Gifting Circles and Women’s Gifting Circles have been described to Star’s Edge, mostly through Masters who wrote EJPs after realigning with their intuition. As described, these Gifting Circles operated as “pyramids.” The term pyramid is derived from the shape the scheme would make if it were written down on paper. These schemes leave out having a product or service and concentrate solely on the financial “gifting.”
The United States Legal System has looked at various financial schemes that focus on recruitment rather than offering an exchange of money or services for a valuable service or product. The United States Federal Trade Commission investigates and prosecutes fraudulent or illegal money making schemes. Additionally, the individual states have various criminal laws prohibiting certain financial schemes. These schemes are also risky because Courts have found that they are “multilevel chain distribution gifting programs” which are classified as securities under the Uniform Securities Act. People involved in them are often prosecuted under U.S. criminal laws.
U.S. Courts and Legislatures have found that the success of a pyramid scheme depends on continuously getting additional people to join the pyramid. However, there is a practical limit to how many participants can be found. Plans that pay members when they recruit new participants inevitably collapse when no new participants can be recruited. And when a plan collapses, most people — except perhaps those at the very top of the pyramid — lose their money.
A Colorado Court found that the financial portion of the Women’s Gifting Circles was illegal and fit the definition of a pyramid promotional scheme. There is a set amount of money to enter the circle and the giving of this amount is the only way a woman enters the financial portion of the circle. The only way a person has the opportunity to make it to the receiver position is by recruiting new members.
The financial portion of the Women’s Gifting Circle is in the shape of an inverted pyramid. Various groups name the positions different things but the fundamental structure does not vary.
An Indiana Court found that a financial scheme in that state was criminal. The Court noted that the financial plan was referred to as an airplane program because the participants were designated pilots, co-pilots, crew members, and passengers. In that plan, each “airplane” contained one pilot, two co-pilots, four crew members, and eight passengers. Participants boarded the plane as passengers by paying $1500 to the pilot. Once all the passenger seats were filled, the airplane broke into two sections, everyone moved up a place, and new passenger seats were sold. As new members were recruited, persons changed positions, advancing with the goal of achieving pilot status and receiving approximately $10,000. If new members were not recruited, the airplane “crashed,” and the investment was lost. The Court found that the participants were engaged in an illegal scheme and they were convicted of criminal offenses.
A Nebraska-based scheme, entitled the “Friends Network” labeled the monetary contributions as “gifts.” The Court found, “participants had to recruit others to join the pyramid in order to progress to a place in the pyramid where that participant would receive gifts. Once a participant had received $ 12,000 in gifts, the pyramid would split. The participant was then required to leave the first pyramid and start again at the bottom of a new pyramid if he or she so chose. Each participant was required to bring at least one additional person into the Network, although the participants were asked to bring in more than one.” When asked whether the Network was legal, the organizer’s answer was that it was not a pyramid. He attempted to distinguish the Network from a pyramid scheme on the basis that a pyramid goes on indefinitely, whereas once the top person in this Network reaches payout, the scheme begins anew. The Court was not convinced and found that it was a “multilevel chain distribution gifting program,” and it was illegal.
A New York Court considered a scheme in that state which called itself a private club wherein consumers and business owners got together to expand the base of businesses. The Court found that “the financial portion of the program was wholly dependent upon the recruitment of new members who gave “voluntary gifts” to the person in the CEO position. That CEO could use the money for any purpose, including the fulfillment of the CEO’s dreams. When a sufficient number of new members joined the “gifting board,” the board split, allowing the participants to move into or closer to the CEO position.” The Court found that this program was an illegal pyramid scheme.
The Colorado “Women’s Gifting Circle” used the same system but labeled the positions using the terminology of food. New members were appetizers and the recipient of the “gifts” was dessert.
All of these groups were found by the Courts to be pyramid schemes. They are still being promoted. Women’s Gifting Circles are currently being promoted within the Avatar Network. The groups use the same format as the Colorado group, including the same recruitment letters, changing only the names given to the positions. A group in Germany uses the terminology of flowers and gardens but the structure is identical to the dining table and boardroom groups, described above, and found to be illegal in the United States.
