Women Helping Women


I woke up terrified every night for about a week. You know that dream where you’ve committed some terrible crime and everyone is after you; and waking up is such a relief?  Well, I would wake up and realize it was real. I was living in a nightmare and there was a possibility I was going to drag my family into it with me.” —Janet Smith

For Smith (not her real name), the emotional roller coaster created last year by the illegal, get-rich-quick scheme called Women Helping Women was one of skyrocketing highs and gut-wrenching lows. At 45, she had spent her entire adult life as a law-abiding, PTA-going, Little League mom and business owner, and her closest encounter with a felony was watching “Law and Order” on television. That was before WHW swept into town and created the biggest gang of law-busters in Sacramento history. The unlikely and compelling story of Janet’s deep financial and emotional involvement with WHW is equal parts comedy and catastrophe, and, most amazing of all, it is shared by nearly 15,000 other women in the Sacramento area.

Some of what happened during the mad, mad year when WHW held sway you may already know, but part of the story has never been told. We felt this story-behind-the-story was worth examining because in some quirky and intriguing ways, it exposes some surprising truths about our community and ourselves.

What makes the story so captivating is that the vast majority of the WHW lawbreakers were pillars of the community: nurses, teachers, lawyers, state workers, church leaders and, in Janet’s case, a prominent business owner. The fact that these women eagerly and willingly plunked down a whopping total of roughly $12 million in cold, hard cash to take part in the risky scheme that could have landed them in prison for five years has been well-recorded by the media. What has never been fully explored is why it happened—and why it is highly likely that it will happen again soon.

When WHW fell apart in summer 2003, more than 20 Sacramento area women, the alleged ringleaders, were arrested for what, under the California statutes, is called “operating an endless chain.” Facing time behind bars, they all pled guilty in exchange for a lighter sentence, and were ultimately sentenced to hundreds of hours of community service and fines up to $150,000 each. Most also were greatly embarrassed by their arrests, which were made public by the media. (We found that many of them now have unlisted phone numbers.) One would assume, in light of these facts, that the capital region’s wrong-way romance with get-rich-quick plots would have ended there, with debts paid to society, lessons learned and all that. But experts say that, on the contrary, Sacramento’s lusty love affair with pyramid schemes is far from over.

“No matter how many times people around here learn the hard way about these pyramid schemes, another one always comes along and claims new victims,” says Albert Locher, assistant chief deputy district attorney for Sacramento County. “We’ve been through several in the past decade. It’s just a matter of time before Sacramento experiences another big one.”

What follows is an inside look at the WHW phenomenon—a cautionary tale of seduction, sin, wild parties and fast money. Outside of the state Capitol, that sort of thing just doesn’t go on every day in Sacramento.

“Oh man, when I went to my first WHW meeting and I saw $80,000 in cash being flashed around and two women getting $40,000 each for doing nothing, I was hooked,” says Janet. “I just sat there and laughed this wild, nervous laugh. I couldn’t believe it. All I could think was, ‘Oh my God! They are telling the truth! The money is real!’ Everybody was cheering and clapping and the two women were waving that thick stack of cash in front of our eyes. [My friend and I] walked out of that meeting with our mouths open, shaking our heads. We couldn’t wait until the next meeting so we could give them our money and get involved.”

Illegal pyramid schemes work off a simple premise. Most are started by con artists who claim to have a “can’t miss” product or land scheme that will double your money in no time. In truth, there is rarely a product or viable land deal involved. Rather, these con artists take your money, keep part of it for themselves and use the rest to pay off investors who got in ahead of you. It is a scheme made famous by an Italian immigrant in New York, Charles Ponzi, in the early 1920s. (See sidebar.)  Ponzi conned investors into paying out some $15 million for an international postal deal he said he had worked out. He spent most of the money on women, wine and fast cars. But rather than running for political office or joining Wall Street where his talents would blend in, he became enamored with the “good life” and continued to work his plan.

In less than a year, his pyramid scheme fell to the same fate as all such schemes must face:
It fell apart.

The reason pyramid schemes cannot work in the long run is that at some point it takes too many investors at the bottom of the pyramid to pay off those at the top. As soon as the money runs short, the scheme is usually discovered, the perpetrators are jailed and more than 90 percent of the investors lose their money.

