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Jan. 8, 2004


The Weekly Wrap

Pyramid Scam hits Humboldt


 THE WEEKLY WRAP

PLEA BARGAIN IN PUPPY KILLINGS: Animal rights advocates said they were saddened by Monday's plea bargain in the case of two Blue Lake men accused of killing eight puppies and maiming a ninth last June. "I'm disappointed but not surprised," said Angela Crane, a board member of the Eureka-based Friends for Life Animal Rescue. "I think there's still a mentality out there that animals are secondary beings to humans." Adam Curtright, 23, pleaded guilty to one count of felony animal cruelty and faces a maximum prison sentence of three years, said District Attorney Paul Gallegos, who prosecuted the case. Adam's brother, Paul Curtright, 27, the owner of the mother dog, was in Willits at the time the puppies were killed and pleaded guilty to misdemeanor animal neglect. He faces up to six months in county jail and a $1,000 fine. The litter of dogs -- some shot, others with slit throats -- was found by Blue Lake City Councilman Sherman Schapiro as he was jogging off a local road. Gallegos said that while the incident was a tragedy, "what people will discover at the sentencing hearing is that these killings weren't done for kicks. It certainly wasn't done to derive some perverse pleasure." Kathleen Kistler, executive director of the Sequoia Humane Society, said she had hoped the case would go to trial. "We're always disappointed when cases are not fully prosecuted," she said, noting that violence against animals is often a sign that the abuser will also hurt people. On the other hand, she said, "I was of course pleased to see there was a felony count recognized in this case. It was a small step forward. We just didn't see [animal abuse] cases prosecuted under Terry Farmer at all." The two men are scheduled to be sentenced before Judge Christopher Wilson at 2 p.m. on Feb. 1.

WORTH SCORES: Deputy District Attorney Worth Dikeman picked up a big endorsement on Monday, after the board of the Humboldt Deputy Sheriffs Organization announced its support of his campaign to replace DA Paul Gallegos if the recall succeeds. Dikeman spent around 20 minutes addressing the union organization -- one of the first groups to come out in favor of the recall -- at a meeting of its board Monday night, but according to union president Dave Morey, Dikeman's presentation was something of a formality. "Worth's reputation arrived in this room before he did," Morey said, adding that most deputies knew Dikeman as an "intelligent, capable, conscientious and charismatic prosecutor" who always made himself available to law enforcement's rank and file. Dikeman has consistently said that he supports his boss and will not vote for the recall, but that doesn't change the deputies' position. "We're even more in support of the recall now that Worth has thrown his hat in," Morey said.

PL LAYOFF? It's been on the streets for a week or so now: A layoff of as many as 400 Pacific Lumber employees -- half the company's workforce -- is looming. On Tuesday, PL spokeswoman Erin Dunn tried to dismiss the matter by saying, "We don't comment on rumors." What she didn't say was whether the rumor was false.

CHILD ABDUCTION: The Eureka Police Department issued what is believed to be the county's first Amber Alert Monday -- and it worked like a charm. That morning, 37-year-old Jimeise Dilley of Eureka took her two daughters -- ages 11 and 15 -- from their schools on the first day of classes after the winter break. A family court had previously awarded custody of the children to their grandparents. The Eureka Police Department soon got word of the children's disappearance, and the case fell to Detective Curt Honeycutt -- a 10-year EPD veteran on his first day as a detective. Honeycutt talked to the childrens' grandparents and witnesses to the abduction, and discovered that Dilley's history meant that there may have been a chance that the girls were in danger. At 6:50 p.m., he and the California Highway Patrol decided to put out the alert. Just two hours later, word of the alert reached Dilley in Nevada. She pulled over and turned herself in to the local authorities.

ARCATA WOMAN MURDERED: An 81-year-old woman found dead last Friday in her home at 784 H St. was identified as Betty Pennywell, a longtime resident of Arcata, said Lt. Tom Chapman of the Arcata Police. Humboldt County Coroner Frank Jager said his office had tentatively determined that she died of suffocation and stab wounds to the neck. Her son, Albert T. Mercuri, 43, of Eugene, Ore., arrived at the home when investigators were examining evidence and turned himself in to police. He is being held at Humboldt County Jail.

