Oz at BehindMLM has a fantastic article about MLM Business Development Arrangements (BDA), backroom deals that happen between MLM companies and high-level distributors from other companies. BDAs are a means by which these distributors are enticed to leave their current company to go over to the new MLM opportunity.
We’ve hinted at these backroom deals in the past before. The Salt Lake Tribune previously described the $3 million dollar loan that MonaVie made with Orrin Woodward. Seeing Robert Dean move from company to company has led many to wonder what kind of money is being exchanged behind all this MLM hopping. Oz details how Jeunesse Global enticed Matt Nestler, “25 year veteran in the multi-level marketing industry,” to join its company with a 6-month $15,000/month incentive to bring volume to the company.
Jeunesse saw the acquisition of Nestler and Kevin Giguere (Nestler’s immediate downline from a previous MLM opportunity) as an investment.
The BDA required Nestler to generate enough sales volume for the company to make back what it agreed to invest in him and Giguere over his first six months with the company.
Oz describes what happened next as “cloaks within cloaks, daggers within daggers. With so many possible layers of subterfuge, backstabbing and betrayal in play, it’s difficult to get a clear sense of what exactly went down.” Much of the detail he shares has been gleaned from a lawsuit filed by Nestler against Jeunesse Global, which he accuses of the following six counts:
- breach of contract (Jeunesse)
- breach of The Implied Covenant of Good Faith and Fair Dealing (Jeunesse)
- tortious interference with (Nestler’s) contract (Kevin Giguere)
- interference with Nestler’s business relationships (Jeunesse and Giguere)
- tortious and civil conspiracy to interfere with Nestler’s business relationships (Jeunesse and Giguere) and
- violation of The Florida Deceptive and Unfair Trade Practices Act (Jeunesse)
Read the rest of Oz’s post to get a glimpse at the backroom deals that often accompany top distributors leaving one company to go to another “amazing” opportunity.
For those at the bottom-rung of an organization or just starting out, this could be what really happens at the top of your company. Your chance of being successful at your MLM — just like Mr. and Mrs. so-and-so — is not as good as you might think or are led to believe. As Oz puts it:
Meanwhile what of Jeunesse’s affiliates. In this snapshot of the upper echelons of the Jeunesse affiliate-base, what hope does a regular affiliate just starting out to compete?
It certainly sounds like if you’re not getting your own secret backroom deal when you join Jeunesse, then you’re probably under someone who is.
And can you be sure they’re then acting in your best interest, or theirs.
Prosperity gospel (or health and wealth gospel) is commonly used by those at the top of multi-level marketing companies to lure people into their fold. The new person is mesmerized by the rags to riches story of the leader and is convinced (or brainwashed) into thinking that he too can enjoy the fruits of prosperity by doing what the leader tells him to do. “If he can do it, why can’t I?” a new recruit comes to believe.
McDonald argues that it’s all based on the “deceptive success of the guy at the top.”
Yes, it is. And that’s because someone paid for that pastor’s house. Me. I paid, when I bought the book. So do millions of others, when they bring truckloads of seed-money to his doorstep each weekend. The people who fund the prosperity pastor’s success, in other words, are the people at the bottom of the pyramid. Of course it works for him. He’s at the top.
Any of this sound familiar?
Read the two articles for more on why McDonald believes the prosperity gospel is the worst pyramid scheme ever.
Pershing Square Capital Management, which has accused Herbalife of being a pyramid scheme, has posted a good video primer on pyramid schemes that’s worth watching:
Does this video sound familiar to those who have been involved or have been approached recently by someone claiming to have an “incredible” business opportunity?
Former Agel high-level distributor, MonaVie Black Diamond, MonaVie International Master Distributor, MonaVie President of North America & Europe, and MonaVie Black Diamond (again) Randy Schroeder has left the company for another MLM company called ForeverGreen. He apparently sent a letter to other MonaVie distributors that purportedly described financial troubles at the purple juice company; this letter prompted MonaVie CEO Mauricio Bellora and CMO Paul Muehlmann to post this video response as part of the MonaVie’s 2014 year-end company update.
The departure of high-level MLM distributors from MonaVie to other companies is not new. Robert Dean, Brig Hart, the Jeunesse Global group of distributors have all packed up their bags and officially left MonaVie. Then, there are other distributors who don’t seem to be promoting MonaVie as vociferously (or at all) as they have in the past. Has the ship sailed for MonaVie, despite their efforts to reinvigorate the company with Mynt?
Check out Bellora and Muehlmann as they try to pump up the MonaVie faithful in their year-end company update video below:
Finally, go to Lazy Man’s site for an analysis of Forever Green.
Reader @Missouri posted a comment about this recent This American Life feature on Wake Up Now, yet another MLM company.
Listening to the This American Life reporters talk about the Wake Up Now pitch, I heard a familiar refrain. In fact, if I replaced the name Wake Up Now with any number of MLMs that I’m familiar with, I would be hard pressed to tell the difference between all of these companies. Wake Up Now distributors had the same vague descriptions of what their company actually did, the same negative viewpoints on jobs, the same ignorance regarding the “success” rates in their business, and the same starry-eyed look when talking about those who “made it” in the business.
My New Year’s wish for those people in MLMs today is for them to go to the opportunity meeting of twelve other MLM companies operating in their area. I want them to take notes on what’s similar and what’s different from their current MLM. Do they think the other companies are legit? Or do they think these other companies are economic cults, as Robert Fitzpatrick calls Wake Up Now in the podcast? If so, why is their MLM not one too?
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!