The unusual part of the WHW pyramid scheme is that there was no product involved. It worked with ingenious simplicity. You simply handed over your cash—you could enter the bottom of the pyramid for $660 to $5,000. The idea was then to “recruit” friends, co-workers, relatives, anyone, to also get involved. If they agreed to hand over their cash, you got to move up a step in the pyramid. Once you moved up four steps, you reached the top and “birthdayed,” in WHW parlance, and the money flowed into your pockets.

Those who bought in for $5,000 would receive the top prize of $40,000 in cash. It was possible to reach the top in less than three months if you were an active recruiter. The lucky ones reached the top, then bought in again for $5,000 and within three months collected $40,000 again. One woman in WHW reached the top 13 times before it collapsed.

As with most WHW participants, Janet was recruited into the pyramid by a friend. Her story is similar to those of thousands of other Sacramento-area women.

“I first heard about it at my son’s baseball game,” Janet says. “My friend Angela and I were sitting there cheering away and between innings, my neighbor told me about this amazing party she had gone to the night before. She described how much fun it was with all these women having a great time and how much money was involved. At first, I didn’t believe her. “I said, ‘Oh sure. A bunch of women having parties and giving each other huge amounts of cash.’ It sounded too good to be true. She just laughed and told me she hadn’t believed it either until she saw it for herself. It was all just casual conversation, but I found myself thinking about it all week at work. Forty thousand dollars in cash for doing nothing? I couldn’t resist. I called Angela and it turned out she was obsessed with it, too. We decided to go to the next meeting. That’s how it all started.”

According to a report done by ABC’s “Dateline,” WHW had its genesis in Canada in the late 1990s. It was a simple remake of a scheme that raced across the United States about seven years ago called Friends Helping Friends. The WHW version moved directly from Canada into the South Lake Tahoe area in early 2001, and then to Placerville. Just how it moved and who moved it—or whether it simply took on a life and movement of its own as it spread throughout the United States—remains a mystery. What is known is that the game literally exploded into Placerville, Cameron Park and El Dorado Hills, and thousands of women got involved in a short period of time.

“I first heard about it when a number of concerned spouses called in to see if their wives were doing something illegal,” says Gary Lacy, El Dorado County District Attorney. “It wasn’t long before we realized it was pretty widespread and we needed to do something about it.” Some of the organizers were teaching women how to raise the $5,000 initial investment, according to Lacy. This included how to secure a home equity loan and how to get cash from credit cards without their husbands knowing about it. This, apparently, was part of the “empowering” aspect of the program.

In February 2002, five nervous ringleaders asked to meet with Lacy. They tried to convince him it was legal, but like virtually every other prosecutor across the United States, Lacy disagreed. “I told them I wouldn’t prosecute if they voluntarily contacted all the people involved and shut the scheme down,” he says. “Of course, I didn’t have any evidence or any case I could have made against them at that time, but they did shut it down and I didn’t take any further action.”

Almost immediately the scheme moved to a new home: Sacramento County. There it flared to life, quickly luring doctors, lawyers, business owners, teachers, homemakers and others. Successful women, some of whom had carefully built their own businesses in Sacramento by being fiscally prudent, couldn’t wait to hand over stacks of cash to enter the game. It created what some observers called “a frenzied environment” in the community that compelled others to join.

“Once I got involved, I found it was one of the most exciting things I’ve ever done,” says Janet. “We would have parties and sometimes hundreds of women would show up. We’d rent out a banquet room in a local restaurant. There was so much action going on; it was great. It wasn’t like going to some organization where some spokeswoman would get up and tell us about them—it was all about us. It was truly about camaraderie and helping each other. There was no back-stabbing or arguments, just good positive feelings amongst each other. We dressed in business casual, although some of the women came in blue jeans. It didn’t matter; we were just all into having fun. When someone got to the top of the pyramid and made their $40,000, we held a ‘birthday’ party for them. The birthday girls would sit at the front of the room and they would get presents from the eight women at the bottom of that pyramid. The presents would each have $5,000 in cash in them. Several times, I saw birthday girls give $5,000 back to someone who couldn’t afford to get into the pyramid. It really was about women helping women.

“Women were partying and laughing and drinking champagne and having a great time. There was always noise and lots of cash and presents. There was no negativity at all; it was just heaven. It was so much fun. It was such a high I can’t describe it to you.”

