INSIDE MONEY: Programme 1 "THE CURSE OF THE PYRAMID"

PRESENTER:  LESLEY CURWEN

LISTENER :  LINDA SMITH 

PRODUCER:  LYNNE JONES

Transmission Date:  21st  JULY 2001 and repeated 23rd July 2001

THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT 
IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST.  
THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER 
THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN 
GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED 
HERE.

Britain is in the grip of pyramid fever.  People are handing wads of cash into 
so-called pyramid schemes which promise sky-high returns.  Some are 
emerging as winners, even getting pay-outs as big as £24,000.  

We’ve talked to people involved right across the British Isles from Glasgow 
down to Brighton and all points in between.  Since the autumn we estimate that 
millions of pounds in cash have been changing hands in front rooms and pub 
car parks. It’s a new craze that’s taken the country by storm, but it’s also one 
of the oldest get-rich-quick tricks in the book. That’s because all these pyramid 
schemes have the same fatal flaw, there’s never enough money in the system 
for everyone to get paid out.  In the latest version the ratio of losers to winners 
will eventually be eight to one, that’s eight losers for every one winner. 

It might seem crazy, perhaps even an immoral way of managing your money, 
but there’s nothing to stop any of us sticking our savings into a pyramid money 
scheme.  

Radio 4 listener, Linda Smith, has been watching all this from the sidelines and 
is struggling to make sense of it.

"I want to know more than anything why is it allowed, you know, shouldn’t something 
like this be regulated? Is it legal? I don’t even know if it’s legal or illegal.  Or should 
we just say to people, we’re in a free country you know this is my business, it’s my 
money, I earn it, I can do what I like with it.  Perhaps you can help me with that."

Linda, a trainee economics teacher, has a personal interest in this subject, 
which has brought her face to face with the innate flaw at the heart of every 
pyramid.   In May, she came home to Herefordshire, after a week abroad, to 
find frantic messages on her answering machine from her son-in-law. He’d got 
involved in a pyramid money scheme and wanted her help.  When she arrived 
at his door, she couldn't believe what she saw. 

"He just showed me lots of papers with so-called pyramid little boxes on, showed me 
envelopes with money in.  They had people knocking the door continuously, the 
phone was ringing constantly when I was there.  In fact there were eight people 
sitting on the bench in the garden waiting to find out where they were in the pyramid.  
To me it was just mind boggling because I thought what on earth is going on here?"  

In the space of just two days, the family had succumbed to pyramid fever. 
Their home had become the scene of chaos and anxiety. Linda’s son-in-law 
had started a pyramid scheme where each member paid in a hundred pounds, 
expecting to get back £800. For one person to get their pay-out, eight more 
people need to pay in. For THOSE eight to get THEIR pay-out, 64 more need to 
hand over a hundred pounds each.  News of the scheme spread quickly and to 
start off with, it went like clockwork.

"I started on the Friday say 4pm and in four hours I was paying people out. I paid five 
people out in less than 24 hours.  The last £4,000 come into this house in less than a 
day you see."

"Tell me about what it was like when you actually could pay-out?"

"Well, it’s a good feeling to pay-out, I mean the first person I paid was a person who 
was in a bit of debt, to ring him up and tell him I had £800 for him was a really good 
feeling and of course I did that with seven or eight people then."

But for the 64 people now in Linda’s son-in-law’s pyramid to get a pay-out, he 
then needed eight times 64 - that's over 500 new people. The maths was 
beginning to become clear. Linda explained - the scale of the task was making 
him increasingly anxious. 

"I just realised that something had snapped.  My daughter, she walked into the kitchen 
and my son-in-law said, ‘who are you, what are you doing in my house?’  It was just 
horrendous."  

"What do you think it was that caused this anxiety for your son-in-law that made him 
become ill?"

"I think my son-in-law quickly realised that a lot of people were going to lose on this 
because he knew he didn’t have the time or commitment to continue it. He was 
feeling so guilty that these people aren’t going to get their money. At one time he 
said, ‘oh I’ll have to borrow money, I’ll have to get some money myself to pay 
everyone back’, and he kept on saying, ‘oh everyone will get their money won’t 
they?’.  But I think he really knew underneath it they weren’t going to get it and that 
stressed him even more."

"So was it the principle of the pyramid scheme that in fact you have to keep 
recruiting people, that’s what made him anxious?"

"Yes, definitely.  It’s like all these type of pyramid schemes that we’ve had in the 
past.  You have to keep bringing more people into it to make them successful."  

