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SEC Files Charges Against TelexFree, Alleging It is a Pyramid Scheme

April 17, 2014
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The Securities and Exchange Commission has filed charges against TelexFree alleging that it is a Ponzi and pyramid scheme. TelexFree sold telecommunications and advertising services via a network marketing plan. Critics have long contended something illegal was amiss with the business, and the government has finally stepped up.

It’s heartening to see governmental agencies are stepping up to the plate to stop these shady businesses from taking advantage of consumers around the US and world. You can take action by filing a complaint to the Federal Trade Commission.

Kevin Trudeau believers are going to believe

March 19, 2014

Reuters, reporting from the sentencing of former TV informercial salesman and convicted fraudster, Kevin Trudeau, made note of a packed courtroom of Trudeau supporters. One of the Trudeau believers was Ed Foreman, 80, a motivational speaker and former congressman from Texas and New Mexico. Foreman twice attempted to make a statement supporting Trudeau, and both times the judge told him to sit down and be quiet. After the second outburst, the judge had him removed from the courtroom:

When Foreman failed to respond to the judge’s order to be quiet, he was lifted up by his arms and legs and carried out of the courtroom by federal marshals.

Read another description of the Trudeau sentencing proceedings from the Chicago Tribune.

Even in the face of overwhelming evidence, Trudeau’s believers are going to keep on believing. At some point, one has to just shake one’s head and let them continue living in their fantasy world, no? I wonder what pyramid scheme adherents think when they read articles like this. Do they ever wonder if their leaders might be hucksters too? Or do they think, “Well, that guy’s a fraud, but my leader is a paragon of virtue and honesty!”?

Check out the argument put forth by Trudeau’s attorneys to reduce jail time for Trudeau. From the Reuters’ article:

Trudeau’s attorney, Thomas Kirsch, argued the government could not punish him for the content of the book and the amount of the fraud to the individual was small because they didn’t wipe out anyone’s life savings, attorney Thomas Kirsch said on Monday.

Small fraud multiplied thousands of times can sometimes equal large fraud. It’s still fraud.

Dressed in an orange prison outfit (as opposed to a dark suit with a red tie in this previous courtroom appearance)1, Trudeau said that he’s learned a “life-changing lesson” from this. He promised the judge that should he ever make an infomercial again, he would not embellish, lie, or otherwise puff up his pitch. In ten years, we’ll have to check back and see if Trudeau truly learns from this teachable moment.

1 An earlier version of this article incorrectly stated that Trudeau was wearing a suit and tie during sentencing. In fact, he was wearing an orange prison jumpsuit.

Herbalife Under FTC Investigation

March 13, 2014
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The Federal Trade Commission announced yesterday that it is investigating Herbalife. Claims have been made over the years that the company is operating an illegal pyramid scheme. This bears close following over the coming months.

Lazy Man’s Opposing Look At Orrin’s Pyramid Scheme Article

March 8, 2014

Lazy Man has been analyzing and critiquing multi-level marketing (MLM) programs since 2008. He first covered MonaVie and has expanded his investigations to companies such as One24, Protandim, Visalus, Vemma, Asea, and others. This weekend, he took another critical look at Orrin Woodward1, deconstructing the arguments put forth by Orrin that LIFE is not a pyramid scheme:

  1. Orrin’s hypothetical statement that only 1 in 100 people make $50K or more per year.
  2. The “hard-wired” nature of the LIFE business model.
  3. The car assembly line metaphor Orrin uses for the LIFE business.
  4. The misplaced belief that one will succeed if one just works hard enough.

Lazy Man also points to discussions on the (relatively) new LIFE forums in which TEAM members can repeat whatever they hear and read from their leaders. In my years of covering MLM’s, I have found that the echo chamber effect to be a signficant cause as to why so many people stay in far longer than they ordinarily would.

Check out the full article on Lazy Man’s site. If you find it useful, leave a comment over there and encourage others to read and share it.

1 Lazy Man previously wrote these articles about Orrin Woodward.

Won’s TEAM/LIFE Prospecting Story

January 6, 2014

A new comment on Bewildered’s TEAM/LIFE prospecting story tells the tale of a reader called Won, who gave me permission to repost his or her original comments below:

I thought I’d chime in on this subject, being I’ve experienced near-constant annoyance from this MLM called “LIFE” since last August.

It began when an acquaintance I’d nearly forgotten about showed up to my home, for no apparent reason, other than to tell me she was starting a new business and wanted me to review her plan.

