My first post about Gifting Circles has gotten a lot of attention and that’s a good thing. However, I keep getting comments that lead me to believe I didn’t get the point across that they are illegal.
Well they are. Not only is it a felony to be a part of one, it is a felony to get the cash when you reach the top of the pyramid and then file false state and federal tax returns without reporting the money. It’s also a separate crime to encourage the other winners to hide their income from the IRS.
Gifting Circles are not OK just because:
- The money is ‘gifted.’ Many criminals willingly participate in schemes to defraud investors. They put up their own money to get it started all the time.
- You sign a contract suggesting you do not expect any return. By participating you are conning others into giving up their money. Eventually people are going to get ripped off because of your participation.
- You really, really believe you are just doing it to help women. You might help a few but you are ripping off a lot more of them.
- You get some lawyer or some accountant’s opinion that it is legal. Maybe you can sue them for malpractice from your prison cell.
It also doesn’t work if you say you had a “good faith” belief that the gifting circle was a lawful way to avoid taxes like Donna Bello, 57, and Jill Platt, 65 from Connecticut tried to say recently. That’s them to the right. They ran a series of ‘Gifting Tables’ from 2008 to 2011. The feds finally got wind of what was going on and prosecuted them for wire fraud, filing false tax returns and conspiring to defraud the Internal Revenue Service. They were found guilty recently and under the federal sentencing guidelines faced 11 to 14 years in prison.
Do you know what Bello and Platt were doing? They called their scheme a ‘Gifting Table’. It was operated almost exactly like I described them in the other Gifting Circle post here on Lawyer Rant. New members paid $5,000 to join a “gifting table” and climbed up the rankings by recruiting new members. Eventually they left the table after receiving $40,000 from new members. A grand jury indictment shows that more than $5 million exchanged hands as more than 70 women made it to the top of the tables to cash out. Somehow Platt skimmed $90,000 off the ‘tables’ and Bello brought in $180,000.
Platt’s attorney had said everything she did was legal and based upon the advice of lawyers. Bello’s attorney denied it was a pyramid scheme. Both lawyers were flat wrong.
The prosecutor in the case said this in court:
“Despite their claims that the scheme was legal, the defendants repeatedly instructed the participants that they should not deposit the money they earned in the bank, but if the money had to be deposited, it should be done in small increments. The defendants frequently explained to new members that the important thing was to avoid raising red flags or alerting the IRS.”
The Judge sentenced Bello to six years in prison and Platt to four and a half years. Not quite a death sentence but maybe close. They were both ordered to serve three years’ supervised probation after their release. Bello also was fined $15,000. Both women were ordered to pay a combined total of $32,000 in restitution to several victims. I guess the IRS is going to go after the other seventy ‘winners’ and amend each of their tax returns to show an additional $40,000 in income. That’s going to hurt.
“I still struggle daily with how something I thought could be so good turned out to be such a disaster,” Bello said. “I broke the law, I kidded myself and I deceived others. I must live every day with the knowledge that I hurt not only myself but many other people.” Bello said she had viewed the gifting tables as sacred places where women could share monetary and spiritual support. “I am deeply anguished by the pain and anxiety experienced by the women of the gifting tables,” she said. “They were good souls, loving companions and did not deserve” what happened to them. Well, except that Bello was doing it for years and didn’t care when she was hurting all those women.
Platt said before her sentencing: “I’m very sorry I caused anybody any harm, because it wasn’t my intention to do so.” She said her goal in joining the gifting tables was to help women in similar situations to hers — people struggling with financial problems. Wait – did Platt say she planned to help struggling women by ripping off other women?
Don’t forget that Bello and Platt – and you too – can be prosecuted in state court and also again in federal court for the same acts. I don’t know if they will face more prison in Connecticut but they could get another, separate and consecutive prison sentence. Few state prisons are as cushy as the federal detention center where Martha Stewart served her federal time so keep this little tip in mind.
$5,000,000 is a lot of money. No wonder the feds were upset.
© Samuel Owen 2013. All rights reserved. Please read important notices and disclaimers by clicking here.
- Sentencing Today For Women Convicted In ‘Gifting Table’ Scheme (foxct.com)
- 2 women face sentencing in ‘gifting table’ scheme (sfgate.com)