey on people’s emotions,” Jensen said.

And the prospect of quick, easy cash preys on simple human greed, he continued.

Over the last couple of weeks, Jensen said there have been at least three such parties in the Grosse Pointes alone. Michigan State Police have been investigating similar incidents across the state, and these crimes have been reported all over the world. Farms Detective Bryan Ford said he became aware of this scheme through an article by the MSP. One of the state investigators has been working on a case for the last two years, Ford said.

“This is happening in the community, and (we want) residents to be aware of it,” Ford said.

Farms police learned about the local incidents through a couple of savvy residents who were invited to these parties and sensed something was wrong. Jensen said organizers will insist to participants that these events are legal, but anything involving the recruitment of others, the request of large sums of money and the promise of astronomical returns on those investments should raise alarm bells.

“If it (sounds) too good to be true, that’s probably the case,” Jensen said.

Grosse Pointe Farms women who believe they may have taken part in such an event are asked to contact the detective bureau at (313) 885-2100. Residents of other cities should call their local police department to file a report.

“Our goal is to prevent it from occurring,” said Jensen of his department’s efforts to alert the community.