For years, I have been openly-saying that the mystifying global labyrinth of corporate structures commonly-known as 'Herbalife,' is the deceptively-kitsch front for a highly-organized, blame the-victim, closed-market swindle, or pyramid scam, dissimulated as a so-called 'Multi-Level Marketing Income Opportunity,' and related advance fee frauds, dissimulated as so-called 'training and motivation programs, lead generation systems,' etc.
Tellingly, no one has attempted to refute this accurate, deconstructed analysis - which itself predicts that any commentator with a full-understanding of the widespread financial, and psychological, abuse which has secretly been occurring behind the essentially-totalitarian 'MLM Income Opportunity' fairy story, will be systematically excluded, and/or denigrated, and/or ridiculed, by it.
Although I seem to have been almost alone in publishing a clear explanation of why 'Herbalife,' and various other essentially-identical organizations, should be investigated, and prosecuted, not as wayward multi-national companies in breach of civil legislation, but as subversive fronts for an up-dated form of ongoing, major, racketeering activity (as defined by the US federal Racketeer Influenced and Corrupt Organizations Act, 1970), a significant part of my published analysis of the 'Herbalife/MLM income opportunity' racket has been in broad agreement with various other informed observers, notably Robert FitzPatrick of the Pyramid Scheme Alert and, lately, Bill Ackman of Pershing Square Capital.
In December of 2012, Bill Ackman called the outrageous 'Herbalife/MLM Income Opportunity' bluff, and announced that he had bet $1.2 billion that the company's shares are effectively-worthless, because, although legally-registered in the USA and elswhere, 'Herbalife' is a fundamentally unlawful enterprise run by manipulative charlatans who, for decades, have been allowed to withhold key-information from the regulators and from the public, and who have never faced an intellectually-rigorous, independent inquiry.
In simple terms, Bill Ackman's central charge against the so-called 'Herbalife MLM Direct Selling Income Opportunity' is that, since common-sense, + the available independent evidence, indicates that the scheme's revenue can only have largely derived internally from its own participants (based on their false expectation of future reward), rather than from authentic profitable external retail sales to the general public (based on value and demand), 'Herbalife' has been hiding a giant pyramid scheme in plain view, in which billions of dollars of unlawful, losing investment payments have been laundered as 'sales,' simply by giving a never-ending chain of ill-informed participants banal, but over-priced products, which no rational customer would want to buy on the open-market, and which, therefore, might as well not exist.
Like all 'MLM Income Opportunity' racketeers, the 'Herbalife' mob have never said that their company makes its profits by retailing anything directly to the general public. For decades, if challenged, they have steadfastly pretended that their company makes its money lawfully by selling its exclusive good-value products to its distributors at a discount, who then can sell these highly-desirable materials for a profit themselves, to their own customers and end-users. Amazingly, even though certain key-information would obviously reveal to regulators whether 'Herbalife' is a dissimulated pyramid fraud, the company's bosses initially responded to Bill Ackman's central charge that 'Herbalife's' profits have largely been unlawful, because they have derived from the company's own agents, by making the extraordinary claim that they have never tracked and, therefore, do not know for sure, what percentage of their company's own products sales have actually been resold by their company's distributors, but that they believed that this percentage of outside retail sales (to customers and end users) has always been significant.
The 'Herbalife' bosses then pretended affinity with the regulators, by implying that as responsible and patriotic Americans, they were going to employ an external private company to do the job of Federal Trade Commission, and Securities and Exchange Commission, agents and, thus, save US tax-payers a fortune.
However, the common-sense key-questions which the 'Herbalife' bosses have always avoided answering, are as follows:
Since the instigation of your company:
- Exactly how many people overall have signed up to become so-called 'Herbalife Distributors?'
- What percentage of these so-called 'Distibutors' have actually got back more money from the so-called 'Herbalife MLM Direct Selling Income Opportunity,' than they have invested in it?
- What possible lawful reason can you put forward for withholding full, and truthful, answers to the above questions, from regulators and the public?