As a bit of back story, many of my friends, and some who call me their friend, often come to me for assistance regarding marketing new ideas for their businesses, reviving a storefront during an extended lull, or even launching some new idea – often bizarre and unrealistic.

With that being said, I expected to do for her what I do for each of these friends: look over the paperwork, nod a few times, and send them on their way with advice I know they’ll probably not utilize anyway.

She said she would return shortly with the paperwork, and I agreed to meet with her for one hour to discuss the matter.

Within about a quarter of an hour, she returned with a car full of strangers. How peculiar is it to return with unannounced strangers to someone’s house? I did not let them in, and we sat around an outdoor table in the lovely 90 degree weather. That’s just my way of saying “Welcome!”

Expecting to review an idea, or several, I was instead promptly given a very scripted sales pitch on some “business” called “LIFE” by her mentor and his cohorts who were starting her off on this scheme. They could tell I was highly annoyed and about to dismiss them instantly. I found it highly ironic and simply strange that this motley crew of poorly dressed “business professionals” was lecturing me on how to make money, especially being the way I was supposed to make money was from them! I was dumbfounded! I cut them off after about five minutes of berating me with nonsensical leadership attributes and strategies. Five minutes of longwinded talk about absolutely nothing!

A bit more background: I began my career as a salesman. I’m now a regional for one of the largest retailers in the nation. I know the language of sales better than I do English. The language they spoke was a primitive version of what would be expected from a 20 something salesman just starting out, and following the corporate sales guide word for word, selling low-end electronics. The rhetorical questions, the saccharin-like compliments, the indirect slide toward profitability, and the ever-present lack of any true detail aside from heaping piles of nervous hype! Blah!

Anyway, as I cut them off and told them how straightly bewildered I am as to why they are trying this on me, and what I do for a living, the mentor responded, bewildering me just as badly, by saying, “Well, wouldn’t you like to quit your job and have all the free time you could ever imagine? What would you do with a lifetime of weekends?” What a serious face palm!

I found a bit of humor in the situation and dismissed them from my property. Before they left, the mentor in the group handed me a small box of CD’s and pamphlets. This, of course, as any good salesman knows, ties the salesman to the client by artificially creating a future chain of communication. I shouldn’t have taken it, but I like to have a good laugh. It’s not everyday someone has the nerve to try something like this on me.

I’ll finish the account later on. It gets interesting, lol.

and the follow-up comment a short time later:


That’s ok.

I’ll finish a few more thoughts.

Later on that week, I decided I’d throw one of the CD’s in my car and have a listen while I drove to work (it was going to be a terribly boring 45 minute drive that morning.) After 30 minutes of listening straight then skipping around the disc, here’s what I found:

-An initial relatable story about debt, poverty, and “just getting by” to prompt the listener to feel as if the speaker is talking directly to them.
-Offering a swift reaction (MLM business proposition) to solve financial dilemma.
-Announcing victim of said financial ruin is actually founder of LIFE.
-Utilization of the “Bandwagon Effect,” like those sleazy infomercials on property flipping, to keep the audience captive.
-Reassuring the likely MLM-weary audience that LIFE is just the opposite.
-And next CD please!

All of this while not exactly explaining what LIFE really even is.

So, what we have is basically this:

“Hello, I understand the financial pain you are in. That’s why you have this CD. I also understand you are probably listening it on your drive in to work this morning, which means you’ll be captive for an average of 20 minutes.

On the subject of work, what a lousy life, right? Bills are piling up, you have to work for the man, and don’t get any time off. I had the same experience, only I used my woes to better my family and start this wonderful business.

You can be part of it, too! All these people just like you did it!

Since we’ve established a level of trust, and we’re speaking on the same level, let me answer the question you’re thinking. LIFE is not an pyramid scheme, in fact, it’s just the opposite. If you follow the steps (please purchase) after becoming a member (please purchase,) you’re guaranteed to make enough money to quit your job and become financially free!

And what is it that you will be doing? Creating communities and changing lives! And what does that entitle? Please purchase your next box of CD’s and answer the persistent calls of the mentor/friend who sent us your way!”

Pretty much, they throw a relatable problem to a selected audience to increase the closing percentage. Then, they let the audience react to said problem (common financial story.) Finally, the audience finds out the husband and wife from the narrative are the founders of this crazy program called LIFE! A surprising (to some) and emotion-filled solution! After all, this just became a little drama while you drive into a job you’ve been convinced to hate!

