Wednesday, 22 February 2017
During the depths of the Great Recession, Donald Trump counted among his many income sources a side gig as a pitchman for ACN Inc., a company whose “members” sold newfangled videophones and other products. “Trust me, it’s changing everything,” he promised in a 2009 promotional video shown to eager crowds of recruits, many of whom would fork over nearly $500 to sell ACN phones in hopes they could sign up more would-be entrepreneurs to do the same. “Believe me, it’s ultimately a dream come true,” said Trump, who also featured ACN on episodes of The Celebrity Apprentice.
But instead of a dream, companies like ACN have become nightmares to many of the people who buy the hype. As with many similarly structured “multilevel marketing companies,” many of ACN’s sellers say they end up losing money, even as they plunk down more and more cash to participate.
As for Trump, his pleas to “trust me” and “believe me” have continued to pay dividends, only now he’s saying, “I alone can fix” whatever stands in the way of American greatness. But even as Trump pursues his biggest scheme yet, one of his old ones will continue to thrive in 2017: The Trump era could ignite a golden age for politically connected multilevel marketing companies—or what critics (and John Oliver) say are often merely disguised pyramid schemes, illegal enterprises in which people primarily earn money by recruiting others instead of by selling products to the public.
MLMs aren’t a negligible portion of the U.S. economy, with some $36.5 billion in sales during 2015 and more than 18 million Americans participating in an MLM in a given year. A dismaying number of figures in the Trump administration also have connections to MLMs—beginning, of course, with Trump himself.
During the Obama administration, the Federal Trade Commission made its biggest-ever effort to curb this industry when last summer it slapped nutritional supplement–seller Herbalife with a $200 million fine and, as part of a settlement with Herbalife, demanded it restructure its business so that it would “start operating legitimately,” as FTC Chairwoman Edith Ramirez put it. The FTC alleged Herbalife had engaged in “unfair and deceptive practices,” and put it under a federal monitor for seven years, demanding onerous changes to its compensation plan and requiring extensive documentation of customer sales. Ramirez then set down an ambitious posture for the FTC: In the future, she said at an MLM industry conference in October, these companies should adopt the new Herbalife rules when structuring their businesses, as the FTC would be watching.
In an MLM, sometimes more euphemistically called a “direct-selling” company because the products aren’t sold in stores, salespeople frequently woo participants by dangling riches before their eyes as they are led to make big, upfront purchases of pricey products, then asked to recruit others under them to sell the product and recruit still more participants in the hopes of earning big commissions in what becomes a pyramidal structure. As Ramirez noted, most participants don’t make significant income. Following the Herbalife settlement terms would force these companies to ditch any deceptive income pitches and also keep track of sales to customers outside the member networks to prove that most of their products are not just being bought by the company’s own salespeople.
But the FTC’s newfound toughness may come to naught in the Trump era. There’s little hope, according to both critics and cheerleaders of the MLM industry, that the Trump administration will assume such a strict posture toward Herbalife’s peers. “The more likely scenario is that they just won’t bring a pyramid scheme case,” said Bonnie Patten, executive director of Truth in Advertising, a consumer advocacy group that helped the FTC in its prosecution of Vemma, a nutritional-product MLM that the FTC alleged was a pyramid scheme in August 2015. The case was settled in December on terms similar to the Herbalife one. (Neither Vemma nor Herbalife admitted guilt in their settlements.)
When Ramirez announced on Jan. 13 that she would step down from the FTC in February, shares of the largest publicly traded MLMs—Herbalife and Nu Skin—shot up.
With her departure on Feb. 10, there are only two commissioners remaining on the FTC and the acting chairwoman, Republican Maureen Ohlhausen, is a staunch supporter of self-regulation by MLMs. Trump will appoint three new FTC commissioners, including the chairperson. Whether it’s Ohlhausen or someone else, the next chairperson is also likely to be sympathetic to the MLM cause. The only name floated for the spot so far has been Republican Utah Attorney General Sean Reyes, who was also greeted with glee by MLM shareholders when his consideration was reported by Politico on Jan. 17.
