Longtime reader freedomhaha recently posted this comment:
Amthrax- Can we start a new area to follow the law suits. Those are some of the biggest things going on right now it would be great for everyone to have a spot to follow and discuss them. Thanks for everything.
Over the years, members of TEAM have engaged in litigious activity to silence their critics. Here’s a dedicated post to discuss these lawsuits.
Update July 18, 2014: LazyMan has a similar post about MLM lawsuits on his website that is worth reading.
MLM critic LazyMan provides a step-by-step guide on how to start a $500 million company the easy way. I’d put “easy” in quotes because he’s just describing the MLM playbook that countless companies have followed over the years. He breaks the process down in the following steps:
- Finding the Right Product
- Hire or Partner with Some “Doctors”
- How Do You Sell this Product?
- When Our Distributor Levels Drop…
- Hire the Famous MLM Lawyers
- Start a Charity
- When the Truth of Our Company Comes Out
- But We Have to Hurry!
- When it All Collapses on Us
How does this describe the playbook of your current or former MLM?
I liked the section on “When the Truth of Our Company Comes Out” because litigation is one tactic MLM companies use to try to silence their critics. The BehindMLM site was recently offline for several days as it dealt with a frivolous DMCA takedown notice from a former TelexFree distributor (it’s back up now). The Anti-Vemma YPR Pariah site went dark at the end of August without much explanation about what really happened.
Local and federal agencies have been especially active over the past two years in shutting down illegal companies like TelexFree, Zeek Rewards, and IAB. This past month scams like iFreeX, eAdGear, and Zhunrize have been shut down. While consumers can breathe a sigh of relief that they won’t be scammed by these companies, there are countless more popping up like the heads of hydra to replace them. Consumers should understand the warning signs of fraud, ponzi schemes and pyramid schemes. As they say, if it sounds too good to be true, it probably is!
LazyMan’s site is more than just diagraming and critiquing the MLM playbook. He has countless articles on improving your finances, be it through saving, investing, or rethinking your financial beliefs.
Taken from the comments section of this site are two stories from longtime readers, Brent Hansen and Freedomhaha.
From Brent Hansen wrote about his experiences in Amway, Quixtar, TEAM, and MonaVie:
@Sasha, great to hear from someone who knows how to think critically. Over a 12 year “career” with Amway – Yager – Quixtar – Legacy – Team & Monavie, I became a 5 percenter.
We worked very, very hard, built an organization that less than 5% of those involved in MLM are ever able to build, reached ranks that less than 5% of those involved in MLM ever reach, and still amassed net losses that exceed $250,000 over the span of that career.
The amount of people who ever earn from MLM is negligible, and your family will most likely end up in the exact same position. Brace yourself for the mathematically inevitable.
Asked to elaborate on his experience Brent provided additional details:
@Rascal, without getting in to too much of the gory details, and really exposing my foolishness I’ll try to give a summarized version to help you understand.
At age 25 (I’m now 45) I was blessed with an above average income and career in sales. I was earning around 80K a year and living on 30K, with zero debt, no mortgage, and no children to support.
When I saw the ‘opportunity’ it rang true to me, so I was all in from day one, and I wasn’t afraid to invest in what I thought would one day payoff.
Our teams were in rural areas in the west (closest meeting was around 50 miles away), so working with people to build required lots of cash flow. Between flights, hotels, meals, and wearing out a car every year and a half, the losses quickly accumulated. I remember several months that I put on enough miles I was changing the oil in my sharp car (cadillac, haha, so stupid) every 10 days. I recall spending around $20,000 in travel expenses when Amway launched the Philippines, and I was determined to get in on the ground floor since I had ties to the country.
I remember when they began promoting the 300 PV club which would cost us about $750 – $900 a month in products alone (yes, there were no real customers), and many, many $1,000 tool orders, sometimes on a weekly basis.
The first 6 or 7 years weren’t difficult to fund yet we were never able to produce a positive cash flow. As children came, along with that whole ball of wax, the following years became increasingly difficult to continue to ‘run the roads’, and stay in the game.
Every time it looked like we could turn a profit, something would happen with a group (they would quit) , a transmission would go out, or something else would happen that would prevent us from turning a profit.
I could honestly never get the deal to produce enough profit above expenses to become ‘job optional’, and apparently from all of the bankruptcies, and discussions I’ve had with other high level achievers, neither could they.
