Monday, 6 November 2017

Bosses of 'Herbalife(HLF)' racket continue to flout FTC Order.

Image result for pseudoscience

Statutory Warning

More than half a century of quantifiable evidence, proves beyond all reasonable doubt that:
  • what has become popularly-known as 'Multi-Level Marketing' (aka 'Network Marketing') is nothing more than an absurd, cultic, economic pseudo-science.
  • the impressive-sounding made-up term 'MLM,' is, therefore, part of an extensive, thought-stopping, non-traditional jargon which has been developed, and constantly-repeated, by the instigators, and associates, of various, copy-cat, major, and minor, ongoing organised crime groups (hiding behind labyrinths of legally-registered corporate structures) to shut-down the critical, and evaluative, faculties of victims, and of casual observers, in order to perpetrate, and dissimulate, a series of blame-the-victim rigged-market swindles or pyramid scams (dressed up as 'legitimate direct selling income opportunites'), and related advance-fee frauds (dressed up as 'legitimate training and motivation, self-betterment, programs, recruitment leads, lead generation systems,' etc.).
  • Apart from an insignificant minority of exemplary shills who pretend that anyone can achieve success, the hidden overall loss/churn rate for participation in so-called 'MLM income opportunities,' has always  been effectively 100%.

David Brear (copyright 2017)


Income Testimonials At Herbalife Events Paint Unrealistic Picture Of Business Opportunity, Further Violating The FTC Order