Then, the trust that had been slowly built is established via a continuance of the narrative as well as the bandwagon effect. Finally, the audience trusts the speakers enough for them to nullify the elephant in the room objection!

All this, of course, before the mentor even has time to arrange meeting after meeting after meeting.

Hey, maybe your financial situation is bad because you’re stuck going to these meetings all the time, lol!

Here’s what really threw me off. How does Christianity have anything to do, and I mean anything to do, with running an insidious multilevel marketing enterprise? I was sickened to hear God, Jesus, and the Christian Bible brought up into this sales pitch. Nothing I’ve ever read in the Good Book describes Jesus looking favorably toward those who dupe their friends into buying tons and tons of CD’s (or scrolls, lol), and getting other people to do the same, for no apparent reason other than to get more people to buy CD’s. And the CD’s are nothing better than the hyped-up self help dribble you can hear on YouTube, or at your company’s next performance meeting.

Anyway, about a week later, my friend called me back and asked me how I liked the material (surprise, surprise… I thought she would want to see how I was enjoying the sunny weather!)

Here’s my dilemma. I wanted to tell her off on the phone, just how moronic it is to join one of these sugar-coated MLM’s of the future, but, who listens to me, anyway? I don’t have any debt. I don’t drive an old car. My financial situation is golden. How would I even begin to describe an MLM, or the proper sport of salesmanship, to someone who is seemingly oblivious to these concepts?

I did it by example.

To her on the phone, I said “Oh, what lovely information, passionate speakers, yes, yes! When do you want it all back, so I can take another?”

I think I caught her off guard (sorry!) and she stumbled a bit, telling me she will arrange a few meetings with her mentor and I, as well as with a few more people, then she’d invite me to a monthly meeting where I will meet everyone.

Luckily, these people had no issue driving an hour to meet me for lunch a few times before the monthly, which surprised me quite highly. Also, the fact they’d drive all that way and not eat anything was very weird, as well, even as I’d offer to pay each time.

Can you all guess what I was planning to do?

She wouldn’t listen to me if I told her, but maybe she’d listen to me if I showed her how things really were in this company – right in front of her “friends,” mentors, and company idols. So, that’s what I did, lol!

I’ll conclude this later on. I have quite a lot to say on Pyramid Schemes and MLM’s, regarding legality and so forth, as well.

And here’s part three of Won’s story:

Half the country is snowed in, I have some free time, lol.

I’ll talk about the lunch meetings for a bit before I dive into the big monthly meeting.

As I said earlier, my friend scheduled a handful of lunch meetings on my behalf with her mentor and a few other people in his downline, as well as a couple more people who also had downlines that generated enough money for them to allegedly become “financially free.”

Now, that phrase, “financially free,” is something I heard quite often. Never was I given a full explanation as to what it meant, nor did I really care. Buzzwords are just buzzwords.

During these meetings, I had to play the part of someone who was at least semi-interested, or they’d quickly dismiss me, and I wouldn’t be able to attend this glorious meeting they couldn’t stop jabbering about – and that’s what I wanted to do – hopefully shake a few people out of this trance they’re in, maybe even my old friend.

Many times, I had to bite my tongue. As someone who started in sales, appreciates an honest sale, and oversees thousands of such sales nationally, I find talk of “downlines” and “uplines” disgusting. This isn’t sales. This is, “hey, let’s write down ten names of people we love and care about so that maybe one of them will do the same, and I’ll be able to make a commission!”

When I am purchasing new suits, ties, and shirts, I know the creative saleswoman who always coordinates my colors and so on is thrilled to see me – not only because I’m charismatic, lol, but because whenever I come in, she earns enough in commission to eat steak for dinner all month. And I’m ok with that, in fact, I am very happy for her, because she is making an honest sale and actually selling something tangible. She puts in great effort to put together my outfits, takes pride in her design work, and has great skills as a saleswoman.

This is the big difference between direct sales and pyramid selling. A pyramid selling company is not based on selling products, though products may be involved, they are not the primary concern of the company, and function more as a “mask.” A pyramid selling company is interested in limited exponential growth models, where the salesperson, and I use the term loosely, isn’t so much as selling a product as he/she is replacing him/herself with another salesperson who will do the same for them. It’s the difference between selling a product and a scheme.

