Donna Medina was found guilty in a money-making scheme-but does the law punish criminals or victims?
For Donna Medina, one thing was clear: She was no desperate housewife. Suburban bliss had eluded her and would continue to do so if something didn't give. She lacked an upwardly mobile husband, the de rigueur 2.5 kids and house enveloped in white picket fencing. Instead, in the year 2000, Medina was a 34-year-old single mother living in a trailer for which she consistently made late payments. Her child's father was out of work, making her the sole provider for her infant son. Accordingly, when Medina heard about a moneymaking group aimed at women like herself, her interest was instantly piqued. Not only could the group give her a much-needed financial boost, it appeared to have already done so for others. "You know, you'd go to a nightclub, people were talking about it," Medina recalls. "You'd go to work, people were talking about it."
Before long, Medina was more than just curious about the group, dubbed Women Helping Women or Heart Charts by participants.
"Everybody was talking about it, so I decided to go to one of those meetings, see what it was all about," Medina says. "It was single women with children, you know, people who needed help. I saw for myself, and it was helping people."
What Medina saw was cash-in the copious amounts one would expect to find in a Depression survivor's closet or in a music video featuring rappers flashing Cristal and bling.
Mesmerized after witnessing a woman receive $40,000 in cash, Medina wholeheartedly decided to join Women Helping Women.
Little did she didn't know that in September of 2004, four years after joining, she would be convicted of violating New Mexico's Pyramid Promotional Schemes Act and sentenced to pay $40,000 in restitution. At the time of sentencing, Medina also faced four years in prison but was given probation instead.
Now, with the case behind her, Medina says she's ready to move on with life. However, as Medina begins serving her sentence and the Attorney General continues investigating pyramid schemes launched in the millennium, questions remain.
Medina's guilt isn't one of them-she has freely admitted to both participating in and promoting the scheme. But with pyramid watchdog groups asserting that there aren't clear ringleaders in the schemes and the prosecutor in Medina's case grudgingly admitting that there were "bigger fish" involved in area pyramids than Medina, why was she charged with promotion of a pyramid while other participants emerged unscathed?
The question grows even more pressing when considering the fact that, for pyramids to function, every participant must recruit other members, and, therefore, promote the scheme. At its core, Medina's case exemplifies the ambiguity of the state laws surrounding pyramids, laws in which "recruits" of such schemes also are rendered perpetrators.
Donna Medina still remembers her initiation into Women Helping
Women. "At the first meeting, people would explain to you how the charts worked and what the process was, what it cost to buy into it," she says. The charts Medina refers to illustrate how the pyramid operated. They depicted eight entry-level hearts topping the chart and a lone "jackpot" heart at the bottom. To enter the pyramid, one needed
to contribute $5,000. The estimated 10-12 percent of pyramid players fortunate enough to make it to the jackpot spot received $40,000, or what's called a "birthday" in scheme lingo. After accepting a friend's invitation, Medina attended a few pyramid meetings on an observatory basis. At one of the meetings, Medina witnessed her first birthday. "It's all cash," she explains. "It was happening. So many emotions were going through you." Immediately after her first birthday experience, Medina decided to get involved in the pyramid.
According to Robert FitzPatrick, president of a watchdog organization called Pyramid Scheme Alert, more people than not find the schemes irresistible. "You're normally solicited by someone you know and trust. There's a certain element of obligation to go along with this. To say no really says to someone, 'I think you're doing something wrong.'"
Medina's aunt, Leslie Medina, believes that, in her niece's case, financial desperation played the largest role. "They dangle a carrot in front of your face and say, 'If you invest this money and get other people to invest, you'll make money,'" Leslie Medina says. "It's going to entice someone who was living paycheck to paycheck."
When combined with ignorance, economic hardship can make anyone vulnerable to the seductiveness of a pyramid. "The government has been consistently weak or absent completely in protecting the public and informing the public about pyramid schemes, how they work and that they're illegal and why they're illegal," FitzPatrick says. "One reason many people fall into them is that they really don't know how they work. Many people do not understand the math of a pyramid scheme."
According to Assistant Attorney General Jody Curran, 87.5 of all people who get involved lose money
and 12.5 percent gain money-"You have guaranteed victims."
Medina wasn't thinking about statistics when she decided to participate; however, she
was
faced with a dilemma. She didn't have the $5,000 needed to join. That's where sponsors come in. Because many of the working class women attracted to the pyramid lacked the funds to join the scheme, often people already involved provided newcomers ports of entry by allowing them to share their hearts. "Someone sponsored me for $2,500," Medina says. "When someone sponsors you, you don't have to pay them back. You just sponsor someone else when you get a chance and get other people involved."
Once Medina became a player in the pyramid, involvement was time-consuming, to say the least. "We'd have to meet at least twice a week, three times a week in order for the charts to fill up and for you to bring in new people, and for those people to tell their friends and those people to tell their friends." There also were birthdays to attend-such events were the primary way to show recruits that the pyramid earned participants a profit eight times more than the entry fee.
