expectation of getting anything in return, which is not the hook in these scams.
The way many gifting clubs work, participants, typically women, are invited to join a club of some sort. One club was called "Ya Ya Sisterhood" and another was the "Businesswoman's Networking Club." Some of them promote a charitable connection, and they usually claim they have the approval of the state Attorney General. To join, you have to make a cash gift to the highest-ranking members, those at the top of the pyramid.
In one gifting scam, participants gave cash gifts of $100 in order to move up through levels named freshman, sophomore, junior, and senior. There were ultimately six steps to the program, and the required investment ranged from $100 to $4,000. Once you completed the six levels, you needed to make a gift of $7,850 and you would receive a tax-free payment of $62,800.
Another gifting tree went by the name, "The Dinner Club." This group was organized according to the four courses of a dinner party. Eight people known as appetizers filled the bottom row of the tree. They had to pay five thousand dollars apiece to the dessert person at the top of the tree, in order to be seated at the dinner party. As new people joined, the bottom rung advanced to the "soup and salad" level and on to the "entree" rung before themselves becoming a "dessert". If you became a "dessert", meaning if enough people were suckered in to elevate you to that level, you were expected to receive $5,000 apiece from the latest crop of eight participants: $40,000. That's a $35,000 profit on their original gift. Most people, though, never get to the top and lose all their money. The crooks, though, always arrange themselves in the tree so they ensure that they get their gifts.
When you examine the mathematics, a pyramid scheme looks awfully tantalizing. If you're asked to send $10 to ten people, that's $100 you're out. But you add your name to the list of participants and get ten new people to join. They each send you $10, and you're back to even. If each of those ten recruits ten additional people, then the next level of the pyramid has a hundred people. You collect $1,000. Another round produces a level of a thousand people. You get paid $10,000. The next level grows to ten thousand people. You collect $100,000. One more round brings you $1 million.
The trouble is that in order to perpetuate these pyramids, more and more people must be recruited to feed those at the upper levels. Once the supply runs out, the pyramid collapses and the people at the bottom are out their money.
And that's why pyramids have to fail. The supply of people is not infinite. By the time one pyramid scheme reaches its eleventh level, assuming each new participant recruits ten new people, it will have exhausted the entire population of the planet. Plus, no new wealth is being created. Any money that one participant earns, another participant loses.
HANDICAPPING DEATH
The way a criminal thinks is, whenever something becomes popular as a legitimate investment is when it becomes a perfect candidate for an illegitimate investment. A case in point is what are known as viatical investments. The word viatical comes from the Latin viaticum, referring to the money and supplies given as traveling expenses to a Roman official when he departs on a journey. Viatical investments are, in essence, death futures.
A couple of decades ago, the idea was hatched of allowing terminally ill people a way to get money from their life insurance policies while they were still alive, to pay for needed medical expenses or to take one final vacation with loved ones. The way they work is that brokers arrange for investors to buy a certain percentage of the death benefits of the policies of the terminally ill, always leaving 20 percent or so for the estate. Someone given a year or two to live might have a $200,000 policy. For an investment of $100,000, investors might buy $150,000 of the face value. The ill person would get immediate cash and if he died soon, the investors would get a handsome return. How good a return, of course, depended on how well they managed to handicap death.
Policies that get viaticated are generally those of people diagnosed with AIDS, fatal cancers, and other catastrophic illnesses. It's something of a ghoulish business, but investors look on it as helping a sick person. And, of