There’s good reason for the industry’s cheer. In October, Reyes was a special guest speaker at an MLM conference in Salt Lake City, the capital of a state that is home to so many MLMs that the term is sometimes jokingly referred to as “Mormons Losing Money.”
“Utah Attorney General Sean Reyes has been a supporter of the direct selling industry for many years,” the organizers of the Direct Selling Edge Conference said in promoting his speech. “As a former business owner himself, Reyes applauds those who desire to manage their own businesses on their own terms,” which is the kind of “be your own boss” come-on MLMs make to prospective members.
If Reyes gets the gig, he’ll have plenty of MLM supporters as peers in the administration. Let’s start with Trump himself. In 2009, Trump licensed his name to an MLM, which became known as Trump Network, and “often gave the impression of a partnership that was certain to lift thousands of people into prosperity,” according to the Washington Post.
Instead, some participants lost everything: Homes were foreclosed on and cars repossessed. The company filed for bankruptcy in 2011. And for his job as a motivational speaker for ACN, Trump earned $1.35 million for three speaking engagements in 2014 and 2015 alone, according to recent financial disclosures.
Trump’s Cabinet picks also have MLM links. First there’s his education secretary, Betsy DeVos, whose husband’s family fortune derives from its ownership of Amway, the world’s biggest MLM, with $9.5 billion in annual 2015 revenue on everything from soap to cat food. While the company’s sales have been in decline, falling from a peak of $11.8 billion in 2013, Amway remains the 29thlargest privately held company in the U.S., according to Forbes.
The company has a long, well-documented history of legal troubles. In recent years, Amway or its executives have tangled with law enforcement around the globe, most notably in India, where its CEO for the country was arrested and accused of running a pyramid scheme in 2013, let go, and then rearrested in 2014. Amway denied any wrongdoing. In the U.S., it paid $56 million in 2010 to settle a class action suit alleging it was running a pyramid scheme but did not admit wrongdoing. Meanwhile, Amway’s donations to Harvard’s John F. Kennedy School of Government program have funded the training of more than 500 Chinese bureaucrats, who led that country to legalize direct selling, opening a new boom market that MLMs are now exploiting.
Amway’s outsize political influence goes back to 1979, when the FTC lost its pyramid case against Amway. After four years of litigation, an administrative law judge found that Amway did not run an “illegal” pyramid scheme because it had safeguards to protect against the reliance on recruitment. These included requiring its distributors to sell 70 percent of their inventory each month and to sell to at least 10 different customers per month.
The Amway decision set the stage for an explosion of copycats, which went almost unchecked by regulators until the Herbalife case. After its landmark settlement last summer, Ramirez said the reliance on the Amway rules was “misplaced.”
Both the Amway and Herbalife cases underscore one of the problems of prosecuting alleged pyramid schemes: There is no federal law defining the crime, leaving it to the courts to interpret and pricey lawyers to find wiggle room. The debate is also clouded by the rhetoric of free markets. At the far right end of that debate is the DeVos family, which has donated $200 million to Republicans over the years, and owns a company that combines Christian fundamentalism with extremist free-market ideology and maintains such a grip on many of those who join it that some, fearful for their lives and harassed mercilessly, went into hiding after they sought to expose it.
Other Trump-connected MLM fans include Housing and Urban Development Secretary–designate Ben Carson, who was once a pitchman for the MLM Mannatech, and the agricultural policy adviser from Trump’s campaign, Charles Herbster, whose Kansas City, Missouri–based company Conklin, which sells fertilizers and pesticides, is also organized as an MLM.
Next comes Trump’s special adviser on federal regulations, investor Carl Icahn, who has an estimated net worth of $17 billion. Icahn is something of an accidental beneficiary of MLM wealth, having invested in Herbalife to get back at his nemesis, fellow shareholder activist Bill Ackman, after Ackman launched a public short on Herbalife in 2012 and called it a pyramid scheme. Icahn has ended up virtually running Herbalife, owning 24 percent of its shares and holding five board seats. But despite Icahn’s clout, Ackman’s lobbying effort to bring down Herbalife led to the FTC crackdown, which could pummel Herbalife’s earnings. (The company has other problems, as it recently disclosed that it is subject to an anti-corruption probe by both the Securities and Exchange Commission and the Department of Justice over its burgeoning China business.)