While participation in the pyramid mandated that Medina spend abnormally long periods of time with the women involved, her investment in the scheme yielded results rather rapidly. "For me to actually birthday from the time I got involved, I'd say it took about maybe three weeks," she says. "It was fast." To celebrate her "birthday," Medina had a
luncheon at Tomasita's. "I was just so excited," she says. "How could you not believe it? You actually saw it happen. You actually saw the money there."
But even during birthday celebrations, there were signs that the pyramid was suspect. "When we were going to these meetings, people would tell us, 'Don't put all your money in the bank,'" Medina recalls. "'Save it. Use it as your spending money. Use your regular income from your regular job to pay your bills.'"
Medina says she had no misgivings about receiving money in cash and being told not to deposit it in a banking account. She was simply relieved that the money would allow her "to breathe a little bit." An administrator for the state Department of Transportation, Medina says her job doesn't provide the economic comfort one would think. "Even if you're making $15, $16 an hour, you're paying a mortgage, your daily cost of living," she says. "You're paying the bills. That's not much on one person's income." Medina says she used the $20,000 purse to help her with everyday necessities. "It was a way to be able to go and eat dinner, to go buy new clothing or buy your son or daughter clothes. I was able to start paying my bills on time because I had been paying my trailer payment late, late, late."
FitzPatrick says that it's easy for those involved in a pyramid to ignore the warning signs. "When you're getting $40,000 in a matter of weeks, it's a lot of money to get quickly. For many people, it's an electrifying experience. It's fairly understandable in that environment that they could have believed that this thing was somehow legitimate and plausible. There's an element of deception that is built into the scheme and, in general, a certain element of self-deception."
Pyramids began thriving in American communities in the 1980s,
according to FitzPatrick. "The 1980s was the period of Ronald Reagan optimism," he says. "These were the go-go years. We had more and more rich people, but we also had more people losing ground financially." Factor in groundbreaking amounts of
credit card debt and personal bankruptcies, and a climate ripe for pyramid schemes arose. Some of the larger pyramids during this period had names such as the Airplane Game and the Dinner Party. "They talked about abundance, thinking positively, about an end to scarcity in the world, about giving
and receiving, sharing and a circle of life," FitzPatrick says. Like recent female-centered pyramid schemes, the Dinner Party had a message of female empowerment. "They capitalized on qualities that women have that are different from men," he says. "They'd say it's going to make up for years of discrimination. These things sound good. They have a wonderful, positive, uplifting message about sisterhood and community and support, about using special qualities, being able to help each other."
He, himself, wasn't immune to the empowering messages of pyramid schemes. In the late 1980s, FitzPatrick, then executive director for two industrial trade associations, joined a pyramid in South Florida. When it collapsed, FitzPatrick had an epiphany. "The truth of it flooded in, the truth that it was illegal and the truth that it was a fraud based upon transferring money." After the pyramid's demise, FitzPatrick began thinking of it as "a scourge, like an infection." Though it hadn't a "single ringleader," the pyramid scheme idea managed to spread. "I had to
understand how it happened and how could we have been so deceived and have deceived ourselves."
Medina says it never occurred to her that Women Helping Women thrived on deception. But about seven or eight months after her "birthday," news stories about the illegality of pyramid schemes began appearing frequently.
"That's when everything just stopped," she says. Soon after, Medina "received paperwork, a certified letter in the mail stating that nine women were claiming they paid me and that they were wanting their money back."
According to Julie Anne Meade, an assistant Attorney General who prosecuted Medina's case, Medina had the option
of paying the money back in lieu of going to trial. "She was afforded the same avenues and opportunities that other people had," Meade says.
Medina instead decided to hire a lawyer. "The whole reason I went to court was because, out of those nine women, there was only one person that really did pay me," she says. "That's the whole reason I hired an attorney because I didn't feel I should have paid back women who didn't pay me."
According to Medina, after her "birthday," she sponsored a friend and co-worker who would eventually have a birthday of her own. Despite allegations from the Attorney General's office that she had at least three birthdays in the pyramid, Medina maintains that after her one birthday event, her involvement was strictly promotional. She appeared at meetings, told people about the money she received and explained the pyramid process.
During the legal proceedings, Medina felt singled out for advertising the pyramid. "I was very angry
because…it was just everyone pointing the finger at me. They said they saw me explaining how the charts worked and that I was saying it was a good thing, and it was."
Meade disputes Medina's characterization. "Medina was not made an example of," she says. "That is erroneous and ludicrous. She had a friend who was a loan officer, and Ms. Medina was convincing people if they didn't have the cash to participate in the pyramid, they could take out loans. She was giving instructions on getting cash advances. She was a little more aggressive than someone who is unknowingly involved in a pyramid scheme." Adds Michael Cox, director of special prosecutions and investigations in the Attorney General's office, "There's a reason she refused to take checks. The only reason you use cash is because you don't want someone to track you."
