Officials say 'gifting circle' is illegal

A local prosecutor says a women's gifting-circle scam is sweeping Mid-Michigan. It invites women to give $5,000 cash, with the potential of gaining $40,000. Those in the circle say it is perfectly legal based on the current gifting laws, however local law enforcement explains that it is a pyramid scam and a seven year felony!

It sounds like a great idea - women getting together to help each other out. But, it TMs not that premise that has law enforcement TMs attention. In good times, this is flat out greed, and in a bad economy, this is preying on people who can't afford to lose this kind of money," says Lapeer County Prosecutor Byron Konschuh.

Prosecutor Konschuh explains the group is highly persuasive. No men are allowed, and those women invited are encouraged to join the exclusive circle. Konschuh compares it to a harmless Tupperware party. "Everyone's been invited to a Tupperware party or some other type of party, there's some peer pressure there to buy, so you end up spending 20 or 30 bucks on crap you don't want and that's what they're preying on. But this party is not $20 or $30; it is $5,000 in cash.

From the group TMs own literature, it says, "To enter, you give your ($5,000) gift to the woman who is in the Receiver position in your circle... Your journey continues through your support of your circle and your willingness to invite others whom you care about into your new community."

The women involved say the money goes to helping other women. According to a woman from the circle, a recent gift helped a struggling woman pay for new brakes and tires on her car. Those involved say they don TMt recruit, but that they simply invite. They say they don TMt ask for a fee; they ask for a gift and expect nothing in return for this simple gift. This is the reason why they say it is perfectly legal.

Prosecutor Konschuh says just because they say it TMs legal, does not make it legal. "Whether they sign something that says ~I don't expect anything in return TM, the piece of paper means nothing. They fully expect to get $40,000; that's why they're doing it. That's why that law does apply; it's a simple pyramid scheme no matter how it's painted.

The group says the circular structure makes it legal. It says each person gives and each person benefits. However, law enforcement says the fact is someone is making money while others are out. "It's amazing to me the tips that I get start explaining why it's not a pyramid scheme, but it's a circle, it comes back to you, all kids of catch phrases to empty your pockets," Prosecutor Konschuh explained.

Michigan State Attorney General Mike Cox is investigating several gifting circles. He says, in a consumer alert, "No matter how these schemes are presented, the bottom line is the same for all -- cash gifting schemes are illegal in Michigan."

Those in the circle say they have talked to attorneys who say it is legal. However, members didn TMt want to go on camera, saying they fear the government could change the gifting laws.

Prosecutors say if you TMve been invited to join a group like this, or if you TMre already in one, call the police. They are looking for the organizers of these groups.

NBC25 is continuing to follow this story, and wants to hear from those who have been affected by it. If you, or someone you know, have any information on this organization, please email You may remain anonymous.