The biggest difference between them and all of us is we actually tell the truth, while they continue to bury their heads in the sand and rob Peter to pay Paul. It is a horrible state to be in when you always believe that success is just around the next corner, while not even understanding the principles that really determine success.
Brent continued in this comment:
@Rascal Teamster, convincing a choleric or high D personality that the should ‘quit’ takes more than just a few bumps in the road. Reality set it when I placed a $30,000 mortgage on a 25 acre parcel that I owned free and clear as a means to continue to make ends meet.
The subsequent loss of that property when I failed to meet a $500 a month payment began to open my eyes, but ultimately, I made a conscience decision to leave when I began to think critically and ask questions about everything. I was instantly labeled as a dissenter by those who had feigned loyalty all during the 12 years, and ostracized from the very groups that I had worked so hard to create. My undying loyalty to my ‘upline’ failed, and they slandered me to everyone in our organization.
The financial devastation wasn’t sufficient, but the loss of friends, relationships, and self-dignity did the job. I basically hit rock bottom as I watched a $120,000 piece of property (with a $30,000 loan against it) go to creditors because I couldn’t scrape together 4 or 5 payments to bring the loan current.
While Freedomhaha did not reach the same levels in the MLM business as Brent did, s/he discovered the dark underbelly quicker, allowing him or her to leave with minimal loss. Freedomhaha frequently asks MLM proponents one simple interrogative:
What percentage of your downline is making a profit?
This question is important, because it has been shown that MLM profits are heavily skewed towards the top of the pyramidal organization.
Freedomhaha recently shared his/her TEAM/MonaVie/LIFE story in this comment:
Amthrax- When I was being prospected none of the TEAMs history with Amway was ever shared with me. It was drilled into my head many times that this was the opposite of Amway. It was about 11 months into my 12 months into TEAM that I started to learn the history with Amway. When I approached my upline about it they told me that “Orrin and Chris left to fix everything they thought was wrong with Amway. In TEAM history this was the buildup and the initial launch of LIFE. I remember hearing about how “finally Orrin could run his own company and do things the exact right way”. Due to this being the first company change I thought nothing of this. From my perspective it would be much easier to get someone to start on the LIFE system than sell them $45 bottles of juice.
It was when I started to learn about the TEAM history (coupled with the fact that I had lost roughly $1,500- $2,000) that I had an uneasy feeling about what was going on. I had a two week stretch where I distinctly remember that I couldn’t listen to any of Orrin’s tapes. I still don’t completely know why, but they just made me feel slimy inside. I used Chris and Bill’s tapes to make me feel better about the business at that point. However, even they did not do the trick and I one day when I was looking up Darkagelo’s blog I saw that Amthrax link to the bankruptcies. I did my due diligence and checked them out. The very next day my LIFE into box, or whatever it was called, came to my door. I didn’t even open the material and dumped it straight in the trash.
After finding out the truth I let my former TEAM know that I was out and why. That was in fall of 2012, and I have felt it is my duty to continue to help others through this blog. I never reached a high level, or even went Power Player, but Orrin and TEAM still robbed me of a whole lot.
If any current TEAM members would ever like help on dealing with leaving TEAM we can work out a way to talk. It was rough, painful, and embarrassing for all of us but I promise it does get so much better!
Amber Hunt from the Cincinnati Enquirer has published a new article on Vemma, a multi-level marketing company that recruits younger, college-age people to hawk energy drinks. The report provides a good introduction to both Vemma and the MLM industry and solicits input and quotes from both critics and supporters.
While the article states that the emphasis on recruiting young adults is unique to Vemma, there are signs that other companies are shifting their focus to do the same. LIFE has its EDGE-series, which targets youths aged 12 and up1. MonaVie recently launched MonaVie Mynt which goes after those in the connected-generation, Generation C. In the late 1990’s, Amway changed its name to Quixtar in the attempt to distance itself from its controversial history and appeal to those growing up in the early years of the Internet.
This demographic is impressionable and ambitious, yet they lack wisdom and experience when it comes to identifying illegal pyramid schemes and dubious business opportunities. As a result, they may be more easily swayed by stories and promises of being financially free in three to five years. The statistics show that the majority of MLM participants do not make much money, let alone enough money to become financially set for life. What happens when these people find themselves years later in greater debt and with the emotional baggage that comes from participating in a business where they are led to believe that they are losers for quitting or that they didn’t succeed because they didn’t work hard enough?
