My response (along with HomeGuru):
This is, I'm sure, a "Pyramid Scheme". I did a little research. The following news articles describe and warn against "Gifting Programs" as mere illegal schemes to separate a fool and his money. You can make your own decision after reading the following:
Suspected pyramid scheme disbanded
Friday, September 24, 1999
THE ASSOCIATED PRESS
KENNEWICK -- The leader of a "gifting" club that Tri-Cities law-enforcement authorities are investigating as a possible illegal pyramid scheme has disbanded the operation.
Don Casey said he was sorry he ever became involved in the operation, called the Renewal Celebration.
"I'm guilty of being stupid," Casey said.
Casey, a 55-year-old church pastor who works for a Kennewick organization called the Society of Helping Hands, said he became overseer of the suspected pyramid scheme two days before police tried to shut it down Sept. 11.
He said he concluded that the club was "riddled with problems" after doing his own research.
He said he called Wednesday's news conference to publicly apologize to the Tri-City church community, and to warn people throughout the state to stay away from pyramids.
Kennewick police confiscated more than $51,000 from a Sept. 11 "gifting" meeting the Renewal Celebration held at a hotel.
Since then, the group has been under investigation by the Benton County prosecutor's office, Kennewick and Richland police, and the Benton County sheriff's department. No arrests have been made.
Club members estimate that there are a few thousand participants in the Tri-Cities.
Casey said he suspects he will be blasted by many in the organization who want it to continue.
Some Renewal Celebration members said they expect to continue in one form or another. A few members of the loose-knit organization said they believe Casey's about-face was part of an attempt to wrest money away from the club to benefit his organization, the Society of Helping Hands.
"No one is really behind him," said Connie Wormington, a club member.
Casey said some members don't want any accountability or oversight. He said his suggestion that more of the club's money be given to charity was met with opposition.
Members have described the operation as a way to pool their resources and give away the pot to needy farm laborers, young families and everyday folks saddled with high-interest credit-card debt.
Members usually join by contributing a $2,000 "gift." Some eventually might receive a $16,000 gift, although no one is guaranteed such a return.
A financial return depends upon members' ability to constantly recruit others to join. When recruiting slows, the pyramid can collapse, leaving those who joined the organization late the losers.
© 1999 The Associated Press.
Moore warns of pyramid schemes
JACKSON/Aug. 10/The Associated Press - Two pyramid schemes that promise winnings up to $16,000 in exchange for a $2,000 investment are illegal and don't pay off, Mississippi Attorney General Mike Moore said.
The so-called Dreamweavers and Private Gifting schemes have been offered by phone across the state recently, Moore said.
Both are no more than a trick to separate Mississippians from their wallets, he said.
''Although the first few might get $16,000, those on the bottom will have to lose their $2,000 for this to happen,'' Moore said in a written warning. ''It is just like the children's game of musical chairs. When the music stops, someone is going to be left standing.''
Moore said his office has been flooded with calls complaining about the schemes.
Participants are asked give a ''gift'' of $2,000. They get a slot on a board, which contains a tracking number. As other slots are sold, participants' numbers advance. Numbers at the top after a set time are supposed receive the payoff, according to Moore.
The schemes operate on the notion that gifts are untaxed and generate money that will be passed on to the participants.
''I can think of no one who would really consider the payment of $2,000 a gift,'' Moore said.
Pyramid scheme moving through Treasure Valley
Patrons are asked to pay $5,000 to attend dinner party for needy women
Associated Press
BOISE -- The Attorney General's Consumer Protection Unit is warning Idaho consumers to avoid what appears to be an illegal pyramid scheme that is moving through the Treasure Valley.
The scheme is known by the names "Circle of Friends," "Women Helping Women," "Women Empowering Women" and "Women for Women." It is set up as a dinner party where women are invited by friends or acquaintances to attend a party that purports to provide gift money to women in need.
They are told that if they give $5,000, they'll be seated at the "appetizer" level. The women are also told that if eight more women agree to come to the next party, the first group will advance to the "soup/salad level." Once a third group of eight women again fills the appetizer level, the original women are told they will move to the "entree level."
Finally, the women are told that if still another eight women join the "appetizer" level, the initial women will progress to the dessert level and receive a "birthday gift" of $40,000.
To continually fill the appetizer level, the partygoers are encouraged to invite other friends and acquaintances to attend the parties.
Several women have reported to the Consumer Protection Unit that they were instructed to bring the $5,000 in small bills to avoid attracting the attention of their bank or the Internal Revenue Service. Some callers also reported that they have not been told the location of the parties. Instead, they are told they will be escorted to the party after meeting in a designated parking lot.
"Anyone should think about the risks of taking $5,000 in small bills to a grocery store parking lot to be escorted to a secret location for the purpose of making a charitable gift," said Deputy Attorney General Michele Butts.
Idaho law prohibits pyramid schemes, classifying them as felonies.
"Neither providing money to needy recipients, nor disclosing the potential risk of losing one's money, nor `gifting' the money to avoid tax consequences absolves citizens of their obligation to comply with Idaho's Pyramid Statute," Butts said. "Participants and promoters should be aware that Idaho law provides for both civil and criminal penalties for conducting an illegal pyramid."
‘Pyramid Scheme’ Losers Can Sue
BY MICHAEL A. RICCARDI
New York Law Journal
Monday, December 6, 1999
PEOPLE WHO lose money in "pyramid schemes" may seek damages in lawsuits based on common law fraudulent inducement theories, a Civil Court judge has ruled in a Bronx small-claims case.
Even though the New York statute that outlaws arrangements such as pyramid schemes, in which funds are funneled by new recruits to the people situated above them in the scheme, does not give private citizens a statutory right to recover their losses, Judge Paul A. Victor ruled, victims of pyramid schemes can press a common law claim that they were induced by fraud into participating.
In two cases under the caption Pacurib v. Villacruz, Index Nos. 2604 and 2605/99, Judge Victor said that the statute, while not providing a private remedy, did not preclude victims from using traditional common law tort theories of liability to recoup losses.
In her complaint, Jerie I. Pacurib alleged that the persons above her in what was called a "gifting program" committed fraud in convincing her to join the scheme, named "Network Associates Social Club."
As her initiation into the club, Ms. Pacurib averred, she paid $2,000 to defendant Loreana Villacruz and $2,000 to defendant Marlene Terez. She was told that these were "voluntary gifts," and not taxable.
The payoff was to come when the pyramid splits and a recruit like Ms. Pacurib moves up in rank in the new pyramid. The truth of such schemes, Judge Victor wrote, is that the original members do make money, since new recruits are plen
