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'Tis Better to Receive

Lynn Bennett

Wendy is the birthday girl for the second time in six months. On her first "birthday," in September, she got $20,000. And she's hoping to receive another generous gift soon.

The money couldn't have come at a better time. Wendy, a 51-year-old single mom, lives in a mobile home in Boulder with her twenty-year-old daughter. As a self-employed massage therapist, she's never had health insurance, and for many years, she needed serious dental work, including root canals and crowns. But no longer. She's found the answer, she says, to financial freedom. And it requires so little effort that she wishes she'd discovered it years ago.

Last May, a friend asked Wendy to join a women-only club called the Original Dinner Party. She told Wendy that the club gives its members the opportunity to empower themselves by controlling -- and making -- their own money without the oversight or assistance of men. All she would need was $5,000 to start.

So Wendy attended an informational meeting held at another woman's house. There she learned that the women who join break down into smaller groups -- usually between seven and fourteen people, and, in keeping with the dinner-party theme, pay $5,000 to become what's known as "soups and salads." When four soup and salad positions are filled, meaning $20,000 has been raised, the "birthday" girl gets the money. The group then splits in two, and the soups and salads move up to the "entree" level, with the two women who were previously at that level moving into the birthday spots in the two new groups; four new soups and salads then have to be created at the bottom of each group. When the new birthday girls get their birthday presents, the groups split again, and so on. Before long, there are dozens of groups.

Once the birthday girl cashes in, she can take her money and leave, or she can reinvest $5,000 and start again. But the success of the dinner parties is completely dependent on the ability of current members to bring in new ones.

It was an intriguing idea, and Wendy signed up. Two days later, when the soup and salad positions in her group had been filled, she was asked to give the birthday girl $5,000. Wendy was prepared. To come up with the money, she had taken out a $1,500 cash advance on her credit card and depleted her savings account.

"It wiped me out temporarily," she admits. "But money is a renewable resource, so it didn't wipe me out for long. The beauty of this is that you realize that you can really scrounge up more money than you think you can. At first I was worried that I wouldn't be able to come up with the money, but where there's a will, there's a way. Some women in Guatemala never see $5,000 in their lifetime. You learn how blessed you are in this country that you can amass $5,000 in two days. You stop thinking of yourself as poor and start thinking of yourself as abundant."

For Wendy, who asked to be identified by her first name only, it's been a huge success; of the six women she's invited, five have joined, and she got her gift after only three and a half months.

"There are a lot of single women and single moms in the group. Some have husbands, but mostly it's a way for single moms to make a little money and have a cushion to fall back on," she says. "I know of at least three women who have had head injuries; for them, this money is a lifeline. I know, because I had a head injury from a car accident in 1995, and it took me four years to heal. Also, a lot of women feel isolated, so it's a way for them to get together. The meetings are really uplifting. We talk about our fears around money. If this was a coed thing, I'm thinking it wouldn't be as fun."

Part of that fun involves the dinner itself. Each member brings a dish matching her level in the group to the monthly meetings. When Wendy was at the bottom, she brought a green salad; when she was an entree, she brought lasagna. The parties are informal, and the women talk about their jobs, their kids and current events, she says.

The money is never exchanged in public, however, and in the groups Wendy has been in, it's never handed over at the actual dinner parties, either. But some of the women have come up with creative ways to present their gifts to the birthday girls. When it was Wendy's turn to receive her gift, for instance, one woman came to her home and gave her a book called The Ten Gifts; she had placed fifty $100 bills between its pages. Another woman pulled money out of her freezer and said, "Here's $5,000 in hard, cold cash." Wendy has heard of other women putting money in bras and saying things like, "This is for your support." One woman put cash in a baby bottle and told the birthday girl to nurture herself. "I've also heard of people baking money into cakes," Wendy says.

 

When she got her money, Wendy spent $5,000 on dental work, paid off several thousand dollars in credit-card debt and set aside $5,000 so that she could join the Dinner Party a second time. She also rewarded herself by getting rid of her twelve-year-old Honda and putting money down on a brand-new Volkswagen "with all the bells and whistles."

Since then, however, she's decided to sell the car because she can't afford the payments. "That probably wasn't a good idea. But for years I'd self-deprived. Now I'm learning about my issues around money and how I've always denied myself things like comfort, pleasure and health care." Accepting the money, she says, was a big step for her. "It was easier for me to give $5,000 than it was to receive $20,000. Women are givers. We don't know how to receive. It took a lot for me to realize that maybe I do deserve this."

Now Wendy wants to give back to other women. With her next $20,000, she's hoping to buy property in the mountains just west of Boulder for a women's healing clinic that would offer massage and other therapies. She says she's already convinced the owner of a bed-and-breakfast that's for sale to wait to sell it until Wendy can come up with the down payment. "If that doesn't work out, maybe something else will," says Wendy, adding that she's found patience and peace since joining the Dinner Party. "I don't know what the future will hold, but at least now I know I have one."