ROGUE WAVE CLAIMS TWO: An 8-year-old boy, whose body had still not been found as of press time this week, and the uncle who tried to save him were drowned last Friday afternoon when a rogue wave swept over their family at Freshwater Spit, a half-mile south of Orick. "We've been trying to get out and sweep the beach either by foot or by ATV at least once a day. Unfortunately, we haven't found anything at this point," said Kale Bowling-Schaff of the Redwood National and State Parks. Eight-year-old Joseph B. Bailey of Olalla, Wash., is presumed dead. He was with eight other members of his extended family, who had been vacationing in Southern California, when a wave washed over seven of them. His mother got a hold of the boy but a second wave washed Joseph out to sea, Bowling-Schaff said. His uncle, Jeffrey Glenn Russell, 38, of Tacoma, Wash., was at the car when he saw the boy get carried out, and ran into the ocean to try to rescue him. Fifty minutes later, Russell's body was found. Bowling-Schaff warned that rip tides and rogue waves are not uncommon. "What happened at the spit is possible at any beach on the Northern California coast. In winter, the best policy is to stay far back from the surf and to keep an eye on it at all times." The tragedy was a grim reminder of the death of 4-year-old Peter Kautzmann of Orick, who was drowned by a rogue wave at nearby Dry Lagoon State Park in November 2002.

TALKING MONEY: Redwood Capital Bank, slated to open its doors this year, is holding informational meetings next week for potential investors. According to a Jan. 2 letter by President and CEO John Dalby, anyone interested in discussing "an investment in the bank's common stock" can attend either of two receptions scheduled for 6 p.m. next Tuesday and Wednesday at the Eureka Inn. RSVP by phone (444-9800) or send an e-mail to: reservations@redwoodcapitalbank.com.

SHERIFFS TAKE OVER ANIMAL CONTROL: Beginning Jan. 4, management of animal control services for Humboldt County was moved from the county's agriculture department to the Sheriff's office. Lt. Steve Knight, previously in charge of the detective bureau, will take the helm of the operation -- which will include running the proposed new $3.1 million animal control building, slated for completion July 1 near the Arcata airport.

LEAK CLOSES ARCATA ARTISANS: Rainy weather and a drainage problem led to the closure Dec. 30 of the Arcata Artisans shop, an artists' cooperative in a new building at 883 H St. Fortunately, there was no damage to the artwork, as the leak was discovered immediately. "We were really lucky we had a member there taking down some Christmas stuff," said Betsy Roberts of the Co-op. The water appeared to be draining from the apartment above, and was coming through all of the ceiling openings, such as light fixtures, Roberts said. President Marian Coleman said she was not sure of the exact cause of the leak, but that representatives of owner Alex Stillman, who was out of town, had responded immediately to correct it. Members were hoping to have the shop open for Arts Arcata on Friday, but it was doubtful the work could be done in time.

THEY'RE WATCHING: A group of "concerned citizens" wants to raise awareness about the possibility that a San Jose energy company may build a liquefied natural gas terminal on Humboldt Bay. To that end, they have launched a Web site -- www.LNGwatch.com -- with information about the Calpine proposal, which the group opposes. "LNGwatch feels the community is not getting the full story on what this project means," said the group's spokesman, Mike Buettner. The 55-year-old Eureka resident said about half a dozen Eurekans, none of whom are affiliated with any environmental or citizen groups, are involved in the effort.


Pyramid Scam hits Humboldt

by HANK SIMS

A PYRAMID SCHEME TARGETING WOMEN that has been drawing the attention of law enforcement officials throughout the state and the nation has recently hit Humboldt County.

The scheme, called the "Women's Gifting Circle," or "Women Empowering Women," asks women to give $5,000 to a "guide." Afterward, if all goes according to plan, each person who gives the money becomes a guide and collects a total of $40,000 from the people below her.

In practice, for every person who receives $40,000, eventually eight people must lose $5,000. For that reason, pyramid schemes like the gifting circle are banned by California law -- and are ethically dubious, at best.

Despite its illegality, and despite the fact that it is mathematically impossible for more than one-eighth of the participants in the scheme to get the $40,000, the promise of quick, under-the-table money -- as well as of a ready-made community of fellow women, with similar problems and aspirations -- means that the scam will inevitably attract new recruits.

The Journal spoke with one local woman who was invited to join the pyramid, but decided not to after learning that it was illegal. A woman from the Humboldt Bay region who asked not to be identified -- call her Jane -- said that another local woman convinced her to take part.

"It has something positive to me that I like," said Jane. "It could turn out that I just lose the money. It could turn out that I'm completely wrong. But that's just not how I feel about it."

In a reference to Humboldt's extensive underground economy, Jane added: "We live in an area where there's all kind of things going on under the table. I think it's perfectly OK. I don't necessarily think it's wrong just because it doesn't fall under normal business practices."