Someone who can describe the “high” is Kim Roberts, Ph.D., a lecturer of psychology at California State University, Sacramento, and an expert in psychopharmacology, the study of effects of chemicals on the brain. “What many of the people involved in the parties were feeling was undoubtedly increased levels of dopamine,” says Roberts, explaining that dopamine is a naturally occurring neurotransmitter that causes sharply increased feelings of pleasure and self-confidence when it’s released in the brain. “It is an extremely powerful chemical. We know that people who are addicted to gambling definitely experience increased levels of dopamine. It doesn’t matter if they win or lose, only that they are in the game. It can easily become addictive. You become a victim of your own chemistry.”

Tests have shown that cocaine use similarly increases dopamine levels in the human brain. Intriguingly, other tests have shown similarly elevated levels of dopamine in the brains of college-age male volunteers after they kissed young women they found particularly attractive. “The allure of these activities definitely goes beyond the psychological,” says Roberts. “The physiological effects are what hook you.”

anet said that in her Sacramento office, the atmosphere was “euphoric” for women who put their money in WHW. “It was a natural high that most people don’t get very often,” she says. “I think that feeling was really at the heart of it all. It felt awesome. It feels good right now just remembering it. Angela really got hooked. She is a natural saleswoman anyway, and she was recruiting people right and left. It became a huge part of her life. We were in awe of how strong she was in convincing people to get involved.”

Pyramid schemes also prey heavily on people’s desire for positive reinforcement, says Roberts. While the potential for a big cash reward in the future creates the initial excitement, the emotional payoff comes immediately as your excitement is openly shared with dozens of other people in the room. This sharing affirms and amplifies your own positive inner feelings and connects you immediately to the group.

“There are many, many lonely people out there and this gives them an instant connection to others,” she says. “The tremendous amount of loneliness in our society is rarely addressed, but it is substantial. It is human nature to want to join a group. This kind of operation provides you with a group of new friends literally overnight.”

The overriding desire many people have to experience positive reinforcement and recognition from groups may stem from many causes, but one of them is the fact that our business and social structures do not have successful systems of public recognition for adults. We have many for children, but for adults the most universal system of recognition is money—in the form of salaries, bonuses or profits. Too often, adults neglect their fundamental need for social confirmation and recognition. It explains, in part, the mania we have for attending sporting events. They remain one of the few arenas we have for an immediate public sharing and affirmation of our emotions, such as excitement, exhilaration, worry and even sorrow (as in the Kings’ 2002 NBA playoff-series loss to the Lakers).

But skeptics echo the sentiments expressed by Michael Douglas’ power-hungry character Gordon Gecko in the film Wall Street. “It’s all about the money, kid,” says Gecko. “Everything else is just conversation.” That point of view has some validity. Like most pyramid schemes, WHW initially generated dizzying amounts of money for a select few—the woman who birthdayed 13 times reportedly pocketed more than $600,000 in cash in less than six months.

At every turn it was the topic of conversation,” says Janet. “The way it would work is whenever the birthday girls got their cash, they would spread it out in their hands like you would hold a hand of cards. They would be given crowns to wear on their heads, and they’d raise the money up high and wave it around so everyone could see. The room got pretty hysterical at that point with everyone cheering and laughing—we were all envious, we all wanted to be the one doing that. We all wanted to get rich fast, without doing any work.

 There was also something fascinating and maybe even addicting about sitting up there in front of the room when you birthdayed, knowing all that money was yours and that every woman in the room wanted to be you. With everyone cheering and clapping, you felt like a queen or a movie star for just one moment. It got so it was all anybody could think about; we talked about it all the time between parties. I saw more cash every week than I had seen in my entire life. And it was real, and I knew I had a good chance of getting a great deal of it. It was so exciting that everything else in my life seemed dull in comparison.”

Part of the sassy appeal of WHW was that organizers prohibited men from playing. Most pyramid schemes have an emotional shtick that adds to the allure, and excluding men delighted many women. They felt freer with their money without the fear of male judgments. It was a slick turnaround because most pyramid schemes are usually hatched and operated by men. In July 2003, for example, a former Washington State resident, John Wayne Zidar, was sentenced to 30 years in prison for running his own private pyramid scheme in the Northwest. The Seattle Post-Intelligencer reported that Zidar bilked more than 3,200 investors out of roughly $70 million. Many were older men and women who lost their life savings. A men-only scheme called NASCAR was created to be a companion to WHW, but it failed to gain traction nationwide.

“I didn’t tell my husband about it at first,” admits Janet. “I knew he would yell and tell me I was throwing my money away. So I waited until I came home with some of that cash. You should have seen his eyes.