By Christine Richard


In a previous article, we looked at how Herbalife’s “Circle of Success” event system violates the FTC Consent Order by imposing undisclosed costs and minimum purchase requirements on distributors.
Step inside these events, and the violations continue.
Distributors take to the stage, making income claims that are far from representative of the business – a violation of Sections II and IV of the Order.
Herbalife corporate facilitates these events and yet fails to take reasonable steps to monitor its distributors, violating Section V of the Order.
We compare the false impression of the business created by testimonials at a typical event with the reality.
In July 2016, the Federal Trade Commission imposed conditions on Herbalife Ltd. (HLF) and its distributors to assure that the earnings potential of the company’s business opportunity was accurately described. Promoters are now prohibited from “misrepresenting or assisting others in misrepresenting, including by providing others with the means and instrumentalities with which to misrepresent, expressly or by implication that participants will or are likely to earn substantial income” and “the amount of revenue, income, or profit a participant earned or can likely earn.” (Section II)
Yet, that’s exactly what happens at dozens of Herbalife “Circle of Success” training events in dozens of locations across the country, from Los Angeles to New York, Seattle to Miami, Houston to San Juan. These monthly events are organized by top distributors in close coordination with Herbalife corporate.
At Success Training Seminars (STSs), held on Saturdays in hotel ballrooms and convention centers across the US, the audience is packed with distributors and their guests. As part of every STS, organizers ask distributors to come up on stage and tell the group how much they earn. These individuals, who parade across the stage, one after the other, have a few seconds to give their testimonial. These are not the star distributors, who appear on stage as part of the event grand finale, accompanied by thumping music and a crush of distributors rushing the stage to get the speaker’s autograph. For the most part, the group providing testimonials is presented as rank-and-file Herbalife distributors.
The testimonial section of the event is included in a segment known as the Herbalife Opportunity Meeting (HOM), which is intended to provide information for the guests that distributors brought to the meeting in hopes of recruiting them into the business.
We now know, thanks to an exhibit provided in Rodgers v. Herbalife, the Florida racketeering case filed against Herbalife corporate and more than 40 of its top distributors, which you can see here, that Herbalife sets the agenda for STSs, approves slide presentations by speakers and collects information regarding attendance. According to Herbalife’s suggested itinerary, income claims should be given between 10:05 am and 11:05 am during a typical Saturday event.
There is little doubt that distributors feel pressured to go up on stage and to exaggerate their income. Top distributors frequently tell their downline members that the way to succeed in the Herbalife business is to maintain a positive attitude. Why bring down this part of the meeting – which is, after all, a sales pitch for potential recruits – with a less than inspiring story?
Also, even if distributors tell the truth about the size of their checks, the income claims they make are typically based on gross income; testimonials don’t include information about the costs of operating an Herbalife distributorship.
Because this parade of testimonials is a part of every STS, it’s important, in the wake of the FTC Order, to ask if the claims – even when taken at face value and even when leaving aside the questions of expenses – realistically represent the business opportunity.
Arizona Event
We sent a researcher to an STS in Arizona to document testimonials. In our experience, this was a typical event, one that followed a predictable pattern of income claims ranging from a few hundred dollars a month up to “more than I ever imagined possible.”
Here’s how the income claims began at that event, according to the researcher’s notes:
"New distributors were asked to come on stage and share how much money they’ve made selling Herbalife products. Most people said they made about $200-$500 in the month of November. Many shared how they saw this as supplemental income. Some stay-at-home moms said they started selling Herbalife because they wanted to stay home with their children and still be able to make money."
Herbalife’s US Statement of Average Gross Compensation for 2016 states that a distributor needs to sell 10 canisters of Formula One to make $95. This assumes that all sales are made at the full retail price, the seller is able to pass along shipping and taxes to customers and the seller has no expenses beyond the cost of the product.
The distributors at the STS in Arizona claimed profits that equate to selling between 20 to 50 canisters of Formula One in one month. Herbalife does not provide an income distribution for business opportunity seekers whose only potential profits come from retail sales, so we have no way of knowing what’s typical. But, it’s hard to believe that most distributors are moving this much product in their first – or any – month of business. Yet, that’s what potential recruits were told at the Arizona meeting.
Supervisor Income Distribution
Herbalife does provide information on how much it pays a select group of distributors who have purchased a sufficient amount of product to be eligible to earn commissions on the purchases of people in their downline. Before providing this income disclosure, however, Herbalife eliminates anyone who has not created a downline and it eliminates those who have a downline but haven’t earned commissions on purchases by those recruits.
As a result, Herbalife provides income distribution information for a group made up of just 14% of all Herbalife members.
In order to make this group more representative of all business opportunity participants, we added back distributors who have recruited a downline but haven’t received any commissions and distributors with no downline. We were able to estimate these numbers by combining information from Herbalife’s 2014 disclosure document with the company’s 2016 disclosure.
We then put all these business opportunity seekers into a pie chart showing their annual income distribution for 2016.
Fifty-seven percent of this group earned nothing in 2016. Twenty-one percentage earned something less than $245. Seventeen percentage earned between $245 to $4,350. Just four percent of distributors earned between $4,350 to $82,000 – a very wide range of incomes to include in one category! Less than 1% of distributors earned more than $82,000.
Testimonials by Top 4%
Does a person who attends an Herbalife Opportunity Meeting come away with a reasonable overview of the income potential? Back to the notes from the Arizona event:
"Next, the Active World Team members were invited on stage. This is the first step to a leadership position in Herbalife. There was more variation in how much money they made in one month versus the first group. The lowest was $600 and the highest was $4,100. Some people said they were selling Herbalife products part-time while working in full-time jobs. Among the group were dental assistants, bankers, cashiers, people with government jobs, and personal trainers."
Note that distributors typically describe their income in monthly terms during testimonials while Herbalife’s income disclosure statement provides annual incomes. On an annualized basis, this group reported earnings of $7,200 to $49,200, placing them in the top 4% of all distributors.
The income testimonials continued with the distributors in the next level of the marketing plan called up on stage:
"Next, the Global Expansion Team members were invited on stage. These people claimed they made anywhere from $2,500 to $7,500 last month."
"One woman said she used to have a corporate job, making a six-figure salary. But she left that job and began selling Herbalife products because she ‘needed a purpose in life’ and Herbalife provided that for her. She said she made $6,488 last month."
"Another lady said she became motivated to sell Herbalife products after learning she could work from home and not have to drop off her kids at a daycare. She claimed to have made about $3,800 last month."
"One guy said he was homeless when he started selling Herbalife. He talked about having trouble finding a job because employers would turn him down after doing a background check on him. He said he was encouraged when he found out he didn’t have to go through a background check to sell products for Herbalife. All he needs is a distributor ID number. He shared that with the money he has earned through Herbalife, he was able to pay for an apartment, a car and for nursing school."
We assume an income that covers rent, a car payment, and tuition would exceed $4,350 annually. As a result, all the testimonials by this group also fall within the top 4%.
The testimonials continued:
"Next was the Millionaire Team. One man said he was laid off from his corporate job shortly after he started using Herbalife products. He began selling them as a way to make money. He made $1,700 in his first month. Last month he made $9,234.”
"One lady said she made $64 her first month. After she lost her full-time job, she started selling Herbalife products full time. In eight months, she was able to make as much money as she was making in her old job. Last month, she made $5,034."
"Another woman, who said she used to play volleyball in college, said she started selling Herbalife to the people closest to her. She eventually quit her full-time job and dedicated herself to selling Herbalife products. She said she’s projected to make $120,000 this year."
All three testimonials put the distributors in the top 4% of all distributors, while the projected income testimonial puts that distributor into the highest earning category, which includes less than 1% of all business opportunity seekers.
Misrepresenting the Income Potential
The final group called on stage at the Arizona event were President’s Team members:
"A woman was the only person to go on stage for this group. She said that when she first started selling and using Herbalife products 23 years ago, she was a teacher and her husband was a photographer. They were just starting their family and were struggling to make ends meet. So, they started selling Herbalife products as a way to bring in extra income. They made $1,400 in their first month, more than what she was making at the time as a full-time teacher. Eight months after selling Herbalife products, she and her husband became Global Expansion Team members, making about $3,000 a month. They slowly started making more money. Fast forward to today, she said Herbalife 'transformed our entire lives' and that it has brought in more money than they could’ve ever imagined. She was given a standing ovation at the end of her speech, though she never shared how much money she and her husband currently make."
Her position in the testimonial parade and her comments regarding her income, though not specific, would indicate that she made more than the other distributors who provided testimonials, putting her in the $82,000-plus category.
When the testimonial section of the event was over, not a single person had described earning an income that matches the experience of 96% of all business opportunity seekers. Everyone was – or pretended to be – a distributor in the top 4-5% of all earners.
The FTC Order states that those promoting the business may not make “any representation, expressly or by implication, regarding the amount or level of income, including full-time or part-time income, that a participant can reasonably expect to earn unless the representation is non-misleading.” (Section IV)
What is the purpose of this parade of testimonials if not to provide an overall picture of what’s possible or even likely for those considering the business opportunity?
Surely the organizers of these events understand (and likely orchestrate) this misrepresentation of the business opportunity. Meanwhile, Herbalife must also be aware of how these testimonials – all concentrated at the high-end of actual earnings and presented without regard for business expenses – have no chance of creating a “non-misleading” picture of a recruit’s income potential.
Under Section V of the FTC Consent Order, Herbalife is required to “take all reasonable steps necessary to monitor and ensure that Business Opportunity Participants and Preferred Customers act in compliance with the requirements of Sections II-IV of this Order.” They certainly weren’t policing the Arizona event.
It’s simply not possible to offer an accurate representation of the business opportunity by limiting those who speak about the business to individuals who claim to earn more than 96% of business opportunity seekers.
No one testified that they have yet to receive a check from Herbalife – though that’s the experience of 57% of all business opportunity seekers. No one described what it was like to earn just a few dollars after spending hundreds of dollars on products, flyers, and event tickets. No one talked about earning an Herbalife income that falls short of the minimum wage – though that’s the situation for more than 96% of business opportunity seekers.
If distributors offered these types of testimonials, it would make for a pretty depressing “Herbalife Opportunity Meeting,” but it would reflect the reality.

