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.
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.
Operators of Fortune Hi-Tech Marketing, the pyramid scheme shut down by the government at the beginning of 2013, have have agreed to pay $7.75 million to former customers. The settlement with the Federal Trade Commission and the states of Illinois, Kentucky and North Carolina also stipulates that FHTM officials are to be banned from future participation in multi-level marketing businesses.
Kentucky Attorney General Jack Conway spoke about the settlement in this article from Kentucky.com:
“This was a classic pyramid scheme in every sense of the word,” Conway said in a news release. “The vast majority of people, more than 90 percent, who bought in to FHTM lost their money. Today marks the end of one of the most prolific pyramid schemes operating in North America.”
Some concessions were made to the defendants, most notably in that they neither admit nor deny the allegations that FHTM was an illegal pyramid scheme. Furthermore, the $169 million judgment, which represented estimated consumer losses, was reduced to the aforementioned $7.75 million.
The death of FHTM founder, Paul Orberson, in December, 2013, precipitated the settlement. Thomas Mills, former CEO of FHTM, had this to say:
“The destruction of a decade old business and the subsequent health challenges and passing of Paul Orberson made settlement an inevitable path to resolution,” the statement said. “We deny all of the allegations made by the government in this case. In order to avoid the additional emotional stress and costs of likely years of litigation, we felt it in our best interests and the interests of others to put this behind us and settle this matter.”
In the FTC statement on the settlement, the listed parties banned from future participation in MLMs include “Thomas A. Mills, Fortune Hi-Tech Marketing Inc., FHTM Inc., Alan Clark Holdings LLC, FHTM Canada Inc., and Fortune Network Marketing (UK) Limited”. You can read the official court filings here.
Check out this video from former Herbalife distributors on the Facts About Herbalife website. The stories of how these people were prospected, how much money they spent, the mental hoops they went through to stay in, and how they ultimately got out are eerily similar to those from other multi-level marketing (MLM) companies. One could substitute Herbalife with any number of companies described in this blog and other blogs critical of MLMs, and the stories would not substantially change.
I wonder what MLM proponents think when they read the news reports that the government has shut down scams such as TelexFree, Zeek Rewards, FHTM, and IAB. Do they think these companies are outliers in their industry? Do they truly believe that the same thing couldn’t possibly be happening (or never happened) at the company they are aligned with?
Similarly, what do MLM proponents think when they see the plan from another MLM? Do they notice that the description of the opportunity — and the rewards that potentially come with joining up — are pretty much the same?