They were big as saucers. He said, ‘Where did you get that!’ and I told him about WHW. At first he started frowning, and then he looked at the money and shook his head and shrugged. Then he came over and held the money and started laughing. That was probably the high point of the entire affair for me. I have my own business, but it was so much fun to see his jaw drop when I came through the door with the cash.”

From Sacramento, WHW stormed through California and out to several dozen other states. Hundreds of thousands of women became involved nationwide and estimates are that several hundred million dollars changed hands. Recent reports from Africa and Europe, especially Great Britain and Ireland, indicate that the WHW game is currently gaining steam worldwide. Nigeria, for example, has become a hotbed for the WHW scheme, according to Internet accounts. Clearly, the fascination with the pyramid runs deep.

“You have to understand how cleverly the structure of these schemes is designed,” says Roberts. “It carefully targets and exploits some of our most common and powerful psychological needs. These schemes prey upon the most vulnerable areas of the human psyche.” These include our need to belong, our decreasing sense of personal empowerment and our increasing desire for excitement and stimulation in our lives, according to Roberts. “It helps explain why, although people know intellectually that they are likely to lose their money in these schemes, many can’t resist getting involved,” she says.

The female camaraderie fueled by the parties was a carefully crafted part of the operation. “People like to feel a part of something larger than themselves,” Roberts says. “It’s a natural desire.” It’s also a feeling that is sometimes difficult to achieve in modern society. In states like California, where residents are highly mobile and a sense of community is not always valued, finding a group to belong to is not always easy. The WHW organizers carefully used rhetoric that dripped with references about helping, empowering and bringing women closer together. Excluding men gave the scheme definition and a feisty tone. As one female ringleader was heard saying on a Sacramento County Sheriff’s Department undercover surveillance video: “Men are just too nitpicky about these sorts of things.” Sure enough, it was “nitpicky” male prosecutors and law enforcement officers in El Dorado and Sacramento counties whose investigations cast the first ominous shadows across the happy WHW landscape.

“We got calls from husbands worried that their wives’ activities in WHW might be illegal, and from women who believed the ringleaders were cheating by getting themselves and their friends to the top of the pyramids too fast,” says Locher. “We felt it was time to move.”

Female undercover cops were sent in to secretly videotape some of the WHW parties. In a short time, some of the parties were caught on film. One of the more entertaining surveillance tapes was subsequently given to the media, and Sacramentans were treated to bits of it on the 6 o’clock news.

When you watch this tape, you notice right away this isn’t exactly the Jesse James Gang. The unedited version shows the “birthday girls”: five well-dressed local women. They are sitting in chairs in the front of a hotel meeting room, opening brightly colored packages and bags. Behind them stands a large American flag.

Central casting couldn’t have selected a better representation of the diverse face of Sacramento—the five include an African-American, a Latina, an Asian and two of European ancestry. They are white-collar workers, business owners and suburban homemakers. Dozens of other women crowd around them, cooing, cheering and clapping as they unwrap their presents. One holds up a stuffed animal to the ahhhs of the crowd, while another holds up a scented candle. A third holds up her present: a leopard-print thong. The crowd erupts in peals of screams and laughter. It isn’t the leopard panties causing the uproar, though. It is the $5,000 in $100 bills pinned to them.

You also notice that the organizers never call any of the participants by their last names. They were called “Sarah M.” or “Cynthia P.” Last names were not permitted. Even more telling was the organizers’ casual attitude toward the IRS. “If you want to make the IRS happy, go ahead and report your gifts,” says one well-dressed and well-coiffed organizer on the surveillance tape. The “gifts” she was referring to often reached $40,000—in cash. “But,” she says with a reassuring smile, “I talked to my financial adviser and he said you can also just put that money right into your savings account or directly into your IRA.” She then spends several minutes explaining how to avoid bank and IRA scrutiny.

Some may have seen those things as a clue that something was amiss. But thousands of area women were convinced that what they were doing was no more against the law than a baby shower. Yet word of a legal crackdown roared through the massive ranks of the participants.

he high for me lasted almost a year,” says Janet. “Then, during a meeting, one of the organizers told us she had been contacted by the cops. We were stunned. It was a huge downer. The organizers were clearly scared, but they encouraged us to keep it going amongst ourselves. They gave us all the charts they had kept on their computers and they all scattered. They tried to convince us we could do it ourselves, but I knew it was just false hope. It was over, just like that. I couldn’t believe it. During the following week, it was like a big, dark cloud came over us. It was really depressing. Angela didn’t want to let it go, though. She kept trying to recruit people. She wanted to start her own private thing. Personally, I knew it was done. I lost my investment, but I lost a lot more than that. I was devastated, heartbroken.”