Groups using the “gifting” approach attempt to evade the label of pyramid by having each new participant send a signed “Gifting Statement” with the money. This statement states that the money is a gift, given without consideration, that the person giving the money expects nothing in return. It is true that Americans are allowed to give another person up to $10,000 as a gift and the gift is not taxed as income to the recipient. However, while the “gifting statement” says that it is following this rule, the recruitment literature sent along with it emphasizes that the “gift” language is necessary so recipients do not have to pay tax on the money.
The Courts recognized that the process of the gifting circle is contrary to the language contained in the “gifting statement.” New members do in fact receive something in exchange for their money. They receive a place at the dinner table, in the garden, or on the board. This includes an opportunity to be in the position of receiver if enough people are recruited to the table, garden, or board. As the Colorado Court said, “few, if any, members truly participate without the hope of a windfall profit. Movement of the circle (the bringing in of new members) is a regular topic of conversation during meetings and providing support to recruiters is much discussed in the literature.”
The “Gifting Statement” itself is of no legal help. It cannot be considered a binding agreement or contract for a gift. The Courts find attempts to make such a contract are void because there is no exchange. The U. S. Internal Revenue Service (IRS) is likely to investigate the circumstances of a “Gifting Statement.” If they do, the IRS will find that the money was exchanged with the expectation of future profits and anything given with the expectation of something in return is not a gift. Since the money was not a gift, the IRS will find it is taxable to the recipient as income. The recipient will owe back taxes, penalties, interest, fines, and may face criminal charges.
The Courts have found that the financial portion of these gifting circles is an illegal pyramid promotional scheme. As the Courts pointed out, the math of the Women’s Gifting Circle makes it clear why these programs are against public policy. The layout of each circle is as follows.4 4 4 4 4 4 4 4
3 3 3 3
2 2
1
There are eight 4s who are the new members. The 4s pay their membership “gift” to the person in position 1. Members progress through the circle until they advance to position 1, where they receive the money from new members. In the initial circle, those in positions 1, 2, and 3 would not invest anything. The following shows the progression of members needed to continue the circle to the 20th level.
New members who enter when the initial level 4s are at the recipient level are in the 7th level. The new members must recruit 8,184 women to receive their “gift.” As the Colorado Court found, “the financial portion of the women’s gifting circle exhibits the classic disadvantage of the pyramid scheme: those who come late to table are going to go to bed without dessert.”
The intertwining of these pyramids with the “women helping women” and the “empowerment” themes makes the scheme less obvious and perhaps more insidious. The literature promises that participation in the circle will reveal limiting beliefs and unconscious patterns (secondaries). As Avatars, we already have the tools to handle these creations. Some Avatars in the network report that the “Gifting Circles” use Avatarese, and tell reluctant recruits that they should discreate their limiting beliefs. When an Avatar Master does this, it is an abuse of power.
The Avatar Master licensing agreement prohibits a Master from recruiting clients of Star’s Edge, either on the Master’s own behalf or on behalf of any other person or entity. This means that using the Avatar network for recruitment into financial schemes, whether legitimate or not, is a violation of the Master’s license.
NOTE: Laws are changed from time to time and laws vary across states and countries. Do not rely upon the general information presented here without discussing your specific situation with a legal professional.
Approved and accepted by the Senior Avatar Council on May 29, 2002.
___________________
Currently the EPC Briefing is available by e-mail in Chinese, Dutch, English, French, German, Italian, Japanese, and Korean. We welcome any feedback, news, successful actions, questions, favorite quote, or advice about future EPC Briefings. We love hearing from you.
Top of page | EPC Briefings archive
EPC, Enlightened Planetary Civilization, and Love Precious Humanity are all service marks of Star's Edge, Inc.
Avatar®, ReSurfacing®, Thoughtstorm® and Star’s Edge International® are registered trademarks of Star’s Edge International.
All content copyright 2003, 2008, Star’s Edge International. All rights reserved.