Although LIFE sells a “product,” it does so indirectly. The idea is that you sell a “membership” that will then purchase CD’s and attend conferences because they have to in order to be a member in good standing. LIFE is not in the business of selling CD’s or any material for that matter. They are in the business of increasing members exponentially who then are required to purchase the CD’s and go to the conferences to maintaing this membership and have a (very slim) chance at making money.

Anyway, as I played interested, all while scarfing down my lunch so as to return in time to finish my daily business, I noticed this pattern playing out in each of these LIFE members’ actions.

I would poke ever so slightly in an attempt to get one of the mentors, or whatever they liked to be called, to explain directly what it is that LIFE was all about (sounds more profound than it is, right?) I’d always receive a textbook-vague answer in return, always ending in a misplaced compliment about my intelligence or accomplishments. Oh gee, I’m flattered, where do I sign, lol.

Seeing that they were getting nowhere with me, but confused as to why I continually gave them “yes man” answers to everything, they tried to pull a classic trick on me during the final lunch meeting before the monthly. Somehow or another, they brought in one of the “heroes” of the company, a 50-something man with poorly-groomed hair and an uncoordinating jean/sport jacket combination. As a rule of thumb, I don’t take business advice from someone who shows up to a meeting not dressed for the occasion. I wanted to ask, so badly, “So, my friend, how long have you been financially free?” Lol!

Anyway, this fellow was luckily a little more slick in his sales presentation, and at least tried to convince me he was answering my questions as he danced around them. Good man, lol! He told me all about his downlines, how much money he was making, how great Mr. Woodward is, and much he loves spending time with Woodward and Co. I really, really wanted to ask him, “How much of your earned money goes toward chasing Mr. Woodward and his lifestyle around, and how much goes toward maintaing your own?” Lol.

When someone can’t make a sale, but they feel as if the customer is a buyer, it’s only a natural reaction to bring someone else in to close the deal. Coffee is for closers! That’s all they did, and I am flattered they brought in one of their best, lol!

Regardless of the fact, he spun around a while, and I continually gave him the dirt beneath his tires to spin around in, until I was ready to get back to work, which wasn’t long after I finished my lunch. I did find it peculiar how much this fellow would sweat when I’d first listen to an entire rant of his about how great an aspect of LIFE was and, second, ask him, simply, “why?” I’ve found that “No” and “Why” are two of the most powerful words to use in any situation. Hardly anyone expects either to be used, even though they are the personifications of the most natural reactions we have to new information.

After a handful of arduous, and seemingly boastful, lunch meetings, I was a couple days shy of the big one. To be honest, I would have expected this group of “financially free” wizards of LIFE to have sussed me out as someone just taking them for a laugh to prove a point to an old friend, but they didn’t. In fact, it only proves their persistence, or desperation. And I am leaning toward the latter, lol.

FHTM and ZeekRewards Update

December 21, 2013

The founder of Fortune High Tech Marketing (FHTM), Paul Orberson died earlier this month.

This week, two high-level Zeek Rewards executives were charged by the government with investment-fraud and tax-fraud conspiracy. Patrick Pretty’s reports that they have pled guilty to the charges.

Bewildered’s Story of Being Prospected by TEAM/LIFE

December 16, 2013

A new visitor posted his story of being prospected by TEAM/LIFE members in a recent set of comments. @Bewildered gave me permission to repost the story here:

Greetings friends. I am in the middle of composing my recent experience with Life Leadership and realized it was going to be a (too?) long entry. So first I’m posting this summary version to spare anyone from having to peruse the whole book! In short:

I was recently approached about the big opportunity. Though I knew I was not interested, I agreed to go to a meeting. I left with a box of CD’s and a book that I knew I wouldn’t read/hear and I also knew that it meant a follow up meeting. So instead of reading the textbook they gave me, I headed to google and found this blog.

I want to take this opportunity to extend my appreciation to the contributors here. Because I was in the middle of dealing with this on a personal level, the information here was both illuminating and FASCINATING. I spent more hours on the site than I thought humanly possible. It motivated me to agree to a follow up meeting just for the opportunity to discuss some of my ‘concerns’ with my friends new mentor, and do it with my friend there.

If you are interested in the gory details I will post the long version soon.

And again, thank you.

Bewildered followed up his first comment with a recap of the meeting. It looks like he attended one of the weekly seminars that are generally held on Tuesday evenings by TEAM/LIFE groups:

A little over a week ago I got a call from a friend that I have not been in touch with for at least a year. He is one of the pastors at a local church my wife and daughter attended regularly for many years. I attended…occasionally…and that’s where I met and befriended Mr. P.