Christine Richard (copyright 2017)

Thursday, 26 October 2017

'Amway/Nutrilite' to 'Herbalife' - all 'MLM' racketeers have peddled the same pernicious fairy story.

Image result for pseudoscience

Statutory Warning

More than half a century of quantifiable evidence, proves beyond all reasonable doubt that:
  • what has become popularly-known as 'Multi-Level Marketing' (aka 'Network Marketing') is nothing more than an absurd, cultic, economic pseudo-science.
  • the impressive-sounding made-up term 'MLM,' is, therefore, part of an extensive, thought-stopping, non-traditional jargon which has been developed, and constantly-repeated, by the instigators, and associates, of various, copy-cat, major, and minor, ongoing organised crime groups (hiding behind labyrinths of legally-registered corporate structures) to shut-down the critical, and evaluative, faculties of victims, and of casual observers, in order to perpetrate, and dissimulate, a series of blame-the-victim rigged-market swindles or pyramid scams (dressed up as 'legitimate direct selling income opportunites'), and related advance-fee frauds (dressed up as 'legitimate training and motivation, self-betterment, programs, recruitment leads, lead generation systems,' etc.).
  • Apart from an insignificant minority of exemplary shills who pretend that anyone can achieve success, the hidden overall loss/churn rate for participation in so-called 'MLM income opportunities,' has always  been effectively 100%.

David Brear (copyright 2017)


Today, 'MLM income opportunity' is a lie which has been repeated so often, that many people around the world (sadly including, regulators, legislators, journalists, academics, etc.) have come to believe that it must be true.

This week, the question of exactly where and when the ritualisation of the pernicious 'MLM' fairy story began, has again been raised. 

About 20 years ago, I was told by a retired US Food and Drug Administration Attorney that (as far as he was aware) the phrase, 'Multi Level Marketing,' had first appeared in print in the early 1950s (or possibly even in late 1940s) in a privately-owned American magazine, 'Nutrilite News.'  

Image result for william goodrich fda nutrilite
Prof. William W. Goodrich
Although, I have never seen the evidence, I have no reason to doubt that my informant (who worked with FDA legend,  Prof. William W. Goodrich) was correct. Indeed, if readers look on the Net, it is generally claimed that, 'although Multi-Level Marketing-style companies existed in the 1920s and 1930s, the first real MLM system was created in 1945 by the owner of Nutrilite, Carl F. Rehnborg.' 

Interestingly, however, the peddlers of the 'MLM' fairy story have preferred not to reveal exactly where or when the thought-stopping jargon term, 'MLM,' was coined or who actually coined it, because 'Multi-Level'  was adopted to hide the fact that these schemes are 'Infinite Level' and are, therefore, intrinsically fraudulent.

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Carl F. Rehnborg (1887-1973)

Carl F. Rehnborg and his first family, circa 1920

Throughout the 1940s and 1950s, 'Nutrilite' was already a highly-controversial trademark owned by Carl F. Rehnborg (a.k.a. 'Dr.' Rehnborg), a previously-penniless, American former salesman (of Swedish/German descent) who'd acquired a considerable fortune by reinventing himself as a historically-important, visionary-scientist, autodidactic scholar and philanthropic businessman. Attorneys at the US Food and Drug Administration Bureau of Enforcement (who applied common-sense, as well as the law, and successfully-challenged the authenticity of some of Rehnborg's many absurd lies in the federal courts during two decades), privately knew him to be nothing more than one of a trio of sinister quacks protected by an echelon of aggressive attorneys who had combined, and updated, the medicine show and Ponzi-scheme to reflect the spirit of the age.

Former penniless science-fiction author, turned multi-millionaire, cultic racketeer, L. Ron Hubbard, posing as a historically-important,visionary scientist and philanthropist who had discovered the secret of how ordinary humans can become healthy, wealthy happy and free super humans. Hubbard was prepared to share this secret with anyone (for a price).