That future could involve jail time, according to law-enforcement officials.

Gifting clubs like the Original Dinner Party are classified as illegal pyramid schemes, they say, and no one involved is innocent. Although it's legal to give an individual a gift of up to $10,000 without either party paying taxes, it's illegal in Colorado -- and in many other states -- to exchange monetary gifts as part of a pyramid promotional scheme, defined in the Colorado Consumer Protection Act as "any program utilizing a pyramid or chain process by which a participant in the program gives a valuable consideration in excess of fifty dollars for the opportunity or right to receive compensation or other things of value in return for inducing other persons to become participants in the program."

Anyone who takes part in a pyramid scheme can be charged with a Class 1 misdemeanor, which carries a sentence of six to eighteen months in jail and $500 to $5,000 in fines; anyone who is arrested a second time could be charged with a Class 6 felony and face up to two years in prison and fines of $1,000 to $100,000.

Wendy's heard it all before, and she doesn't believe that her group is doing anything illegal. "It's not a pyramid scheme, because no one ever stays on top. No one keeps feeding the birthday girl," she says. "In a typical pyramid scheme, the people who are originally there make out the best, and the bottom eventually falls out. But with this, the person at the top leaves after a while and keeps re-entering from the bottom to support the group. In my mind, it doesn't ever collapse. If it breaks up, the last row of women can go to Longmont or Thornton and start another one."

She's heard that some women in Seattle, where dinner-party groups were very active last year, made it to the birthday position an average of nine times. "It's the gift that keeps on giving," she says.

"We're not hurting anyone," she continues. "And it's not like it's a whole lot of money we're talking about -- after you put in $5,000, you only make $15,000."

But Wendy needs that $15,000. In fact, to make a down payment on property, to get health insurance and to set aside a little money for retirement, she needs to be gifted at least three more times. She's just not sure when that will be, as the four soup and salad spots in her group are currently unfilled.


Kent Goodrich, a math professor at the University of Colorado at Boulder, says those empty spots in Wendy's group may stay that way, and he's done the calculations to prove it.

 

Each time the bottom level of a pyramid fills up, it constitutes a "generation" in math terminology, he says. In order for the Dinner Party to keep going in Boulder, the county's entire population of almost 300,000 would eventually need to join, and that amount would be reached after only sixteen generations. Since the number of women who are willing and able to give up $5,000 isn't even close to 300,000 -- even with the women who cycle through the dinner parties several times -- the party in Boulder can't last much longer.

"At the end of thirty generations, you've exceeded the population of the world," he says. "You can't sustain exponential growth. It's attractive psychologically, because you think that you can always convince four more people to join, but you're going to run out of people really fast. The people who get in on it first will make money, but someone will be left holding the bag.

"They say they're helping women, but it's very insidious, because they're playing on a positive thing and turning it into a very negative thing," Goodrich adds. "If these women really want to help other women, they should donate $5,000 to the CU math department, and we'll give women scholarships so that they can learn to do the math themselves."

No one seems to know exactly when or where the first Dinner Party originated, although various news reports indicate that it may have started ten years ago in Canada and then spread to the United States. There are now groups all over the country. Legend has it that the Dinner Party was introduced to Colorado by a pair of Czechoslovakian twins from Seattle after the groups there crumbled because of their failure to attract new members. Wendy doesn't know how many groups there are in Boulder now, but she guesses that there are more than a hundred; she knows ten women just in her mobile-home park who are involved. (Those women declined to be interviewed.)

The first Dinner Party group may have derived its name from feminist artist Judy Chicago's famous 1970s piece of the same name. Coincidentally, perhaps, her multi-media work consisted of a pyramid-shaped dinner table set for 39 of history's most important women. Each place setting was decorated with vaginal imagery, and the work as a whole was meant to symbolize that women have been consumed and forgotten by history.

But not all of the groups use the Original Dinner Party's name or structure. Other names include Women Gifting Women, Women Helping Women, Women Empowering Women, Women's Empowerment Network, Women's Dinner Club, The Original Dinner Club, The Dinner Club, The Breakfast Club and Pit Stop. Some of the groups have an additional eight women in an appetizer level below the soups and salads level.

Last July, a Channel 7 reporter used a hidden camera to expose a Denver Dinner Party group. After the report aired, Wendy says, most of the dinner parties in Boulder came to a halt. By September, she estimates, about a fifth of the approximately 1,000 women who had been involved left out of fear.

To redeem themselves, one of the participants featured in the Channel 7 report and four of her friends met with Phil Parrott, chief deputy district attorney in the Denver DA's economic-crimes unit.