Icahn is helping vet Trump’s choices to head the regulatory agencies and one of his companies has already benefited on Wall Street from the selection of Trump’s Environmental Protection Agency pick Scott Pruitt, whom Icahn helped vet. If Icahn assists Trump in naming FTC commissioners, he will be helping to staff the body charged with enforcing the Herbalife settlement.
Then there’s Congress, where critics also fear the passage of legislative efforts they say would virtually legitimize many pyramid schemes. One such bill, introduced last summer by a bipartisan caucus organized by the industry lobbying group, the Direct Selling Association, was opposed by Ramirez because it contradicts the terms of the Herbalife settlement. Days after she announced her resignation, Ramirez wrote a letter to the DSA chastising it for its opposition to the FTC view, which the DSA had laid out in a press release shortly before Trump’s inauguration. The question is whether there is retail demand for the products of MLMs or whether the purchases are just a camouflage for recruitment. The DSA, and the bill, argues that purchases by participants in the scheme, called “internal consumption,” can represent true demand, which means they would count when determining commissions paid to salespeople. Ramirez and the FTC disagree. Even if MLM participants do want to buy products for their own use, they shouldn’t be compensated for doing so, Ramirez said. To ensure compensation is driven by retail sales, she noted, companies should keep track of all customer sales outside the network (as Herbalife is being forced to do).
What this all adds up to, in the eyes of opponents and supporters, is a benign era for MLMs. Regulating these companies, with their legions of independent salespeople, is difficult for the toughest regulatory regimes. And the Trump era will be anything but that. “Anybody who would continue to expect or hope for law enforcement regarding financial schemes of this type would be living in a dream world,” said Robert FitzPatrick, the president of the watchdog Pyramid Scheme Alert. “[MLMs] are going to gain protection.”
FitzPatrick will get no quarrel from the industry’s biggest fans. “We think that with the new administration you can forget any aggressive action vs. MLMs,” industry analyst and Herbalife shareholder Tim Ramey wrote in a note to clients in January. “When Betsy DeVos was named to the Trump Cabinet we took that as a very strong signal that the Trump administration had no real issue with the MLM world. … You don’t put Betsy DeVos in your cabinet and then go out and try to put [Herbalife] out of business. We are in a post-regulatory world.”
* * *
It’s fitting that the Trump administration has such an affinity for MLMs: Their economic and political philosophies are perfectly in sync. Even though the FTC continues to say such claims are deceptive, MLM companies are notorious for making ludicrous promises of wealth that can still be found all over the internet.
It’s not dissimilar to what Trump has promised his followers. “The false income opportunities of pyramids schemes are parallel to what Trump is offering—an alternative reality, a false hope,” FitzPatrick said.
One of the earliest critics of Amway, former insider Stephen Butterfield, wrote about how its conservative economic policies actually helped bolster Amway’s ranks in his 1985 book, Amway: The Cult of Free Enterprise. “In alliance with the religious right, Amway (which stands for American Way) has spent more than three decades building an authoritarian, pro-business movement in the American middle class,” according to a promotion blurb for the book. “Amway preaches devotion and obedience to its leaders, hard work and sacrifice for the Company, contempt for the poor and worship of the rich.”
That was more than 30 years ago, and now nearly all those ideals are back in vogue—or at least cherished by those in power. And to those who perceive themselves to have lost ground, who see Trump’s “American carnage” surrounding them, a miracle cure can hold a lot of sway.
“[The current political moment] is perfectly aligned with Amway’s mission—selling a phony lifesaving raft to people who are drowning. People will pay any price for it because they are drowning, and Amway is dependent on people drowning,” said FitzPatrick, referring to Amway’s influence in a Republican Congress, which now threatens to erode the social safety net by gutting Medicare and Social Security and repealing Obamacare. “The more there are helpless people, people deprived or struggling, the better the market is for their phony proposition.”