There are certain observers who consider that Carl F. Rehnborg's role in the creation of the 'MLM' lie was only secondary and that, although he was a quack, he was somehow a dupe who was used himself. However, just like his contemporary, L. Ron Hubbard, Rehnborg was no ordinary quack; for he was a particularly dangerous performer who undoubtedly became totally convinced that his own ego-protecting, elaborate game of all-American capitalist make-believe was reality. 

The Nutrilite Story

Tellingly, Rehnborg's own comic-book version of his life and achievements as set-down in various non-independent propaganda films and publications (including a book signed by his son, and heir, Sam Rehnborg), reads uncannily like the autobiography dreamt-up by 'Scientology' instigator, L. Ron Hubbard (a man who was once famously described as 'a combination of  Baron M√ľnchausen and Adolf Hitler'). Unfortunately, just as with the followers and casual observers of Hubbard, the only information made available to the followers and casual observers of Rehnborg, has been carefully controlled and all other sources systematically excluded, and condemned, as fake.

Rehnborg, Circa 1927.

Thus, to date, the world has been led to believe that Rehnborg (who was born in 1887 in   Florida) :- 

- was a noted-child-prodigy who read voraciously and who amazed his teachers with his detailed knowledge of: philosophy, religion, history, politics, astronomy, mathematics, aerodynamics, chemistry and human rights. 

- became  fluent in many languages, including Chinese. 

- was not a believer, but he studied Christianity, making a boyhood pilgrimage to Palestine and Egypt.

- had a great passion in his teen-age years - the study of planet Earth, its population, its food reserves, and the 'technology of conservation of natural products, but his first love was always the science of nutrition. 

 - was, by the tender age of 27, already a 'doctor of chemistry' who had moved to Tianjin in China to work as a salesman and then an accountant for an American Oil company.

- ran a shipbuilding company, before becoming the representative of the 'American Dairy Company' and, eventually, the representative of 'Colgate Products Company' in Shanghai.

 - witnessed ‘mass-starvation’ in China, before surviving a ‘siege of Shanghai’ by supplementing his diet (and that of his starving friends) with an improvised, vitamin and mineral-enriched broth made from grasses, vegetables, powdered limestone, ground-up bones and rusty nails, etc.

- sailed across the Pacific (studying its many island-cultures on the way) and landed on the West Coast of the USA, where, despite having no money, he managed to establish a 'research laboratory’ in his modest loft-apartment on California’s Balboa Island.

- selflessly dedicated 6 years of his life (1927-1934) to develop a ‘Revolutionary New Food Supplement’ to save mankind from starvation, assisted only by his second wife.

- first naively tried to give his wonderful new formula away, but the cynical world wasn’t interested, so, in 1934, he reluctantly decided to create ‘California Vitamins Inc.’ 

- moved his flourishing  ‘Business’ to a ‘Manufacturing and Processing Facility’ in Buena Park, California, and created the ‘Nutrilite Products Company Inc.’ in 1939. 

- acting in association with a ‘Network Sponsoring Company’, ‘Mytinger and Casselberry Inc.’ (to whom he’d sold ‘Exclusive Nutrilite Distribution Rights’) created the ‘World’s First Multi-Level Marketing Scheme’ in 1945.

-  tried, but failed, to prevent Messrs, Mytinger and Casselberry from making exaggerated 'cure-all' claims about 'Nutrilite.'

- had lived the American dream, starting from nothing to become an admired and respected millionaire through ‘Helping thousands of fellow Americans to build their own MLM Businesses.’ 

Carl F. Rehnborg  circa 1939

Like L.Ron Hubbard, no independent quantifiable evidence has been produced to prove that Rehnborg was qualified (let alone expert) in anything, other than lying to vulnerable people to get their money. Again, like Hubbard, Rehnborg's lies, and exaggerations, usually contained elements of the truth. Apparently, he did once work as a salesman for 'Carnation Milk' and the 'Colgate & Co,' and he was in China during, and after, WWI, but all the other exciting episodes in his various occidental and oriental odysseys are largely anecdotal. However, the truth about Rehnborg’s convoluted ‘Rags to Riches’ American fairy story, is an entirely different matter.

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In 1934, Rehnborg (aged 48) legally-registered ‘California Vitamins Inc.’allegedly to manufacture and distribute what he arbitrarily defined as 'the World’s First Multi-Mineral/Multivitamin Plant-Based Food Supplement - a Unique Combination of Vitamins and Minerals in a Special Base.’  At first, this so-called ‘Health Tonic’ was brewed up, and peddled as 'Vita-6'  a.k.a. 'Vitasol,' in insignificant quantities. Consequently, it was of no particular interest to regulators.

Anyone with an ounce of common sense could immediately tell that Rehnborg’s ‘invention’ was just another essentially-inert potion (in the absurd tradition of the medicine show); a random mixture of cheaply-procured common substances with an expensive price tag. It had probably taken Rehnborg 6 hours to concoct, not 6 years.

