The federal "gifting table" fraud trial of two Guilford women continued Tuesday in U.S. District Court with testimony from a prospective participant who said she tipped of the Internal Revenue Service to what she considered a pyramid scheme.
Investigators say that Donna Bello, 56, and Jill Platt, 65, recruited women from 2008 to 2011 to participate in a financial conspiracy and failing to pay taxes on their profits. Their attorneys have said the women believed that the club was legal and that they had consulted attorneys and accountants who advised that the income was not taxable. The women are charged with wire fraud and filing false tax returns.
Robin Tierney, a part-time teacher and teaching assistant in New Haven, testified Tuesday that Bello was her hairdresser and that she became aware of the gifting table when she noticed a wad of cash sticking out of Bello's appointment book. Tierney had gone to Bello's home to have her hair done.
"I said 'wow that's a lot of money to be on the counter in the kitchen.' She said it was her money from her gifting circles. She described it as this thing she was doing," Tierney testified.
Tierney said Bello explained how the process worked, including how participants needed to put in $5,000 to start and could be expected to make $40,000 at the end.
"I said 'doesn't that sounds like a pyramid scheme?'" Tierney said. "She said no, it was a gifting circle and that the money was gifted." Tierney said Bello told her "you don't have to pay taxes on the money."
"I asked her how was that? She said it was gifted and that her attorney told her."
Court records indicate that each of the gifting tables had a four-level pyramid, with eight participants at the bottom, four assigned to the third row, two participants at the second row and one member on top. New members paid $5,000 cash to the person at the top. That payment, "which is characterized as a gift," according to the indictment, gave the new person a spot on the bottom row.
To move higher up the pyramid, participants recruited additional women. When eight new women joined, the woman at the top left the gifting table and kept the $40,000 paid by the newest members. All levels moved up the pyramid, including one to the top spot of a second gifting table that was formed, and the search would begin for new recruits, according to the indictment.
The indictment alleges that the defendants tried to use the pretext of gifting tables as a way to avoid paying taxes on their proceeds. Each wire fraud charge carries a prison sentence of up to 20 years. A conviction on a charge of filing a false tax return is punishable by a maximum prison sentence of three years.
A third defendant, Bettejane Hopkins, 67, of Essex, has pleaded guilty.
Tierney said she made an anonymous tip to the IRS after speaking with Mary Jo Walker,a long-time friend of Bello who previously testified that she advised Bello that the money made from the gifting table was taxable. Walker is an enrolled agent, a federally licensed tax practitioner who represents taxpayers before the IRS.
Tierney said Bello gave her an opportunity to listen in on one meeting.
"I remember (hearing) something about someone having visions … visions of the blessed mother. There was talk about angels," she said.
Another witness, Katheryn Midgley, testified that she joined the table but quit after concerns over its legality. She acknowledged that she initially did not report the proceeds – which she estimated at $23,000 – on her tax returns. She said she filed an amended return last year.
Midgley, co-owner of Fuzion Medical Aesthetic Boutique in Branford, said she attended one meeting with about 100 women. Bello told her the table was "the best thing she had done for herself. She had been through about 10 times."
At one meeting, Bello's husband, New Haven-area developer Joel Schiavone, offered to speak to the members' husbands or business partners to ease any concerns, Midgley testified.
"He was very theatrical," she said of Schiavone.
In an interview after Midgley's testimony, Schiavone said the only thing that matters was intent. The defense has said it was not the defendants' intent to hide taxable income.
On cross-examination, Bello's lawyer, Norman Pattis, noted that Midgley helped get another person involved in the table even after she quits.
"All I was doing was making a connection," she said.
Midgley testified there was friction in group and that when some members reached the top, others stepped off the table because they didn't want to provide money to that person.
According to a grand jury indictment, Bello — identified by federal prosecutors as "the ringleader" of the scheme — wrote in a 2009 email to club participants that more than 70 women made it to the top levels of the club, most of them more than once and more than 20 of them six times or more. The email also said that more than $5 million had changed hands.
The indictment said new members who donated money were told that the funds were tax-free gifts under the Internal Revenue Service code.
On Monday, Walker testified that Bello inquired about whether Walker would be interested in participating, at one point writing in an email that "your name can stay anonymous. Guess you'll have to trust me."
Bello said that the initial contribution was $5,000 and that the return was $40,000 at the end of the process, Walker testified. She testified Bello told her the returns were in cash.Copyright © 2015, CT Now