11 Oct Partner Editorial: How to Spot a Scheme
By Grant T. Smith
If I told you there was a way to make $40,000, tax free and with very little effort, would you want in?
This article is about such offers. And while they have come in many different forms over the years, it seems they are currently in the name of:
- Women helping women
- Gifting circles
- Women’s wisdom circle
- Women empowering women
Last week, one of our staff had two friends approach them seeking counsel because they had received invitations to join special groups focused on women. The invitations offered amazing deals just for helping others succeed.
I am pleased my colleague counseled that the “plans” were in fact schemes. I was even more pleased when I was asked to reach out to our readers and inform them of this growing scam making the rounds locally and across Canada.
Based on the research I have done, this is how it works.
Currently, the approach appears to be focused on women and on the valid struggles they face in a male-dominated business world. Women, typically professional or of wealth, are invited to learn more about a great group or circle that is working together to support causes both personal and worthy. In the circle, it is understood that each person will contribute $5,000. Once eight new people have contributed, the top person will get $40,000 to put towards their career or the cause of her choice. The best news yet? Since the funds are gifted, there is no tax.
The image below is borrowed from an article I read on the subject. Thanks to Lawyer Rant for its use here. Once the “sun” in the middle gets her money, the chart splits in half and the two planets become suns, as everyone moves up a level.
I am going to map this out here:
Hmm… that circle looks kind of like a pyramid. Wait, what? Did you say pyramid? Could this be a pyramid scheme?
Of course it is a pyramid scheme. Let’s get that right.
This specific example is particularly incendiary because it pulls at the heartstrings of women fighting to succeed. It offers them a light of giving and of success all rolled up into one.
- You can choose to believe the person at the top is giving their ill-gotten gains to support women being victimized by abuse or using it to establish their career.
- You can choose to believe there would be no tax consequence (however, even illegal funds are subject to taxation, so you would be wrong).
But take heed. Here are a few tips to consider when being approached to participate in a business opportunity:
- If there is no product or service being sold, question how it makes money.
- Nothing is free. If a plan offers low risk and high reward, it is not viable and should be scrutinized for the flaw – there is always a flaw.
- Stay away from any plan that requires ongoing recruitment for ongoing success.
One other personal comment here: I believe that in such a plan the people, even in the second row of the pyramid, might truly believe they are doing this selflessly – but mark my words: the person at the top is well aware of the fraud they are asking you to participate in.
Corinne, my editor, and I, had a conversation about how it is disheartening that these schemes take advantage of women who want to support other women. We wanted to point out a number of legitimate ways to support women in business or otherwise. We both encourage research and critical analysis of the opportunities out there. If you’re looking for a few places to start, we suggest the following:
- SheEO – a global community of women transforming how female innovators are financed, supported, and celebrated.
- The Minerva Foundation for BC Women – focused on developing women’s leadership capacities.
- Atira Women’s Resource Centre – a not-for-profit organization committed to the work of ending violence against women.
We’d love to hear from you what women empowerment organizations or groups you already support.
If you hear of such a group or scheme, or are offered an opportunity to join one, I encourage you to contact the police and report the activity, because others will get hurt. To our team at Clearline, thank you for bringing this to my attention.