It was the realisation of this catch in the pyramid game that tipped Linda’s son-
in-law over the edge.  He suffered a severe bout of stress and was admitted to 
a psychiatric hospital for several days.  Linda took control of the scheme and 
sorted out the paper work. She decided the only choice was to let the pyramid 
crash. She paid out the next two people in line to get their money and told the 
rest they would get nothing.  They were the victims of the fatal flaw.  There’s 
never enough money in the system to pay everyone and the winners win at the 
expense of the latest recruits.  It’s a case of robbing Peter to pay Paul.  This 
pyramid had grown and collapsed very quickly but the outcome is always the 
same in the end, though the pyramids guise may change.

" ‘Women Empowering Women’.  Our main goal is the empowerment of women and 
providing them the financial and emotional abilities to support themselves and their 
loved ones."

This is the latest and grandest incarnation of a pyramid money scheme and it’s 
spreading by word of mouth through the female population.  Photocopied 
papers are handed round bearing the rules and the mission statement. No-one 
knows who originally wrote the blurb, but it’s claims are startling.

"We are literally creating a new economic experience. The old belief of having to 
work hard for anything worthwhile is changing and shifting with this process."

Underneath the gloss you get the message that money can be made easily.  It’s 
a classic pyramid where you pay in a certain sum and then queue your way 
through different layers of the pyramid until you reach the top and get the big 
pay-out.  But in this case the initial stake is a whopping £3,000 with an 
expected return of £24,000.  There is a twist.  Once a woman’s got a pay-out, 
she’s encouraged to give some of the profits to other needy women.  But the 
source of the money is the same.  Those yet to be recruited.  

Linda wanted to know what people are told when the scheme’s being promoted, 
by those already in the pyramid money queue. The literature has no health 
warnings about the risk of losing your money; and there's no discussion of the 
real number of people who need to be recruited, for each person to work her 
way up to become a "receiver", who gets the £24,000. 

There is a diagram of a triangle composed of heart-shapes - the biggest heart 
represents the receiver. All around the country, at private meetings in people's 
homes, members are being recruited into "Women Empowering Women". We 
got Linda invited to this meeting at a detached house on the Welsh Borders, 
and we secretly recorded the discussion.

"Right then everybody I’m just going to briefly explain what this is about.  It’s called 
‘Women Empowering Women’.  It started in America."

There were ten other women in the room including the receiver who was well on 
the way towards getting her pay-out.  We were the potential new recruits and 
they wanted our names to end up on their pyramid chart.

"This is our plan or circle at the moment.  All those people on that chart you see 
they’ve all paid their £3,000, all of them. Some people drop within two weeks, some 
people are making their money in two to four to six, it just depends.  It doesn’t 
matter how long it takes, you will get there.  I’ve seen it work many times.  There is 
no catch to it at all. It does work.  You will be amazed at the people that are in it.  
People from Inland Revenue are in it, police are in it. I mean at the end of the day if 
you were to put £3,000 into a bank you would not get that return back.  You just 
wouldn’t."

When we asked how long it would take to, get our pay-out if we joined, they 
started to talk about the maths.  It was explained to Linda that to move through 
the layers of the pyramid from a newcomer to the receiver position a total of 
twenty-four people would need to join after her at £3,000 a time.

"It’s twenty-four people until you start receiving your payment.  But you’re not 
responsible for getting these twenty-four people, everybody in the group is.  As long 
as you get twenty-four."

"It doesn’t matter you all work together don’t you?"

"Lin if you know say, a few other people and they’re interested, it works like that and 
they probably know some more people.  You feed off each other." 

"It does sound too good to be true doesn’t it?"

"There’s no catch to it Lin, there’s no catch at all. I mean yes you could lose your 
money."

"The only thing is if you run out of people, but it’s not very likely at the moment."

In fact the scheme is quite likely to run out of people.  We’re back to the maths 
again.  Stick with me here. It’s true that 24 recruits are needed per 

pay-out, but there were ten people in the room so that’s actually a total of 240 
new recruits for them all to get paid out.  And now you get to the mind boggling 
bit. They, in their turn, would need another 5,760 new recruits.  It all begins to 
sound more and more likely that you will run out of people. Linda and I went to 
check this out with an expert in white-collar crime, Professor Michael Levi at 
Cardiff University.  He’s familiar with pyramid schemes and told us there’s no 
question that sooner or later schemes like "Women Empowering Women" must 
run dry.