Aerial View of Nutrilite Products Inc. Plant

By 1939, Rehnborg had spotted the existing term, 'Nutrilites' (probably in an old scientific magazine). So he legally-changed the name of his pay-to-play game of make-believe to the technical-sounding ‘Nutrilite Products Company Inc.’ and moved his quackery onto an almost unprecedented scale. Soon, Rehnborg was legally employing dozens of white-coated workers in purpose-built industrial buildings in Buena ParkCalifornia. He also acquired an alfalfa farm near to the city of Hemet in California's San Jacinto valley, but it is unclear exactly where he suddenly found all the necessary capital to pay for these impressive sites and their modern equipment. To his followers and casual observers, Rehnborg’s activity looked like any other lawful enterprise. His staff were ordinary honest folk, to whom the truth was also unthinkable.

At this time, Rehnborg rechristened his potion ‘Nutrilite Double X (‘XX’Supplement.’ He now proposed to offer it as two ‘complimentary products’ in one pack -  comprising little green bottles of bright red ‘Multivitamin Capsules’ and boxes of pale-coloured ‘Multi-Mineral Tablets.’ The product was deliberately designed to look modern and scientific (like a proprietary medicine), but, tellingly, the price was fixed at just less than $20 a box (the equivalent of several hundred dollars today). 

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See original image

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Perhaps it's just a coincidence, but in 1940 Charlie Chaplin's celebrated satire of 'Nazi' Germany, 'The Great Dictator', had transformed the Swastika into the 'Double Cross.'

Rehnborg claimed that the ‘XX’ brand-name was derived from the Roman numeral representing twenty. It should have been read as ‘double cross;’ for when the former toothpaste salesman’s pricey wampum was routinely analysed by independent chemists working for the FDA, it was discovered that (although it contained essentially what it said on the labels and was quite harmless) ‘XX Supplement’ really did mostly comprise a random mixture of cheaply-procured, common substances in which vitamins and minerals naturally occur (dried vegetable extracts: alfalfa; parsley; watercress; yeast; etc.). FDA experts later estimated that XX Supplement’  cost no more than a few cents a pack to produce. Thus, FDA lawyers must have known that Rehnborg was, in fact, using authentic pharmaceutical equipment to mass-produce a precisely-measured, harmless placebo, but labelled as a ‘Health Tonic’ (a meaningless term), and peddling it at an exorbitant mark-up (certainly, more than 1000%). This crack-pot pseudo-scientific swindle, which was tantamount to a self-styled 'alchemist' stamping a valueless amalgam of base-metals, 'Pure Gold,and selling it for the price of pure gold, could have been quickly nipped in the bud, simply by charging Rehnborg with criminal fraud. Apparently, prosecutors never considered the possibility that they might be dealing with someone with severe psychological problems whose own inflexible delusions were contagious. Instead, at first, FDA lawyers felt obliged to take no action; reasoning that, by truthfully listing the banal ingredients, but avoiding making any specific therapeutic claims, on his packaging, Rehnborg had found a loophole in federal laws concerning criminal misbranding of medicines. As result, an up-dated version of an age-old fiction was permitted to be mass-marketed as fact to an unsuspecting public. Unfortunately, the lack of any rigorous, official challenge only brought its author more credibility. Not surprisingly, a host of copy-cat 'Unique Vitamin and Mineral Health-Tonic’ scams quickly sprang up.

As WWII drew to its close, ‘Nutrilite’ had lost its novelty, so Rehnborg (who was approaching 60) had teamed-up with two respectable-looking associates, Lee S. Mytinger and William S. Casselberry (later described by FDA officials as a ‘cemetery-plot salesman’ and a ‘psychologist’). The result was ‘Mytinger and Casselberry Inc.,’ a second corporate structure peddling ‘Exclusive Commission-Agency Rights’ to ‘Distribute XX Supplement’ using (what was first defined by the company’s owners as) a ‘New Business Model.’ In theory… you could try to sell ‘XX  Supplement’ to your social contacts for a small profit, but, if you wanted to make big money, you didn’t need to sell anything… you could buy a monthly quota of ‘XX Supplement’ yourself and sign-up your social contacts to do the same… your ‘Sponsored Recruits’ would then ‘Sponsor’ their own social contacts, etc., ‘compensation’ would automatically multiply in an infinitely-expanding geometric progression

‘Mytinger and Casselberry Inc.’ offered a mind-numbing contract’ in which the ‘company’ undertook to pay its ‘Independent Distributors’ an escalating ‘monthly commission’ on the totality of their escalating ‘Business Volume’(i.e. their own regular monthly purchasesfalsely defined as sales’, added to the regular monthly purchases, falsely defined as ‘sales’, of their ‘Sponsored Recruits’, and those of the recruits of their recruits, etc. etc. ad infinitum).