On the surface, Medina hardly fits one's idea of a criminal mastermind. With her long black tendrils and lilting speech, she seems every bit the "home girl" Jennifer Lopez unsuccessfully evoked in "Jenny from the Block." Medina even giggles in disbelief when asked if she views herself as middle class. But the question isn't so much whether Medina knowingly participated in the scheme, as she admitted to both "birthdaying" and "promoting" it-the question is why she and not others were indicted for their involvement.
"There were thousands of people involved," Medina's attorney, Richard Marquez, says. "She was no different than thousands of other women. If you look at the statute, it's somewhat vague."
The state sought violators of the Pyramid Promotional Schemes
Act, Curran says, by focusing on the people who received money. "Those are the people we said were promoting
and operating," he says. "We simplified it for our own purpose of prosecution. It takes the ambiguity out of the rule."
The ambiguity in the law is based on how the pyramids work.
According to the statute, "a 'pyramid promotional scheme' means any plan or operation by which…opportunity to receive compensation… is derived primarily from any person's introduction of other persons into participation in the plan or operation…"
The law prohibits anyone from establishing, operating, advertising or promoting such schemes. But because pyramid participants must recruit others to keep such operations functioning, the recruits essentially become the promoters of the schemes, whether their outreach endeavors bear fruit or not. "Under the statute-the way it's written-you don't necessarily have to profit or benefit. You just have to promote," says Michael E Vigil, the State of New Mexico district judge who presided over Medina's case.
In other words, Curran says, "If a daughter decided to go to a pyramid scheme party and asks the mom if she'd like to go, technically that's promoting because you invited them," he says.
Continuing with Curran's premise, say the mother accepted the daughter's invitation to the pyramid scheme party. If
the mother joined early enough to become one of the 12.5
percent of participants Curran estimates profits from pyramids, she would be targeted by the Attorney General's office as an operator or promoter. On the other hand, if she were one of the 87.5 percent of participants who lose money in pyramids, she would be considered a victim by the Attorney General's office. Hence, the Attorney General's delineation of victims and perpetrators has less to do with who violates the Pyramid Promotional Schemes Act and more to do with who joins pyramids early enough to benefit from them.
"The hard line to draw is that it depends on when you get in," Nathalie Martin, a University of New Mexico law school professor, says. "Two people doing the same exact activity, one of them falls into the victim category and the other into perpetrator. That's not normally how the law works. It's really, really unusual."
FitzPatrick makes a similar assertion. "Pyramid schemes are a true problem for the government in terms of enforcing laws," he says. "You ask the police, 'Why'd you arrest her?' and
they say, 'I had to arrest somebody. There are tens of thousands of women involved-what were we supposed to do? Haul in 35,000 women in the football stadium?' The authorities are forced, really, by necessity, to pick out a few and make examples of them."
Because of the vagueness of the statute, Leslie Medina believes her niece suffered. "This is a political
ploy of Patricia Madrid to say how she could stick up for the little guy," she
says. "I feel like [Donna] was the sacrificial lamb and the scapegoat. They've now convicted her, and she was drawn in just like anyone else."
While Medina was angry because she believed she had been unfairly named a perpetrator of a pyramid scheme, she also feared prison. "I have a four-year-old little boy that I take care of," she says. "What was going to happen to him?" Medina also found herself cash-strapped. "We had to pay for a lawyer for her," Donna Medina's mother, Lora Medina, says. "She didn't have all this money they said she had."
In fact, by her trial in May 2004, Medina had depleted the pyramid birthday gift she says she received in 2000. "Twenty-thousand dollars may seem to you like it's a lot of money, but once you have it and are using it for everyday things, it's gone," she says. "It's like sand in your hands."
Because there was no question of guilt, Medina was convicted of
promoting a pyramid scheme and sentenced to $40,000 restitution and probation. These days, her life, financially speaking, is no better than it was prior to participating in the scheme. Not only did Medina use up her purse from the pyramid, "She's more in debt now because she had to re-mortgage her home to pay the restitution," Lora Medina says.
While Meade is pleased with the outcome of the case, she believes it would have been appropriate for Medina to suffer even severer consequences. "Part of what we were arguing in sentencing depends on whether or not the defendant shows any amount of remorse," she says. "In this case, Ms. Medina didn't. No apology, no accepting of involvement."
Medina, of course, challenges the prosecution's perception of her and of the pyramid scheme. Discussing Meade, Medina says, "She made me out to be this deranged person who was out for
myself and wanting to screw people over, and that's not what it was
about." Asked whether he thinks Donna Medina believed her involvement in the pyramid was legitimate, Judge Vigil is conflicted. "After hearing all of the testimony, it was clear that she was aware of what she was doing, that eventually this scheme breaks down and somebody is left holding the bag." But, Vigil adds, "I think part of her thinks it's OK and continues to. She thinks that everyone will get paid. But, you know, that's not realistic."
That's because, as Fitzpatrick says, pyramids are as much about illusions as they are about money.
Indeed, four years after her "birthday," Medina insists: "The whole thing was about helping people."