"They claimed to have had a conversation with the Boulder DA's office in which they said it was okay," he says. "I later heard from other women who'd attended parties in the metro area that I had told them it was okay, too. I certainly did not. I told them it was a violation."

Cynthia Taylor, director of the consumer division of the Boulder District Attorney's Office, told them the same thing. "A lot of people were calling because they'd heard in these groups that the DA's office had sanctioned them, which is absolutely not true," she says.

But the rumor that law enforcement approves of the parties is still circulating. "He's been completely supportive," Wendy says of Parrott, with whom she has never met or spoken. "He never questioned it after that meeting, because he saw that those women were of integrity. That proves that no one gets hurt."

Parrott says his office hasn't received any calls about dinner parties since the summer, but that doesn't mean there aren't any. He won't investigate until a victim comes forward, however, and the likelihood of that happening, he says, is pretty low. "You have to understand that every victim in a pyramid scheme is a perpetrator wannabe," Parrott explains. "No one who hands over money in a pyramid scheme has clean hands."

The same is true of the Boulder DA's office. But even if a victim does surface, Taylor says, she'd be reluctant to take up that person's case. "Our office has a jaundiced view of seeking restitution for someone who's participating in an illegal activity," she says. "Taxpayers shouldn't have to foot the bill for that. Our approach is public education. We're trying to warn people not to invest anything they can't afford to lose."

 

So is Colorado Attorney General Ken Salazar. In July, he and officials from Mesa County, where similar gifting clubs were operating, issued a consumer advisory: "While promoted as being legal under state and federal laws, some reported programs such as 'Gift Giver,' 'Women Empowering Women,' and 'Private Gifting -- A Total Team Concept,' appear to be classic money chains or pyramid schemes, which are illegal in Colorado and subject those who promote them to criminal prosecution and civil liability to others in the chain."

Ken Lane, a deputy attorney general in the Colorado AG's office, says state officials are leaving it up to individual counties to investigate the various gifting clubs.

Gifting-club participants often go out of their way to try to skirt the laws. The women in Wendy's group, for instance, sign a disclaimer stating that they realize they're giving a gift and that they don't expect anything in return.

But that doesn't mean much to Boulder County's Taylor. "They've tried to get around it by getting people to sign a piece of paper saying it's just a gift, but it's still a pyramid," she says. "And it doesn't matter whether one person stays on top. It meets the definition of a pyramid because people pay money to become part of the scheme, and the ultimate monetary inducement is used to bring in more people."

Wendy says current members don't pressure other women to enter the group. "No one is forced to join. People can come to ten meetings before they decide. There's no recruitment. We just say, 'Share it if you feel like it.'"

Not true, counters Mary DeWeese, a Boulder resident who says she was pressured to join a few months ago by an acquaintance. "She kept calling me and leaving messages on my machine. To me, that's pressure," she says, adding that she's since stopped talking to the woman. "The whole spiel was about empowering women. She was glowing about how it helped women realize their dreams. Well, this may work for women on the top, but not for women on the bottom."

DeWeese had no interest in joining. "The minute I heard about it, I thought, 'This is a pyramid; this is stupid,'" she says. "If I had an extra $5,000 lying around, I'd put it in my mutual fund. I wouldn't give it to a bunch of strangers. Once you get sucked into something like this, it's hard to get out. I really feel awful for women who can't see through this."

Lisa, a recent college graduate who's too embarrassed to be identified by her last name, lost $2,000 this past fall in a gifting club. The group was open to both men and women, but she never met any of the people on the "private gifting activity board"; all transactions were conducted through the mail. A Boulder resident, Lisa says people heard about the club from friends or by receiving a letter. A friend told her she could make $16,000 if she and seven other people contributed $2,000. "I didn't believe it until he got a FedEx package one day with $16,000 inside," she says. That's when she decided to join. "I gave my money to my friend since he knew someone at the top of the pyramid."

But she never got the $16,000 gift she was promised, and she's mad at herself for believing that the gifting club would last. "If the gifting boards don't stall, you can make a ton of money," she says. "But this one didn't go anywhere."


Women in other states have already seen the bottom drop out of dinner party groups.

Late last year, Missouri Attorney General Jay Nixon sued eight dinner party organizers in suburban Kansas City after other participants complained of losing money. In December, the women agreed to pay back the $190,000 they had received; in addition, they each had to pay $1,000 in civil penalties. Nixon is also suing two women from Washington who allegedly introduced the dinner party concept to Missouri in May -- the same time it reportedly started in Colorado.