By late spring 2003, the pressure from law enforcement caused the Sacramento-area portion of the WHW phenomenon to unravel. The first headlines were like something from the Comedy Channel: Organized Sacramento women perpetrate $12 million fraud! Queen pins caught red-handed on videotape! Suburban homes raided by deputies! Computer files seized! One wag called it the Sacramento soccer moms’ answer to the Enron scandal.

Some didn’t think it was so funny. Thousands of women—more than 90 percent of those involved—lost their investment. Some sued their more successful fellow participants in an effort to recover their money, putting a serious dent in the original promotion of the scheme as a project aimed at helping women empower other women.

“It turned out to be more like ‘Women Helping Women Cheat Other Women,’” quips Locher. “No matter what they call these pyramid schemes, they are all frauds.”

It was during this time that Janet hit rock bottom. Her stomach knotted whenever the phone rang and the nightmares struck when she tried to sleep. At any moment, she could be arrested, prosecuted and face five years in prison!  It didn’t seem possible. It made her angry and depressed. She was even more afraid for Angela, who was far more deeply involved and didn’t seem to want to quit. A short time later, Janet was rocked by the news that an undercover cop, posing as a potential participant, had caught Angela on tape recruiting for the WHW scheme. Angela was in deep trouble. Would that lead the cops to Janet?

“It just seemed all so unreal,” Janet says. “I’ve never broken any laws in my life, and now I was afraid that behind every tree there was a cop with handcuffs who was going to arrest me. First, I was depressed and scared, but then it kind of made me mad. I mean, really, what were we doing to hurt anybody? Then Angela got a letter that she was to appear in court to face charges. We were shocked. It was terrible.”

Similar crackdowns occurred throughout California and nationwide. Soccer moms, business owners, lawyers, waitresses and teachers in the Bay Area, Los Angeles and San Diego, and in Maine, Wisconsin, Montana, Vermont, Washington state, New Mexico, New York, Massachusetts and elsewhere were arrested. Hundreds of women were fined and dozens were given jail terms. By summer 2003, the game was over, the jig was up, the caper fini. The cops had won—for now.

Janet, who did not actively recruit for WHW, was never arrested, but she suffered for Angela, who pled guilty in court, was fined and given several hundred hours of community service. The fine was less than $10,000, but she also had to pay thousands of dollars in attorneys’ fees.

“It was horrifying for her,” says Janet. “Her arrest made the nightly newscasts and she was humiliated. She went from this upbeat, energetic person to someone in a deep depression. She still thinks everyone is talking about her behind her back. It broke up her circle of friends. She’s angry that nobody came to help her after all she did to get them involved. I remember we all thought Angela was made of gold. Just touch her and you could be, too. I hope she comes out of this OK.”

Local law enforcement officers say a wager against the reappearance of the pyramid is a sucker’s bet. “It’s like crabgrass,” says Locher. “You can’t kill it. It’s going to pop back up somewhere, whether we like it or not.”
The intriguing truth is that the illegal aspects of WHW still don’t seem to pose a barrier to many Sacramento-area women. Many are still annoyed that law enforcement got involved. They are quick to point out that not all pyramid formats are illegal. Multilevel marketing companies legally sell products throughout the United States, using the pyramid structure. The difference, according to the law, is that the legal ones are product-oriented. The line here, though, is often very thin. Multilevel startup companies are shut down every year because they rely too heavily on thinly disguised initiation fees from those hoping to join the pyramid.

In most other ways, WHW and the other illegal pyramid schemes closely resemble these legal multilevel operations. WHW organizers clearly borrowed a number of techniques that made Amway such a success. For example, some who experienced an Amway sales pitch in the earlier days may remember that a great deal of time was spent getting you to verbalize what you planned to do with your profits. The same device is used by the WHW ringleader on the now infamous surveillance tape. The women are remarkably candid with their answers, illustrating how comfortable they are in their WHW groups.

“I’ll pay some bills,” the first woman says. Then, after a moment’s thought, she adds, “Then I’m going to go get my divorce.” Her response brings thunderous applause and cheers. Others say they were going to help their families and churches, take a vacation or start a new business. One woman announces she is “going to get a boob job.” All of them would later face arrest. That fact, however, may not stop them the next time a similar scheme roars into town.