In recent years, the heavily publicized Herbalife battle has shined much-needed light on MLMs. Last year’s scathing John Oliver segment on them has received almost 10 million views, 2 million of them in Spanish. (Immigrant, often undocumented, Latinos trying to make it in the U.S. have become a major target group.) A documentary on Ackman’s Herbalife battle, Betting on Zero, hits theaters March 10 and will be available on demand April 7.
Even while the popular culture’s view of MLMs is shifting, FitzPatrick doesn’t think we’re yet at a tipping point where consumers reject them en masse. Trump’s election may help explain why. After the election, FitzPatrick says he sent out a newsletter to the many victims of pyramid schemes who’ve come to him for help, explaining the connections with Trump.
“I had some cancellations of the newsletter, and some of them, after canceling, just wrote the word MAGA on the cancelation,” FitzPatrick said. “This is the pathos of it. Those people in general were victims of MLMs, and yet, they are so caught and immersed in the web of lies that they really don’t know why they lost. Now they've put their faith in Donald Trump after being scammed by the type of organization that Trump endorses. But when you point out that Trump is going to enhance these schemes, protect them, and he’s part of them, they can’t hear it.”
Trump, FitzPatrick says, was their last, best hope. And like MLMs, he may yet provide a familiar disappointment.
Michelle Celarier (copyright 2017)
Monday, 20 February 2017
Although his statements were very carefully made in the present tense, recently, Donald Trump insisted that to the best of his knowledge, he has nothing to do with Russia and that no person whom he deals with, has anything to do with Russia.
Donald Trump has a very short memory, because for almost 10 years, he was paid millions of stolen dollars to endorse an 'Amway' copy-cat blame-the-victim 'MLM' cultic racket known as 'ACN.'
The 'ACN' racket, complete with Donald Trump's endorsement, has operated in Russia.
“I do not know the (ACN) company. I know nothing about the (ACN) company other than the people who run the (ACN) company... I’m not familiar with what they do or how they go about doing that.
Furthermore, during the presidential campaign, Donald Trump gave an interview to the Wall St. Journal in which he pretended that he had never understood or endorsed ACN and that he'd only been paid to give a few general speeches at ACN events.
David Brear (copyright 2017)
Sunday, 19 February 2017
Yesterday, in front of 9000 cheering fans, Donald Trump made a curious reference to Sweden:
'... you look at what's happening last night in Sweden. Sweden, who would believe this. Sweden. They took in large numbers. They're having problems like they never thought possible...'
At first, this latest vague statement was generally taken to mean that a terrorist incident had occurred in Sweden, but when it was established that no such incident had occurred, some media commentators concluded that the President might have been confusing Sehwan in Pakistan (where a suicide bomber blew himself up among devotees at the Sufi shrine on Friday, killing 80+ people) with Sweden. Yet, how could Trump and his advisers have made such an outrageous and insulting gaff? Other commentators then realised that the President could, in fact, have been referring (but without thought or clarification) to a recent alarmist report on immigrants and rising crime levels in Sweden, broadcast by Fox News. Yet this explanation merely demonstrates that Donald Trump has absolutely no conception of any diplomatic problems which his clumsy words might create, and that he expects his audience to have the same cable-television viewing habits, and resulting simplistic model of reality, as himself.
Gene Huber is perhaps Donald Trump's most devoted fan.
Mr Huber is an emotionally-vulnerable middle-aged man who proudly boasts of having fallen head over heels in love with Donald Trump and, as we all know, love is blind. Indeed if anyone were to challenge Mr. Huber's current model of reality, his reaction can be predicted with almost 100% accuracy, because it is based on a two-dimensional comic-book narrative.
Granted, Mr. Huber is an extreme example, but nonetheless he is one of a significant minority of US citizens who have become totally-convinced that:
President Donald J. Trump is a wise, strong and honest leader who has selflessly given up his comfortable life as a senior billionaire businessman and television celebrity, to come to the aid of his fellow citizens who are not only threatened by the external enemies of democracy and the American Way, but who have also been lied to and cheated by an array of internal enemies - stupid, and/or weak, and/or corrupt: bankers, politicians, bureaucrats, journalists, judges, etc.