In reality, the new set-up was merely the original mystifying lie with a second mystifying chapter added, but to casual observers ‘Nutrilite Products Company Inc.’ appeared to be exclusively manufacturing for, and wholesaling ‘XX Supplement’ to, ‘Mytinger and Casselberry Inc.,’ whose commission agents, in turn, appeared to be retailing it to the public for a profit. Although ‘XX Supplement’ was presented as ‘Unique,’ it mostly comprised substances which could easily be bought at a fraction of their exorbitant, assembled fixed-price, in traditional retail outlets. The product was effectively-impossible to sell to the general public for a profit on the open market. Therefore, the overwhelming majority of its final customers were merely the non-salaried agents of the second corporate structure, which itself was the sole agent of the first corporate structure. In order for them to maintain the false hope that if they signed-up further contributing participants they would automatically become rich, the participants in this dissimulated money circulation game were obliged by its rules to keep handing-over a monthly payment to Mytinger and Casselberry, to be shared with Rehnborg. From all rational points of view (medical, economic, legal, etc.), ‘XX Supplement’ might have well not existed; for it was just a convenient means of laundering illegal losing investment payments in a classic rigged-market swindle, or pyramid scheme, based on the crack-pot, non-rational theory that endless-chain recruitment + endless payments by the recruits = endless profits for the recruits. New victims were supplied with a $49.50 ‘Business Kit’ (i.e. a large cardboard box stuffed with a month’s supply of ‘XX Supplement’ and a fat folder containing page after page of mind-numbing pseudo-economic/medical presentations and diagrams, and instructions in how to go about remembering, contacting and recruiting everyone they’d ever known during their lives). These presentations contained the concrete evidence which FDA lawyers could use to prosecute Rehnborg, Mytinger and Casselberry. Contributing participants were being instructed to smile, project excitement and enthusiasm, and to recite a precisely-worded script which proclaimed ‘Nutrilite XX Supplement’ to be ‘good value,’ because it could ‘cure or prevent,’ virtually any known human illness.

William W. Goodrich
William W. Goodrich

Even though it wasn’t his area of responsibility, FDA Legal Counsel (1939-1971), Prof. William W. Goodrich, was probably the first senior US law enforcement agent to deduce that the innocent baby that Rehnborg, Mytinger and Casselberry had first baptised a ‘New Business Model’ (later to become popularly known as: ‘Multi-Level Marketing’) was actually the same old delinquent previously known a 'pyramid scam.’ Again, anyone with an ounce of common-sense could work out immediately that, since Rehnborg had been peddling medical alchemythe strong likelihood was that Mytinger and Casselberry were peddling economic alchemy. The sinister trio of quacks were obviously acting in association, but agents of the Food and Drug Administration and those of the Federal Trade Commission acted independently. At this time, anti-racketeering legislation did not yet exist in the USA. However, in the late 1940s, the rapidly-expanding ‘XX Supplement’ dossier was already in the hands of FTC lawyers. Apparently, prosecutors still never considered the possibility that they might be dealing with persons suffering from severe psychological problems and whose own inflexible delusions were contagious. Instead, they still felt obliged to take no action; this time reasoning that Mytinger and Casselberry appeared to have found a loophole in federal law prohibiting fraud. For even today, the fundamental identifying characteristic of all pyramid scams and Ponzi schemes, has not yet been accurately defined by legislators. As a result, another updated version of an age-old fiction was permitted to be mass-marketed as fact to an unsuspecting publicYet again, the lack of any rigorous official challenge only brought its authors more credibility. Not surprisingly, a host of copy-cat 'income opportunity' swindles (camouflaged by banal, but pricey, wampum) quickly sprang up.

By 1947, Rehnborg, Mytinger and Casselberry were steadfastly pretending  ‘15 000 Successful Distributorships in the USA,’ with ‘sales’ totalling ‘$500 000 dollars per month.’ Mytinger and Casselberry had also organised the production of a ‘Free’ booklet, ‘How to Get Well and Stay Well’, in which they further pretended that ‘Nutrilite Double X Supplement’ had ‘cured or greatly helped such common ailments’ as : ‘Low blood pressure, Ulcers, Mental depression, Pyorrhoea, Muscular twitching, rickets, Worry over small things, Tonsillitis, Hay Fever, Sensitivity to noise, Underweight, Easily tired, Gas in stomach, Cuts heal slowly, Faulty vision, Headache, Constipation, Anaemia Boils, Flabby tissues, Hysterical tendency, Eczema, Overweight, Faulty memory, Lack of ambition, Certain Bone conditions, Nervousness, Nosebleed, Insomnia, Allergies, Asthma, Restlessness, Bad skin colour, Poor appetite, Biliousness, Neuritis, Night blindness, Migraine, High blood pressure, Sinus trouble, Lack of concentration, Dental caries, Irregular heartbeat, Colitis, Craving for sour foods, Arthritis, Rheumatism, Neuralgia, Deafness, Subject to colds.’

Carl.F. Rehnborg circa 1947

Rehnborg now cast himself in the role of ‘Scientific Adviser’ to ‘Mytinger and Casselberry Inc.’ He toured the USA preaching the gospel to wide-eyed ‘Distributors’ - ‘for less than $20 a month’‘Nutrilite Double X Supplement’ was the ‘Answer to Man’s Search for Health.’ After both companies’ owners were approached by FDA officials and warned that they could face criminal prosecution for misbranding, the booklet was ‘revised.’ Specific therapeutic claims were supposed to be eliminated. ‘All illnesses’ suddenly became a ‘state of nonhealth’ produced by ‘chemical imbalance’.… ‘Nutrilite XX Supplement’ cured nothing, it merely ‘enabled people to Get Well and stay Well’ by themselves. However, pages 41-52 of the booklet still recounted alleged case-histories explaining that ‘Nutrilite brought relief from such ailments as diabetes, feeble mindedness, stomach pains, sneezing and weeping.’ Not surprisingly, the FDA officials were not impressed, so they finally launched a number of raids, and seizures of ‘Nutrilite XX Supplement’ and associated publications.