If one has any experience the multi-level marketing companies, one might not detect anything terribly new in the two articles. Many of the quotes that were solicited about Vemma could apply to any number of MLM’s in existence today. Still, it’s important for MLM critics to urge news agencies to continue investigating and reporting on companies that are preying on consumers. An informed consumer is a smart consumer, one who will be less susceptible to the slick presentations and false promises given by many MLM participants.
Finally, contacting the Federal Trade Commission and your local attorney general about MLM’s in your area is another option that concerned consumers should consider. In recent years, a number of companies have been shut down by the government for being scams, pyramid or ponzi schemes, in part based on complaints filed by the public.
1 These kids can’t have a business until they are adults; that doesn’t stop LIFE from getting them hooked on to its products from an early age.
- When a market is saturated or dead
- When a leader loses rank
- When you should quit
- How much they’re actually making
While he’s focused on providing critical analysis, news, and opinion on the Vemma MLM opportunity, the points he made can be applied to other multi-level marketing programs.
Readers: Use the comments section below to add to the list of things your MLM leader didn’t tell you.
Last Week Tonight host John Oliver (you may know him from his work on the Daily Show) recently took on the subject of Dr. Oz and the nutritional supplement industry. This past Tuesday, Dr. Oz appeared in front of a Senate subcommittee which took him to task on his often “enthusiastic language” regarding supplements. Quoting Dr. Oz:
I recognize that my enthusiastic language has made the problem worse at times.
While Dr. Oz says he never endorses a particular product, he says that companies often use his name and his videos as tacit endorsements for their products. The Senate grilled him about giving false hope to his viewers about these so-called miracle supplements and products.
Compare Dr. Oz’s statements with those of MLM practitioners. Many of them say that they are providing hope for their followers, but is it really false hope they are peddling? With the recent government shutdowns of TelexFree, Zeek Rewards, and FTHM, along with the ongoing investigations into Herbalife, more people are seeing these opportunities for the financial scams that they really are.
My advice to those being prospected by friends, family, work colleagues and complete strangers is to get detailed and objective information about these “opportunities.” Read up on the history of the founders and those that you will get involved with. Is there a history of serial MLM-hopping among the founders? Does an analysis of the income disclosure statement show that the majority of people are making no money at all? Does the time and money commitment outweigh the benefits? Does the opportunity sound too good to be true?
The FTC has a good page that asks these questions and more. Familiarize yourself with them and be prepared to ask them when presented with these business opportunities. Don’t let those who are prospecting you answer your questions with a question. Get an answer or walk away.
Like many “multi-level marketing” companies, TelexFree has a disturbingly cult-like quality. Egged on by the company itself, promoters spoke of “reaching their dreams” and being “100% TelexFree.”
TelexFree’s promoter extravaganzas – in the United States, Brazil and Spain, among other places – were recorded and posted on YouTube. These events had a “boisterous . . . rock concert atmosphere,” at which crowds of promoters cheered James Merrill when he took the stage. Merrill would have the crowd “do the wave.”
As the “American face” of TelexFree, crowds of foreign promoters lined up to have their pictures taken with Merrill; his wife conceded that he was “treated like a minor celebrity.”
James Merrill is the co-founder of TelexFree. He’s currently in detention in the US, while his business partner, Wanzeler, has fled the country for his native Brazil.
If you’re reading this and are currently in an MLM, does any of this sound familiar? Do you feel like saying, “That might be the case with that company, but that’s not happening with mine?” Do you feel like defending your company with your last breath?
Ask yourself the question, “Why do I believe what I’m saying?”
As had been stated numerous times on this blog and others, the majority of MLM participants do not make much money each month after factoring in their expenses. Yet, they continue to attend seminars, prospect others, and purchase products — often just for self-consumption — month after month in the vain attempt to be one of the select few who make it big. At the same time, they persist in defending and deifying their leaders as paragons of virtue and business acumen.
Perhaps it’s because they’ve bought hook, line, and sinker, into the oft-quoted MLM phrase that “if the dream is big enough, the facts don’t matter.”
Unfortunately for TelexFree promoters, the facts are looming larger and larger, and it’s not looking good for the alleged pyramid and ponzi scheme. For Merrill, his “100% TelexFree” dream may be turning into a nightmare with the threat of a lengthy prison term.
My advice to MLM participants is to keep your dreams, but don’t ignore the facts. Your dreams can be independent of the business opportunity you’re currently enrolled in; despite what your leaders might say, they do not go hand in hand.