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4 Women Held in Dinner Club Pyramid Scheme

Crime: The upscale suburban scam ensnared thousands, D.A. says. Defense attorney says it was 'a harmless parlor game.'

October 04, 2002|ERIC BAILEY | TIMES STAFF WRITER

SACRAMENTO — Marching to jail wearing handcuffs and brave smiles, the four were a most unusual cast of criminal suspects: career women and soccer moms, PTA volunteers and den mothers.

One is a college professor. Another co-owns a suburban Montessori school. All live in stylish neighborhoods.

Their alleged crime: promoting a dinner club that was actually an upscale pyramid scheme, investigators say. It snared up to 10,000 eager participants and helped $12 million change hands.

They called it "Women Helping Women." The sales pitch--delivered over the past two years at intoxicating girls-night-out bashes and clubby dinner parties--revolved around female empowerment, putting cash into the pockets of deserving women to do good.

Instead, a small number of "greedy women" profited from countless gullible participants, said Jan Scully, Sacramento County district attorney. " 'Women Fooling Women' more aptly characterizes this illegal scheme," she said.

None of those arrested figured they were doing anything wrong, their defense attorney insisted. They considered it an enticing social event with a pot of gold at the end, an experience not much different from gambling in an office football pool.

"These are the kinds of women you'd expect around a Thanksgiving dinner table, the backbone of America," said Bill Portanova, a Sacramento defense attorney. "They're intelligent, educated women who thought they were engaged in a harmless parlor game."

If so, the stakes were steep. To buy in, a participant put up $5,000 and then recruited eight other players. As those players put up money and recruited still others, the participant would move gradually closer to an ultimate payoff of $40,000 promised each player at a culminating "birthday" bash. The scheme was organized around a dinner theme: Participants moved up from "appetizer" status, to "soup and salad" class, then "entree" and finally "dessert" level.

None of the women arrested has had any prior brush with the law, Portanova said, and all declined to comment. They are Cheryl Bean, 54, a former human resources officer at Pacific Bell; Anne King, 47, co-owner of a Montessori school; Pamela Garibaldi, 57, a part-time college English professor; and Cathy Lovely, 49, a homemaker.

Authorities say each of the suspects reaped more than $100,000 in profits by manipulating the game so they repeatedly cashed out at the top level. Portanova said the four deny that anyone cheated.

Each posted $5,000 bail and was released within hours of her arrest Wednesday. They were booked on suspicion of felony conspiracy to cheat and defraud and on violations of securities laws and the California "endless chain" statute. If convicted, each could face three years in prison and fines of up to $10,000 per offense.

This week's arrests may be just the start. Investigators say they expect to snag several dozen more participants in the case, an offshoot of a Ponzi scheme that has been moving through North America since the late 1990s. A similar pyramid scheme was crushed two years ago in Orange County.

Participants are spread up and down the Central Valley and into the Sierra foothills. So far, a dozen search warrants have been issued for homes in some of the region's priciest neighborhoods.

Sgt. James Lewis, a Sacramento sheriff's spokesman, said all the top players have resolutely maintained that they've done nothing wrong. They've suggested, instead, that the arrests are "just another case of men trying to put the thumb on women and keep them down," Lewis said.

"They've wrapped themselves in a shroud of supporting women's causes," he said.

In part, their feelings of invulnerability were bolstered because a deputy district attorney in neighboring El Dorado County attended several dinner parties and suggested that the scheme was legal, Lewis said. "They were given some very bad advice."

Lewis said the four women also committed a "fraud within a fraud," cheating other participants by manipulating the game to cut in line or create phony participants.

Investigators say Bean, one of the biggest boosters of the scheme, inserted her husband in the game under the name "Paulette."

Garibaldi, investigators allege, sponsored her college students as participants, then was repaid when the pupils cashed out by reaching the top of the ladder.

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