In 1951, after a series of lawsuits, appeals and counter suits (in which Mytinger and Casselberry hired top lawyers who portrayed their clients as American capitalist heroes being crushed by Soviet-style bureaucracy), the FDA obtained (on behalf of the people) a permanent Supreme Court injunction against ‘Mytinger and Casselberry Inc.’ preventing Distributors’ from referring to 50 publications making false claims about ‘Health Tonics and Food Supplements’ (including various ‘Revised Editions’ of ‘How to Get Well and Stay Well). FDA agents soon found that the injunction was being flouted. As a result of mounting complaints, they infiltrated the organisation (as potential recruits) and recorded deluded proselytisers chanting the same cure-all mantra about ‘XX Supplement.’ Faced with more litigation and fearing that their monopoly of information might be lost, in 1954, Rehnborg, Mytinger and Casselberry hired a leading advertising agency which handled the clean-cut, but fading, Hollywood star, Alan Ladd. Along with his wife and children, Alan Ladd then briefly-featured in a kitsch 'Nutrilite' advertising campaign - published in various mainstream magazines right up until 1959. Alan Ladd (who secretly suffered from chronic depression and who had problems with alcohol and narcotics) was, however, soon to be air-brushed out of the 'Nutrilite' fairy story.

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Almost certainly in an attempt to dodge the permanent US Supreme Court injunction, in the Mid 1950s (using his third wife's name), Carl Rehnborg introduced yet another grossly-overpriced, effectively-unsaleable investment commodity into the 'Nutrilite/MLM' fairy story - 'Juvalite / Edith Rehnborg Cosmetics (ERC).' This would later be rebranded 'Artistry.'


The charlatan-trio, 'Mytinger, Casselberry and Rehnborg,' also paid a team of Hollywood professionals to produce a 20 minute colour propaganda film, From the Ground up’ (featuring themselves as three nice ordinary American guys turned philanthropic scientists and industrialists). They also revamped their own propaganda magazine, ‘Nutrilite News' (stuffing it with ritual photos of happy, healthy and wealthy ‘Distributors' and their dutiful wives).

Amway Co-Founders Rich DeVos and Jay Van Andel (bottom row, second and third from the right, respectively) and their group of senior key agents pose with Nutrilite Founder Carl F. Rehnborg and his wife Edith Rehnborg, in front of their tour bus, 1956.
Richard DeVos and Jay Van Andel (2nd and 3rd from the right, front row), Carl F. Rehnborg (immediately behind Van Andel, second row), circa 1950.

Soon, the 'Nutrilite' show was touring the USA on a motor coach (like a 'Tent Revivalist' group).  Mytinger, Casselberry and Rehnborg had begun organising pay-to-enter ‘Rallies and Seminars'’ (addressed by allegedly ‘Successful Christian Distributors’ like Rich De Vos and Jay Van Andel). No quantifiable evidence (in the form of audited accounts) was ever produced to prove what percentage of claimed ‘sales'’ were authentic retail transactions to the general public for a profit (based on value and demand), or how many people who’d signed a contract'’ with ‘Mytinger and Casselberry Inc.' had actually generated an overall net-profit from the operation of what its instigators arbitrarily defined as an MLM income opportunity’. Excluding the tiny percentage of grinning shills at the top of the pyramid, the hidden, rolling insolvency/churn-rate was 100%. Since there was no significant or sustainable external revenue, participants were actually buying infinite shares in their own finite money. 

 Richard DeVos                                                Jay Van Andel

Circa 1950
circa 1965

In 1959, when it seemed that ‘Mytinger and Casselberry/Nutrilite Products Inc.’ might finally be shut down (under the ‘Federal Food, Drug and Cosmetic Act 3381-3383’, rather than anti-fraud legislation) De Vos and Van Andel hid behind familiar, patriotic words and images stolen from contemporary popular culture. They created the ‘American Way Association’ - the first of what was to become a shoal of red, white and blue herrings.

Previously, the two up-and-coming charlatans, Mytinger and Casselberry, gravitated towards the established (but ageing) Rehnborg, and vice versa. Rehnborg seems to have reflected the pair's own narcissistic delusions as reality and behaved as though they were important businessmen/psychologists, whilst the pair treated him as though he really was an important and respected scientist/ philanthropic businessman. This was the point at which'Nutrilite Inc.' (a legally-registered, and industrialised, pseudo-scientific swindle), began to transform into a highly-organised, self-perpetuating, blame-the-victim 'Prosperity Gospel' cultic racket - tailor-made to fit the existing beliefs and instinctual desires of a broad range of people - peddling a perversion of the 'American Dream' whilst giving victims the illusion that they were making free choices. 

Evidently, US law enforcement agents never fully-understood that Rehnborg, Mytinger, Casselberry, DeVos, Van Andel and their close-associates, were dangerous manipulators who magnified each others' narcissistic delusions. The longer they went unchallenged: the more adherents they ensnared and the more-capital they acquired. The more capital they acquired: the easier it became to deceive more adherents and the more severe, and inflexible, their own delusions became. Sadly, and exactly like L. Ron Hubbard, the more convinced of their importance Rehnborg, Mytinger, Casselberry, DeVos and Van Andel became: the more convincing they became.