However, there is little quantifiable evidence that Donald Trump has done anything in recent months except violently character-assassinate anyone publicly dissenting from his own Utopian controlling scenario, whilst steadfastly pretending affinity with anyone and everyone whose support he needed to achieve power.
Although a flock of smug commentators continue to roll their eyes and bleat that any comparison of the US President to totalitarian dictators (particularly Adolf Hitler) is 'anti-Trump hysteria,' the current evolving-situation is most certainly neither original nor unique and consequently, it cannot be fully-understood in isolation.
Thus, it cannot be denied that Gene Huber is an unabashed Trump groupie who quite literally worships daily before a life-sized cardboard image of his nation's elected-leader; praying to God to protect the infallible object of his devotion. Yet, imagine how easy it would be to exploit the likes of Gene Huber in their present unquestioning state of mind.
One thing is certain, neither Donald Trump nor Gene Huber will have heard of Eric Voegelin - one of the most prolific (and difficult to read) authors of the 20th century - but if Eric Voegelin had still been alive today, I strongly-suspect that he would not have been at all surprised by the arrival of President Trump, because in many respects, he predicted exactly how this would come about.
In the early 1930s, Voegelin (a young German, Catholic academic teaching in Austria) was an original observer who openly identified 'Nazism' as a dangerous ritual belief system founded on a non-rational 'racial' pseudo-science ('Ariosophy'), but presented in a far more-convincing modern encrypted jargon of 'nationalist politics.' Even though Voegelin also saw 'Soviet Communism' as part of a wider historical phenomenon which he described as 'Political Religion,' he faced arrest by the 'Nazi' regime and he fled to the USA.
Voegelin subsequently produced a vast body of work which is a lofty (and linguistically complex) philosophical view of the history of human civilisation. Indeed, I wouldn't advise anyone to try to read Voegelin in pure form. That said, at the core of Voegelin's work can be extracted a self-evident truth which boils down to one plain language sentence.
At times of mass-alienation (following: wars, natural disasters, economic crises, etc.), history proves that would-be demagogues steadfastly pretending moral and intellectual authority whilst pursuing hidden criminal objectives, who at other times would have been almost universally-recognised as absurd charlatans, have found it much easier to become widely-accepted as authentic Messiahs.
David Brear (copyright 2017)
Sunday, 5 February 2017
Today the BCC posted an unsigned article entitled:
Why is Betsy DeVos, Trump's pick for education secretary, so unpopular?
The BBC article contained a summary of why Betsy DeVos is unqualified to be US Education Secretary and of who opposes her, but it also stated that her husband, 'Dick DeVos, was a CEO of the beauty and nutrition giant Amway...'
Talk about 'alternative facts,' because whilst it is true to say that Dick DeVos used to be the CEO of 'Amway,' since 1960, 'Amway' (corruption of 'The American Way') has been the legally-registered corporate-front for the original blame-the-victim 'Multi-Level Marketing/ Prosperity Gospel' cultic racket. For a while, due to its appalling reputation, 'Amway' changed its name to 'Quixtar' in the USA.
For decades the 'Amway' mob has been using a significant chunk of its stolen wealth to infiltrate the Republican party.
Let's be perfectly clear about this: the BBC article completely fails to comprehend that the nomination of the demonstrably empty-headed Ms. DeVos as US Education Secretary has been bought with the proceeds of organised crime. This flagrant act of corruption forms part of an overall pattern of ongoing major racketeering activity as defined by the US federal Racketeer Influenced and Corrupt Organisations (RICO) Act, 1970. Indeed the celebrated attorney, Prof. G. Robert Blakey, who drafted the RICO Act once compiled a jaw-dropping report on 'Amway'.
David Brear (copyright 2017)
Thursday, 2 February 2017
In response to several recent requests, I have posted 'The Universal Characteristics of a Cult' on a separate Blog.