Promotional material circulating in the county states that the gifting circle is not a pyramid scheme, that it is totally legal and that no one has to lose money by participating. The material describes the scheme in quasi-mystical, New Age terms, clearly to appeal to a specific segment of the population.

"We are a group of women who have discovered a way to help each of us fulfill our dreams," the information reads. "We have joined together in a sisterhood that is truly community. ... A small group of women gave birth to the Women's Gifting Circle over a decade ago. ... This group created a powerful way to access the spiritual, psychic and physical energies. ... Today it is a powerful moving force, giving to each woman who enters."

Jane said she considered the gifting circle to be a positive, community-building endeavor. She said she had participated in weekly conference calls with other people in her "circle." She said that women in the conference calls shared their life stories with each other, and told each other what they planned to do with the $40,000 payout.

Jane said she didn't yet have the money to join the group, but planned on borrowing the $5,000 entry fee from a male friend. The gifting circle printed matter suggests that women who don't have the money to join may take out cash advances on credit cards or second mortgages on their homes, among other things.

It's fraud

Jane said if she were able to join, she would try to persuade others to enter the pyramid underneath her. That's when she would run afoul of the law.

Assistant District Attorney Tim Stoen, head of the county's white-collar fraud and economic crimes unit, said Monday that he had not heard of the scheme hitting the county. He warned that participants in the scheme who actively recruit others could be subject to prosecution by the DA's office.

"I will take whatever is submitted to our office by a police agency very seriously," he said. "We are committed to protecting the public against white-collar fraud, of which this is a specimen."

In late 2002, the FBI and sheriffs from Sonoma and Sacramento counties raided the homes of several people involved in the scheme, arresting at least eight. Six women from the Sacramento area pleaded guilty; they were sentenced to community service and required to pay between $10,000 and $25,000 in restitution. In recent months, arrests have been made in Hawaii, Montana and elsewhere in the United States.

Stoen, who is overseeing the county's lawsuit against the Pacific Lumber Co., said the scheme is a fraud that's essentially no different than the alleged fraud committed by PL during the Headwaters Deal.

"The Pacific Lumber case is a fraud case because the public was deprived of the ability to make a decision based on all the facts," he said. "These women are being deprived of a decision based on all the facts. They are being made collaborators in a process that will victimize other people down the road -- people that they may not ever know."

Jane sees the matter differently.

"You're saying it's illegal because you don't want me to empower myself. You want me to make money in a certain way that you have control over. Well, I'm a freedom-loving person."

Not just women

Kam Coveyou, spokesperson for the California Department of Corporations, a state agency that is trying to stop the scheme, noted that despite the rhetoric surrounding the women's gifting circle, such schemes are not inherently female-oriented. She said that police in Maine had recently busted up a pyramid scheme identical in structure to the gifting circle, but designed to appeal to fans of NASCAR.

Pyramid schemes periodically sweep across the country, often in times of economic hardship. In Ponzi!, a 1975 book on the subject, author Donald H. Dunn notes that the recession of the '70s may have been partly to blame for a pyramid craze that occurred then.

"Some economists believe swindles proliferate in cyclical patterns through history, and they have noted uncanny economic parallels between the 1970s and the 1920s that make both decades fertile eras for fraud," he writes. "Most important, inflation is rampant, as it was following World War I, and people desperate for ways to beat rising prices are quick to take a swindler's bait."

Humboldt County's last major pyramid irruption took place in 1994, at the tail end of another national economic slowdown. At that time, the going rate for a spot on the pyramid was $250, with a theoretical $2,000 payoff at the end.

Dawn Addis, a former HSU student who now lives in Morro Bay, was caught up in the scheme when it came through the county in 1994. Reached by telephone last week, she exhorted her Humboldt County sisters to steer clear.

"Don't do it! It's a bad deal!" she said.

Addis said that it became clear that she was not going to make her money back almost immediately after she bought her spot. She said that she felt lucky to resell her spot to someone else and recoup her money that way. Still, she said, her participation in the scheme left its mark -- if not on her pocketbook, then on her self-esteem.

"It's kind of embarrassing when you're associated with that," Addis said. "When the whole thing ends, it's embarrassing to admit you were a part of it."

Even though Jane sees nothing wrong with the gifting circle, she urged women considering the scheme to research the issue for themselves.

"I want people to be informed," she said. "It's not a ton of money, but for some people it is. So I would say to them, `Why do it? Why have that risk? There may be other ways to get the money you need.'"

 

People burned by a pyramid scheme can file a report with their local police department. Anyone with knowledge of a pyramid scheme should call the California Department of Corporations at 1-866-275-2677.


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