Wolf in sheep's clothing:Recognizing and saying 'no' to peer-driven financial scams

NEW YORK -- You're savvy, you know you didn't really win the Irish National Lottery and a Nigerian princess doesn't really need your help to get her millions out of the country, despite the many emails you've received on these subjects.

But what if someone you know and trust says to you:

"You are helping other women..."

"The church members are counting on you..."

"No, this isn't illegal; it is all about giving back and being helped in return..."

Or -- "Everyone you know is doing this too. It's a really good idea."

Doubtless members of Bernard Madoff's Palm Beach Country Club told each other that for years before they found out it wasn't true.

 Shalawn Smith got the phone call just last week. "All of a sudden my phone rang and it was a conference call with some friends in another state, with another gentleman on the line with them. It was so awkward, but to be polite I listened, these were friends."

Invest just $50, the stranger on the line urged, and in a matter of weeks he would return $10,000. Smith's friends on the phone were enthusiastic. They'd already given this man some money and wanted her to get the chance to invest along with them. How did they know him? A deacon in their church.
Smith politely said "no," to the investment offer, but not everyone can be that strong when their friends are bubbling with the news of a get-rich scheme they believe in. How can you keep your money in your pocket and not succumb? It's a tricky path to suddenly find yourself on.

"Ask yourself this question -- what does your heart say?" A powerful closing line, it is one of the standard pitches for a "charitable gifting concept" that appears under names like Women Empowering Women or The Dinner Party. Whatever it is called, whenever it crops up (it has cycled through the U.S. and the U.K. and right now it is going strong in Canada's Alberta province) it is illegal.

Attendees at a recruitment meeting for one of these groups look right at a chart that shows how they will move around the "table" as other women join in and pay up after them, until their name is at the "dessert" spot and they receive the money -- as much as $40,000. So there before their eyes is a diagram of a pyramid scheme, yet women succumb and hand over their money and their hopes and dreams.

 Why? Because everyone else is so enthusiastic about it. Because everyone else assures them that this is a wonderful thing for women, for entrepreneurs, for stay-at-home moms -- the chance to suddenly have a windfall that helps them pursue their dreams. And you can have it too, if you "gift" $5,000. Surprise, it is illegal, despite the organizers' claims to the contrary.

Fending off peer pressure

So how can you make sure you don't fall under the sway of heavy peer pressure when it comes to your financial decisions? Here are a few things to keep in mind:

• Never act on emotions. If you should someday find yourself in a room full of people, listening to a financial pitch, never make a decision that night. Take information, go home, and think for a few days to let your emotions cool and your head clear.
• Believe in yourself, don't let yourself be bullied. Your mother told you this too: just because your friends are all doing something doesn't mean you should do it.
• Check it out. Does something sound too good to be true? It probably is, and a call to your local district attorney or the Better Business Bureau might yield information. Also, check out www.crimes-of-persuasion.com, which is chock full of information on current pyramid investing schemes.

So when your friends come knocking with tempting ideas, be nice. But don't follow blindly.