A couple of years ago my wife and I were invited to dinner at Mr. P’s house. When we arrived we learned that it was more than dinner and there was a pitch presentation for Pre-paid legal and some identity protection mlm. I survived it without incident but, obviously, my respect level for Mr. P was diminished.

So when I got a voice message last week simply saying ‘hey, call me back’, without any indication of the purpose for the call (after a year of no contact), my radar started beeping. But I called back. We caught up on things for a bit and then…he informed me that he had been looking for a mentor in his life for quite a while and had found one. He told me he had read ‘the best book on leadership’ he had ever encountered (launching a leadership revolution). He said he would really like me to meet this new mentor. Before I knew it I was agreeing to attend a meeting the following evening where I could hear all about a business opportunity. Even though I was already 110% sure I wasn’t interested in the ‘opportunity’ I agreed to go, mostly out of curiosity. After I said yes I asked him if it was an mlm business. He answered, ‘it has some of those elements but it is unlike anything I have ever seen’. I told him I already knew, beyond doubt, that I would not be successful in an mlm business. He said it was very difficult to get into it over the phone. I already knew what that answer meant and I was already disappointed that he was treating our relationship so carelessly. I told my wife I really didn’t want to go. She said then don’t. I said what the heck, I don’t mind spending a couple hours with Mr. P and I’m curious. So I went.

We arrived at the hotel conference room 30 minutes early (ugh). They asked me to register when I walked in. I ignored them. As I waited for the show to begin, I noticed that there was a flip chart standing at the front of the room. It was the IDS. So I studied it for about 10 minutes. I had to keep re-reading because I couldn’t believe what I was seeing. I thought, have the other people here (I estimate 70-80 people) SEEN this? Do they know what it says!? I wanted to look around to see if there were cameras. Maybe I was on some hoax show and somebody would jump out and say ‘gotcha’! I mean, right there at the front of the room was all the information a thinking person needed to know how RIDICULOUS this ‘opportunity’ was. I was bewildered.

So the presentation took place (Mr. P’s mentor was the speaker), complete with standing ovation at the introduction of the speaker. Mr. P also invited someone else and he was sitting next to me. I noticed he started to jump up with the rest of the crowd and then stopped himself. I hoped it was because he noticed the other mark (that’s me) didn’t budge. There were also a couple of occasions where the real big shots were mentioned and I noticed the remarkable level of adoration expressed. Inappropriate levels of adoration, it seemed.

I found the presentation to be borderline absurd. The explanation of why it’s not a pyramid scheme being some circles drawn on top of circles with some incoherent description of communities and teams. I literally had no idea what he was talking about. It wasn’t even a good try.

At the intermission and the end I immediately made myself scarce by walking around the hotel just to avoid being asked what I thought. I wasn’t sure I could trust myself to offer a civil reply. But, eventually, I had to come back into the room because I had agreed to ride with Mr. P to the show (yes, that tactic). I sat in the back of the room for about 10 minutes while Mr. P worked the other mark but eventually decided I needed to make my presence known as a reminder that I was owed a ride home (it was pushing 11pm by then). And wouldn’t you know it, the moment I stood up, there was the mentor. ‘So what did you think?’ Um, not much. ‘Ah’, he said, ‘so not really for or against, more neutral?’ More against, I said. He wanted to know why. I pointed him to the IDS. He made some remarkably poor attempt to address that and then handed me a box with a book and CD’s, ensuring me that would clear it up. For some reason my hand said yes I there I was, holding the box, and knowing this meant ‘follow up’.

On the way home Mr. P wanted my thoughts. I told him the truth. I told him about the IDS. I told him it was obvious to me that the entire model was built around cycling in suckers for the sole purpose of enriching a very few at the top. I told him it was clear to me that the only thing being offered to ALMOST EVERYONE else was the opportunity to waste time and money before eventually leaving discouraged and less rich. Please note that all of this up until this point was before I had ever heard of AMTHRAX or the amazing stories on this blog. It was the next morning that I discovered you fine people. And after spending MANY hours perusing this blog, I decided I was VERY interested in a follow up meeting with Mr. P and his mentor.

But I realize this is already way too long for most so I will relate my follow up experience in a future post.

Please leave a comment for Bewildered in the section below.

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