Two women near Austin, Texas, were arrested for participating in a dinner party in December. One was a sheriff's deputy who assured the others in her group that the gifting club was legal; she was forced to forfeit the $20,000 she'd received and was fined $2,500. After her arrest, she resigned from her job and was ordered to relinquish her peace officer's license. The other woman was the deputy's mother, who received a $2,000 fine. Both women pleaded guilty to participating in a pyramid promotional scheme and were sentenced in January to two years' probation.

 

This past summer, Oregon's attorney general issued a consumer-advisory warning with regard to dinner parties in the southern part of that state, and the Better Business Bureau of Spokane sent out an alert to newspapers in Washington and Idaho noting that "Participants are told that state gifting 'laws' permit their participation. They are also misled by false claims of endorsement from the FBI, the BBB and the Attorney General's Offices."

Dinner party groups had been so rampant in Washington that last spring, the attorney general there pushed the legislature to pass an emergency bill outlawing them. The bill stated, in part, that "pyramid schemes, chain letters, and related schemes constitute a threat to the health, welfare, and safety of our citizens and their communities. These schemes are fertile ground for deception and, in the end, can lead to serious financial loss, destroyed relationships, and breach of the peace." But the bill died after lawmakers received an outpouring of letters and phone calls.

Linda Gilliam, a dinner party participant from Washington State, wrote a letter to the editor of The Columbian, a Vancouver newspaper, explaining how happy she was that the bill had died. "The problem is that our group, The Original Dinner Party for women, would have fallen into the bill's grasp, even though we always conducted meetings very carefully so as not to fall into the definition of a pyramid," Gilliam wrote. "I am ecstatic to report that through the unrelenting efforts of women who know the benefit of the dinner party, SB 6586 was killed before it reached the House of Representatives. We e-mailed, faxed and gave testimony in abundance. It was a learning experience to behold. Those in Olympia said our group represented the largest women's protesting faction they had ever seen."

Women and men are protesting similar laws that are already on the books in other states. The Texas Gifting Coalition, a nonprofit group of gifting advocates, formed recently to lobby lawmakers; they hope to amend the Texas Business and Commerce Code to legalize gifting clubs. Gifting coalitions have also been established in New Mexico and Oregon, according to David Myrland, a paralegal who has developed a side business of analyzing state consumer laws for groups like the Texas Gifting Coalition; he travels the country giving seminars for various gifting clubs. Myrland, who's based in Washington State, maintains a Web site called taxthis.net, where people can purchase his interpretation of any state's pyramid-scheme statutes for $75. He stresses on his site that he is not an attorney and that his opinion is not legally binding. (Nonetheless, because of his analyses, Myrland is being sued by the states of Montana, Illinois, Pennsylvania and Wisconsin for practicing law without a license.) He's so frustrated with the legal system, though, that he's planning to go into another line of business; at the end of the month, he says, his analyses will no longer be available.

Myrland started looking into the legality of gifting clubs in September 1999, after police raided one such club in eastern Washington and seized $51,000 that participants claimed had been promised to charity; the search warrant alleged that securities fraud was being committed. Myrland wrote an opinion saying that the state's securities-fraud laws don't apply to the gifting club. Ever since, his reputation has spread to gifting clubs nationwide, including in Colorado, where his opinion on the state's consumer-protection laws is circulating among dinner party groups.

In it, he writes, "The recipient of a gift is under no obligation and owes nothing to the donor of the gift. The donor of the gift, therefore, is not receiving any 'opportunity or right to receive' anything when he or she gives away their property to a club or graduate of the program...The Supreme Court has held that gifts are contracts protected from state interference by the U.S. Constitution. If all participants in the club state in writing or in front of witnesses that their transfer is a gift, no state or local official has the authority to question the context of the transfer."

Myrland, who claims that he's never participated in a gifting club himself, says that authorities who deny adults the right to carry out a gifting contract that they've willingly signed or to which they've verbally consented are exercising "a flagrant abuse of power."

Wendy agrees. "We're all getting smarter financially because of this, and now there are offshoot groups forming. I've started a women's financial-awareness group."

 

The six women in her group, which meets twice a month, are reading The Energy of Money, by Maria Nemeth, How to Attract Money, by Joseph Murphy, and Rich Dad's Guide to Financial Freedom, by Robert Kiyosaki. "We have a lot to learn from men," Wendy says, explaining why a strictly female group is reading books by male authors. "[Kiyosaki] says in his book that when you invest, make sure your liabilities are lower than your assets."

For the first time in her life, Wendy says, she is saving money, depositing $100 a month into two mutual funds. "If it wasn't for the Dinner Party, I wouldn't have thought about money. I would have always thought that I was the victim of my financial status instead of the ruler.

"Women like this. It makes sense. I wonder why the authorities feel the need to protect us from something that's helping us," Wendy says. "We're smart people. We're aware of the risks. We're not sheep being led to the slaughter."


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