On September 6th 1949 (along with Michael Pacetti), two, clean-cut, hitherto-unremarkable USAAF veterans of Dutch Protestant origin, Richard DeVos (aged 23) and Jay Van Andel (aged 25), registered the ‘Ja-Ri Corporation.’ However, throughout the 1950s, this (apparently independent) company was solely the agent of both Nutrilite Products Company Inc.' and of  'Mytinger and Casselberry Inc.'

The two Pentacostalists, DeVos and Van Andel spent ten years perfecting their own sanctimonious 'MLM' act, before finally setting up a copy-cat 'income opportunity' racket.

 'Amway' frst operated as an affinity fraud targeting the flag-waving adherents of Evangelical Churches in the Bible Belt. Most early 'Amway' adherents were already trained to defer systematically to the moral and intellectual authority of their pastors - so De Vos and Van Andel simply dressed up, and behaved, exactly like respectable Church pastors. They taught their male followers to duplicate their clean-cut example. Thus, alcohol, cigarettes and even beards were forbidden. Amway men had to wear a suit and tie, whilst Amway women were forbidden to wear pants or anything too sexy. Indeed, until relatively recently, 'Amway Network Leaders' were commonly referred to as 'Black Hats.'

The classic movie, 'Elmer Gantry' (released in 1960), was written and directed by Richard Brooks and is loosely-based on a novel of 1927 by the Nobel prize-winning author, Sinclair LewisIn the Movie, 'Gantry' (played by Burt Lancaster) is a grinning charlatan in a loud suit - a hard-drinking whore-chasing travelling-salesman, who, for sexual and financial motives, attaches himself to the beautiful 'Sister Sharon' (played by Jean Simmons), the focus of a profitable 'Tent Revivalist' group working the Bible-Belt during Prohibition (1920-1933). 'Elmer Gantry' keeps his grin, but he dons a sombre suit and black hat, and is reborn as 'Brother Gantry' 'Charismatic Preacher' and 'Moral Crusader'. He soon discovers that he has the power to create mass-hysteria, and reap tens of thousands of dollars, by manipulating individuals' existing beliefs and instinctual desires. At a key-moment in the movie, a Protestant Minister (bedazzled by 'Brother Gantry's' offer to fill his church coffers) abandons the traditional Christian message and proclaims: 'Business is business, that's the American Way'.

Perhaps it's just a coincidence, but at almost exactly the time that 'The American way Association' first appeared, 'Elmer Gantry' was playing to packed movie theatres all over the USA.

Initially (and with an irony that is close to exquisite), in order to dodge being drawn into the ongoing FDA investigation of 'Nutrilite,' De Vos and Van Andel got rid of the pills and potions and now laundered all the unlawful investment payments into their copy-cat, dissimulated, rigged-market swindle, behind the claim that they were selling a laundry detergent  (i.e. banal, but effectively-unsaleable, non-'medicinal' pseudo-scientific wampum of their own fabrication). Again, the updated snake oil stain remover was deliberately designed to look modern and scientific, whilst De Vos and Van Andel grinned from ear as they too steadfastly pretended that these strangely-familiar, cheaply-procured mixtures of common substances, were all-American, exclusive, good-value and unique.

The original 'Nutrilite/Artistry' lie was progressively-absorbed back into the spin-off 'Amway' (a.k.a. 'Quixtar') lie, 1972-1994, where an up-dated 'organic/ anti-ageing ' version is still peddled as the truth

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Only after the 'MLM' virus had spread to almost every State of the Union, did the US Federal Trade Commission finally make a half-hearted attempt to close-down 'Amway.' After receiving a significant number of complaints,  FTC prosecutors, advised by specialist economists, recognised that what they were faced with, was not a direct selling scheme, but as a classic pyramid scam, without a significant or sustainable source of revenue other than its own victims, but hidden behind a smokescreen of banal products. However, after years of investigations and hearings, in 1979, a naive, and/or corrupt, federal judge ruled that although 'Amway' had previously been massively in breach of the law and would have to pay fines, the company would be allowed to continue to trade. This was because the judge accepted the latest unbelievable chapter of the 'MLM' fairy story. i.e. That 'Amway' s owners were respectable Christian businessmen who were vehemently opposed to  pyramid schemes and that, consequently, they had stopped fixing prices and introduced their own rules which would, henceforth, oblige the members of 'Amway's' sales force to sell at least 70% (by value) of the products which they had bought wholesale from the company, to at least 10 customers, before they could receive commission paymentsAmazingly, no independent, common-sense mechanism was created to ensure that this latest twist in the fairy story was true, and that 'Amway' would now be in compliance with the law.

Not surprisingly, this tragicomic judgement was seen as an open-invitation to thieve, and, consequently, a whole host of 'Amway' copy-cat 'MLM' rackets soon began to appear. 

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Today the so-called 'Direct Selling Association,' is a demonstrable lie - a false beacon that has attracted, and continues to attract, millions of vulnerable persons into de facto slavery by fooling them into believing they can become 'business owners.'  The so-called 'Direct Selling Association' is financed and controlled by the bosses of a classic, organised crime syndicate.

David Brear (copyright 2017)