"Everyone thinks about there being roughly 15 million adult women in the UK, then 
after about ten layers of the power of 8, you run out of that population assuming no 
reinvestment. By definition the bottom layer is 8 times bigger than its preceding 
layer, so there will be undoubtedly a lot of people in that bottom layer who never 
have invested before and therefore have lost all of what they have put in and those, by 
the nature of the kind of scheme that this is, will be the friends, relatives or 
acquaintances of those who are already in there.  That’s what gives some of these 
schemes their morally depraved character.  You have to, by the nature of things, 
recruit your mates."

"In a meeting I recently went to where there were ten ladies, they were trying to 
convince me that in order to receive my money, we only needed to recruit 24 
members. However, what they forgot to tell me was, it was 24 members for every 
one person, so effectively we needed 240 to make every one in that room get their 
£24,000."

"That’s quite a commonplace thing.  It’s left ambiguous.  I think that this kind of 
mathematical reasoning is quite alien to many of us, so they can claim that they 
weren’t conning the public but those people will certainly feel conned if they don’t 
get their money back."

There is at least one place in Britain where "Women Empowering Women" has 
already collapsed. 

We’ve just pulled out of Lymington Harbour on the ferry to the Isle of Wight. 
The reason we’re going to the Isle of Wight is because this was the first place 
that "Women Empowering Women", this particular pyramid scheme, arrived in 
the UK and we’re going to talk to people who’ve lost money there.  

"Yes, well I hope shall find that tomorrow.  We shall find some more answers I’m 
sure as to exactly how much people have lost and how many people have lost as 
well."

The Isle of Wight is a small and tight-knit community, the sort of place where 
schemes like this can spread quickly.  We spoke to several people 

who’d lost money.  One of them agreed to an interview.  Sue who’s retired told 
Linda she’d paid £3,000 to a local woman to get her name on a pyramid.  That 
was back in March. But since then, only one newcomer has joined the 
pyramid. It doesn’t look good.

"The one who I handed my money over to, she was a receiver and she’s got all of our 
money."  

"Can I just ask how long it’s been now?"

"Three, four months must be."

"That must be pretty tough."

"Well, yea I should say so.  Doesn’t sort of bear thinking about really does it?"

"Can I just ask you.  £3,000 to me is a lot of money and I’m sure it is to you. How did 
you raise the money?" 

"It was really all our savings."

"You must feel really really disappointed by the people who took you into it?"

"Yea in some ways, but also we’re still hoping that people are going to go back in and 
it’s going to kick off, but again saying that’s wrong because someone at the end is 
going to lose.  You know so really I can’t feel that I’d want to say to somebody now, 
look this is really really good, come in because I couldn’t do it to somebody else."

"So what do you think about the way the literature is written?" 

"You’re not really reading it, the hypes there, you’re going to get this money within 
the two weeks or three weeks, you’re not really reading that. It’s only now when I sit 
down and think well my God, it’s like a hoover, I’ve been sucked in." 

If Sue had lost her savings because of bad advice from a financial adviser or if 
she’d been sold a financial product which didn’t deliver a promised return, she 
could complain to the authorities.  But in this case there is nothing she can do.  
Despite the mathematical certainty that there will be losers from such a scheme 
it seems to be quite legal.  Linda wanted to check so we contacted the 
government.  First we went to the Department of Trade and Industry who 
regulate trading schemes.  The DTI told us their bit of the law does not cover 
schemes where there aren’t any goods or services on offer, where cash is 
simply circulating around a group of people so the scheme is not breaking 
those laws. They referred us to the 
Lotteries and Amusements Act which is the responsibility of the Department of 
Culture, Media and Sport. They’d been looking into whether "Women 
Empowering Women" might be an illegal lottery.  But they decided it’s not 
covered by that legislation either.  The government said it’s well aware of the 
risks of such schemes but it has no powers to stop them and now it’s clear 
they’re not illegal that’s perhaps why the promoters of one particular scheme 
are bold enough to make claims like this.

"Look invest only £100 and receive £88,300.  Smaller outlay, greater rewards, 
more control and less risk.  Be part of this community investment club."

We saw this extraordinary advert in one of the Isle of Wight’s newspapers and 
later picked up a leaflet which told us that this investment club was an organised 
operation run by a central co-coordinator called Chris.  But our listener, Linda, 
was gobsmacked to discover that the club openly recruits new members from 
its own shop in a pedestrian street in Newport. She was keen to investigate its 
staggering claims, so we found the shop, went in, and secretly recorded the 
sales pitch.

Inside, the walls were freshly painted. A vase of flowers sat on the desk of the 
man who greeted us. We weren't alone - there were several other people who 
seemed eager, not to say impatient, to part with their money. 

