"Welcome to the Association of Gift Givers," intoned the man with the deep tan and cautious voice as he smiled over the small group assembled in an ornate meeting room the Wellington Hotel near Georgetown one night this week.
Dick (No last names, please), wearing an open necked plaid shirt that revealed several loops of gold chain, told the group of about 30 Washington area residents just what they wanted to know -- how to make a lot of money fast through the latest fiscal phenomenon to hit the District of Columbia: the pyramid club.
The meeting at the Wellington Hotel on Wisconsin Avenue NW was one of hundreds held throughout the city in the last week as area residents rush to buy into the "Business List Concept," a pyramid scheme imported from California in the last six weeks.
Many of the participants are from suburban Maryland and Virginia where recent police raids on pyramid operations have put a damper on the activity there. There have been no arrests or raids in the District.
D.C. police say there is no specific law against pyramid clubs as such, but police are researching their legality under general gambling, securities and fraud laws in the city.
The pyramid club meeting at the Wellington Hotel is the newest one in a 60-year history of get-rich-quick schemes that traditionally flourish when, as now, the national economy falters.
The meetings typically attract mostly white middle-income young and middle-aged professionals -- those able to bring $1,000 cash to the meetings.
The meetings, held at private homes and in local hotels, have the flavor of a tent revival as pyramid members testify to their early skepticism in a system that has now rewarded them handsomely. Each new recruit who invests $1,000 is applauded and warmly welcomed to the enterprise.
The recruit comes into the club as a bottom-most member of "building block" of a six-layered, 63-member "pyramid." The names are arranged on a pyramid-shaped chart showing 32 names on the bottom layer, 16 on the next and so on to the top layer, which has two names.
Each new pyramid member places $500 cash in an envelope marked "gift" and hands it to the person whose name appears on the chart above his own. The other $500 brought by the new member is put in another gift envelope and handed to one of the two persons whose names are at the top of the chart. The new investor is now on the "board" and will in turn recoup his $1,000 when two new recruits come in under his name.
Through a series of splits, the person who joined the bottom 32-name line will eventually work his way to the "payline" at the top. And the persons whose names appear at the top will disappear from the chart after receiving $16,000 each in cumulative $500 "gifts" from incoming recruits.
Critics note that any pyramid scheme requires a never-ending supply of new recruits to keep it going. Without recruits, the pyramid stops growing and dies. Because the pyramids keep "splitting," the number of needed recruits multiplies in ever increasing numbers. For example, the person who enters on the bottom line must go through six pyramid splits which would then produce 128 new pyramid using 8.192 people before he reaches the top and the payoff (assuming that all pyramids fill at the same rate).
Regardless of the risks, pyramid club members are believers. It is amost with religious fervor that everyone tells and retells the story of the man who got money to take care of his sick wife. And of the young couple who can now afford a new home. And of the vacations planned and the clothes to be bought. And the aid for retired parents.
They also stress what they say is the legality of the enterprise. "We're not criminals. This is our money to do with as we please," is a common refrain.
Potential investors are told several times that there is no absolute guarantee they will recoup even their original investment. No one is advised not to pay the taxes on their pot of gold. Police and Internal Revenue Service officials are routinely asked to leave the room at the start of each meeting.
All of this advice is mixed in with a strong sales pitch.
At a Holiday Inn here recently, a big handsome man with a deep tan and graying temples bounded to the front of the meeting room and announced, "I'm going to talk turkey to you."
He introduced himself as "Broadway" and pointed to his name on the lowest rung of the chart. "That's me down there, and this is my second time through," he said.
He beamed at the attentive audience and recounted a tale of his own early skepticism which eventually turned to riches when he followed his wife into the pyramid. He kept the sales pitch going as he stuffed cash-filled envelopes from recruits into the pocket of his beige, drawstring pants. He said he was standing in for his wife whose name was on the top payline that night. Altogether, he received $2,000 from the four new recruits.
"Think what $16,000 could do for you," said Broadway. "But a better house. More down gets you a bigger house. The house you want. Let me tell you what I did. I wanted to buy a condominium in Colorado. The guy called me last Sunday and said we could close the deal tonight if I could come up with a certain amount of cash. Well, before, I would have dashed to the bank and paid those high interest rates." He smiled and tapped the chart. "Now, I just send the money."
Ohs and ahs filled the room.
Later, one of the new recruits said, "I'm a sucker for a good salesman. I didn't intend to join up, but its hard to turn down 16 grand."
A District school teacher named Lou, who was recently laid off after more than 10 years of teaching, said "I was looking for something to brighten up my life.
"I wanted the money to give my parents a special anniversary gift and my sister a special birthday gift. And then, too, I need to look for a new career for myself.
Recent police arrests in Maryland and Virginia, however, have slowed recruiting for both suburban and city clubs.
Sgt. William Harrison, supervisor for the D.C. Police Department's check and fraud squad, said his office has received hundreds of calls from anxious participants.
"I tell them all the same thing," he said. "We're not saying it's illegal, but we do beliee there is some criminal violation of the law."
He said this could involve possession of unregistered securities or fraudulent use of the telephone to solicit members or establish meeting places, both violations of federal law.
Under city laws, Harrison said, both the gambling statute and the false pretense statute could be applied to pyramid activities. Harrison said that if the pyramid is considered a lottery, then the entire concept is illegal because all lotteries are illegal in the city. Under the false pretense statute, a person could be charged if it was determined that there was intent to defraud a person by obtaining something of value.
Police are still researching these and other legal aspects.
Harrison, a veteran investigator of fraudulent activities in the city, has seen pyramids come and go. "Any time there is a recession or depression, these pyramid schemes come alive," he said. "It's the same old milk warmed over."