OREGON LIVE: State Takes Action Against Alleged Gifting Pyramid

OregonLive (The Oregonian) is reporting that the state has taken action against participants in an alleged cash-gifting pyramid scheme.

Like recent cases in Connecticut and Michigan, the Oregon case involves women. The paper is reporting that four naturopathic physicians were involved in the scheme. One of them was ordered to pay a fine of $15,000 and make restitution.

From The Oregonian (italics added):

A letter from the attorney general’s office warned Abundance members that their involvement could run afoul of the Board of Naturopathic Medicine. “A doctor’s solicitation of patients to join a pyramid club can result in discipline by the state board,” the letter said.

Read the story in The Oregonian. (The reader comments below the story also are well worth reading.)

Read the state’s warning on cash-gifting pyramid schemes.

A snippet (italics/bolding added):

Many Oregonians are being defrauded by unlawful pyramid schemes operating under the guise of so-called “gifting clubs” such as the Dinner Club or Women’s Empowerment Network. These “clubs” are elaborate scams designed to make money for a few at the expense of many.

The promoters of the scheme claim that IRS regulations allow people to “gift” one another up to $10,000 per year tax free. For example, persons are asked to pay $5,000 to enter at the bottom of the pyramid or “tree” along with others. As these people encourage others to join the club, they rise on the tree to the top position, where the total amount collected from “gifts” is $40,000, a $35,000 profit. Often, people at the top re-invest another $5,000 and start the process anew.

Each of the eight persons just entering the tree delivers his/her $5,000 “gift” directly to the person at the top of the pyramid. This also helps convince new players that they will eventually receive a $35,000 return on their “gift.”

These schemes are doomed to failure. Each “tree” involves 8 persons who “gift” $5,000 each. The person at the top of the tree gets $40,000 and the other 7 people hope that enough players come on board to push them to the top. For each person at the top, there are 8 people who are likely to lose their investment and the chance of a big “payoff.” Eventually, these schemes collapse because they run out of prospective participants.

No matter what the promoters may tell you, gifting clubs are illegal. They are unlawful pyramid schemes. Gifting clubs and pyramids have not been approved by the Oregon Attorney General, local district attorneys, or the Division of Finance and Corporate Securities. Operating or participating in a pyramid scheme violates Oregon’s Unlawful Trade Practices Act, which imposes civil penalties of up to $25,000 per violation.

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