"The way it works is we list down everybody that comes into the office and they get a 
number, at the moment we’re up to 459." 

"Very nice where do I sign?"

"Do you want to read this first?"

"No thank you."

"I read it last night."

"What’s your name my love." 

"I want to invest for myself and my daughter as well, can I do that?"

"Yes you can."

The man behind the desk did explain to Linda the details of what is an extremely 
complex scheme, working through five different levels of what he called a matrix 
with a stacking system.  It is of course another pyramid scheme in a different 
guise. He told Linda it wasn't possible to say how long it would take to receive 
that remarkable sum of £88,000, or how many new people would need to join. 
However he was optimistic about receiving the first pay-out. 

"As soon as you receive you’ll get a phone call and a gentleman will say to you, 
congratulations you’ve received, you will then go through to whatever level.   By all 
means in four weeks time a gentleman will ring you if you’ve not been paid out by 
then.  Don’t worry just sit back and wait for the money to come.  Nice to have you 
here on board anyway." 

The club was doing a roaring trade.  In twenty minutes, we saw £800 pounds 
change hands. It disappeared into the top drawer of the desk, under a tea 
towel.  According to the club's own figures, more than £40,000 must have been 
paid in. And yet there's no company structure there, no financial accounts, no 
visible security measures to protect people's cash, and no information on 
whether the Club's organiser is getting interest paid on the assets. 

We phoned the so-called central coordinator, Chris. She didn’t want to record 
an interview. But she said people have got to take their choice whether they’re 
going to take a risk with their £100. When we asked if anyone had lost money - 
she said no, not yet, because the scheme was still going, and she expected it 
to run for years and years.  But what she wouldn’t do was disclose her 
surname. 

As we drove towards our next port of call, I asked Linda for her reaction to 
Chris and the shop?

"Obviously I just can’t get over the cheek of it, I mean you know let’s face it, she’s 
running a business it seems and people are going in there and handing over the money 
in broad daylight.  She’s convinced it works obviously and she’s also convinced it’s 
going to go on for years and years and years.  I mean I really think it’s just out of 
order."

But is it out of order? Linda and I went to ask the local Trading Standards 
Inspector, Richard Stone. He'd watched the rise and fall of "Women 
Empowering Women" on the Island - and now this pyramid shop was operating 
on his very doorstep.  Linda asked - was the shop, the so-called Investment 
Club, above board?

"So far as I’m aware at this stage they don’t appear to be breaking any legislation. It’s 
just an advance on the original scheme that we’ve already seen."

"How do you feel about this whole thing yourself as a Trading Standards Officer, 
you’re supposed to be protecting the population of the Isle of Wight from being 
ripped off. Have you got enough powers?"

"Clearly, I would like the powers to be able to do something about it but what we’ve 
had to do is do our very best to educate residents in this area."

"Do you think that schemes like this should be illegal?"

"Of course they should be illegal, of course.  It’s unacceptable for schemes like this 
to operate and clearly in an ideal world it would be nice to see the perpetrators 
prevented from doing this sort of thing.  The difficulty is in legislating to cover this 
type of scheme."

But some places in the world do have legislation against such schemes.  Linda 
wondered whether those laws are effective.  To find out I made a flying visit 
across the Atlantic.

I’m driving through the green and roving hills of Chenango County, 200 miles 
north of New York City, past farms and wooden houses with the Stars and 
Stripes flying from almost every porch.  I’ve come here because in this state, 
like almost all US states, schemes like "Women Empowering Women" are 
illegal and now those laws are being enforced.

"Hi, I’m Lesley Curwen from the BBC."

"Welcome to Norwich.  I’m Joe McBride, I’m Chenango County District Attorney."

"It’s just started raining."

Joe McBride, the District Attorney for Chenango County, takes pyramid money 
schemes like "Woman Empowering Women" very seriously. It took off here at 
the end of last year, and according to Mr McBride, quickly reached epidemic 
proportions.  Here in the US, the emotive language seems to play a bigger part 
in why women sign up -- they're attracted by the talk of supporting, sharing, 
and giving to the needy. They maintain it's NOT a get-rich-quick scheme. But in 
an attempt to stamp out "Women Empowering Women", Joe McBride issued a 
public warning, to remind women they were committing a criminal offence if 
they took part in it or promoted it. He doesn't mince his words about the effect 
it's been having on people in his county.  

"This is ruining lives and it’s been a cancer in our community.  It sells itself to good 
people in your community, that’s why it’s so insidious. By the very nature of the 
scam it can’t be successful because there’s always going to be, no matter how many 
people participate, eight times as many losers as there are winners. Initially I think 
they come in with good intentions and once they participate they lose their 
perspective, they lose their judgment and in our county and in our town they’re acting 
like cult members.  You cannot reason with them, you cannot  have a discussion 
about for every winner there’s eight losers.  I need to enforce the law so it’s clear to 
every other member of my county in my community that if they participate, whether 
they get their money out or not, they’re hooding other members of the community 
and most likely going to hurt themselves."

"In the United Kingdom these kinds of schemes aren’t illegal.  What do you 
think of that?"

"Well, that’s obviously the choice they’ve made over in the United Kingdom.  But I 
can’t see any redeeming social value.  Cleary they’re not helping women. I kid around 
that it should be called "Women Exploiting Women" because that’s what it is."

When despite his warnings, Joe McBride saw a letter written to the local paper 
defending "Women Empowering Women", he took the bull by the horns and 
decided to use the legislation to prosecute the woman who wrote it.

"Name is Shana Jaycox.  Have three children, live in Norwich, born and raised there.  
Met my husband on a blind date. I am a Sales Manager for an advertising company."

She seems like the archetypal American Mom. When we spoke to her, she’d 
just been competing in a beauty pageant. But Shana Jaycox is now facing a 
maximum sentence of a year behind bars for promoting an illegal pyramid 
scheme and taking part in it. It's the first prosecution involving "Women 
Empowering Women" in the State of New York.  Shana is actually pleading not 
guilty, though she's a big supporter of the scheme and doesn't think it should be 
outlawed. [Editor’s note: The case against Shana Jaycox was later dismissed "in the interests 
of justice"]

"This isn’t a gambling ring, it’s not an investment ring, it’s not anything like that.  
You’re promised nothing and there are many many people that I’ve seen benefit from 
"Women Empowering Women".  Single mothers who can’t pay bills, women who had 
breast cancer.  That’s why I personally felt that it was a wonderful thing."      
    
"Do you see why the legal authorities would want to stamp out ‘Women 
Empowering Women?’ "
 
"No, in my mind I feel that this group is benefiting women. I don’t feel there is 
anything objectionable with sharing your money with other people.  If I’m going to 
work 50 hours a week and I’m going to make a decent living, and I’m paying taxes to 
my government and I decide one day that something comes along and there’s 
someone in need, that’s my hard earned money, and if I want to use it to become 
involved in something, I don’t feel that the local DA has any right to tell me that I 
can’t."

"Why do you think the District Attorney has brought this case against you?"

"I think he’s got a public hanging on his mind and unfortunately he’s come after me." 

In fact, the prosecution seems to be having the desired effect. The spread of 
"Women Empowering Women" is slowing down in Chenango County. DA Joe 
McBride concedes this sort of legislation is difficult to enforce, because 
evidence is hard to come by, as witnesses to the offence are often friends or 
family. But he maintains it's still well worth having it, as a deterrent.  The real 
test will be whether he's successful when Shana's case comes to court.   

Back in the UK, Linda listened to the interviews I'd recorded. 

"Thinking about Shana herself who said she’s a mother of three, she’s never had a 
parking ticket in her entire life.  If she was successfully prosecuted, I’m afraid my 
sympathy would end there.  If they’re enforcing this type of law in the United States 
it’s obvious that it does work, it is workable then, shall we say, rather than it does 
work, because obviously it hasn’t acted as a deterrent to some people. So therefore if 
it’s workable in New York state, surely it’s workable in any state and in any country."

Here in Britain, this issue of pyramid money schemes falls within no one 
authority's remit.  It's not clear whether that's because it's fallen through the 
cracks of the legislation, or whether Governments have in the past washed their 
hands of the issue, making a conscious decision to let people take risks with 
their own money. In a society where financial regulators have more power than 
ever before, it seems remarkable that these schemes can run wild, with no legal 
controls, despite the fact they cause distress and hardship.  So, at the end of 
her investigation with Inside Money, what does Linda feel?

"I’m disappointed because the government has done absolutely nothing to stop these 
schemes and, to be honest, with you I don’t think we’ve got the time at the moment to 
enforce legislation. I mean it’s happening here and now.  Someone right now is 
losing money.  We have got to listen to the voices of the losers and at the end of the 
day that’s all these schemes are about.  In simple terms it’s robbing Peter to pay 
Paul.  It’s as simple as that, so be warned."

PROGRAMME ENDS 
Programme 1 - "The Curse of the Pyramid" 		10