Even though Bill Ackman has laid aces on the table and gone all-in financially, to date, the 'Herbalife' bosses and their remaining billionaire Wall St. supporter, Carl Icahn, have raised the stakes, whilst steadfastly refusing voluntarily to reveal their own empty hand and accusing Bill Ackman of cheating. However, the latest attempt to maintain the multi-billion dollar 'Herbalife' bluff, has comprised the bosses of the organization steadfastly pretending that they are now holding an ace. In reality, this dramatic new card is of their own manufacture and to their own devious design, because the 'Herbalife' bosses have paid the Nielsen company to conduct a far-from-intellectually-rigorous survey into the ultimate source of 'Herbalife's' recent revenue, but only in the USA.
|'The Nielsen study found that 87 percent of the 349 respondents (out of 10,525 total respondents) who purchased Herbalife products for personal use in the past three months self-reported that they did not purchase it from the company as a distributor.'|
Thus, the 'Herbalife' Ministry of Truth has triumphantly announced that Nielsen has conducted a study of 10 525 adult consumers, of whom 349 said that they had purchased 'Herbalife' products during the last 3 months, and of this 349, 87% (around 300) declared themselves not to be 'Herbalife Distributors.' Based on these figures, Nielsen has apparently managed to extrapolate that 3.3% of the entire adult population of the USA, some 7.9 million people, bought 'Herbalife' products during the last 3 months, and that the majority of these purchases were made by legitimate end users.
To date, it has not been disclosed how much 'Herbalife' has paid Nielsen to produce this survey. Nonetheless, to casual observers, when spun by the 'Herbalife' Ministry of Truth, it all sounds quite impressive; that is, until you consider that, even by 'Herbalife's' own admission, a staggering 13% of the people who apparently said yes, they had bought 'Herbalife' products in the last 3 months, did not confirm that they were not 'Herbalife Distributors,' whilst the bosses of the 'Herbalife' racket are still boasting 550 thousands 'Distributors' in the USA. However, when put under pressure, they have already confessed that the average, annual drop-out rate for their scheme is way above 50%, yet according to their previous contradictory claims, over the decades this never-ending recruitment chain (already comprising millions of transient persons) didn't actually comprise 'Distributors' at all; for just a few months ago, the 'Herbalife' bosses suddenly said whoops, they'd 'mis-spoke,' the overwhelming majority of all these millions of so-called 'Direct Sellers' (who for more than 30 years have always been clearly described in millions of the company's own take-it-or-leave-it annual 'Distributor Contracts' as, 'Independent Business Owners') should have really been described as millions of 'Discount Customers.'
Thus, no matter what thought-stopping bull-shit is used to cover-up all these millions of transient 'Herbalife customer /distributors,' given the fact that the acknowledged overall, hidden drop-out rate for them, has been effectively 100%, where have all these other many millions of loyal 'Herbalife' customers (whom the Nielsen survey suddenly claims to have discovered infesting every State of the Union) been regularly buying their 'Herbalife' products from, and what prices have they been paying?
Since Bill Ackman's $1.2 billion 'Herbalife' short-selling bet was made public, I've talked to numerous people who have been sat at the table as participants or spectators. In private, all of them have agreed with my description of 'Herbalife' as a cult, but publicly they have deliberately avoided using the 'C' word.
In reality, the 'Herbalife' racket is neither original nor unique and, consequently, it cannot be fully-understood in isolation.
The original 'MLM income opportunity racketeer,' Carl F. Rehnborg (1887-1973), posing as a historically-important, visionary-scientist, autodidactic scholar and multi-millionaire, philanthropic businessman/saviour who helped thousands of people to start their own business.
The above, Orwellian propaganda video (which employs covert hypnosis, ego-destruction, Neuro-Linguistic Programming etc.) features various exemplary schills acting out a scritpted scenario of control in which they once were like 'dirty' and 'miserable' little rats trapped on a treadmill in a form of Hell (i.e. the world of traditional employment), but after exactly duplicating a 'Proven Step-By-Step System,' they have achieved redemption as superhumans in the miraculous 'Herbalife' Utopia, where no one works, but everyone is healthy, wealthy, happy and free....
..... and also drives a Ferrari, and/or a Hummer, and/or a Bentley, and/or a Porsche!
The self-proclaimed 'Herbalife' saviour.
Another 'Elmer Gantry'
The parallels between the aburd 'Herbalife' fairy story, originally peddled as reality by Mark Hughes (and currently by Michael Johnson and his criminal associates) and the the absurd 'Nutrilite' fairy story, originally peddled as reality by Carl F. Rehnborg (and currently by the De Vos and Van Andel clans and their criminal associates), are quite remarkable. In brief, these sanctimonious copy-cat charlatans (escorted by echelons of shyster attorneys) have played the unoriginal role of ordinary poor men, turned visionary supermen saviours - prepared to share their step-by-step secret of unlimited health, wealth, happiness and freedom with anyone (for a price). However, this is hardly surprising, because ‘Nutrilite Products Company Inc.’ was, after all, the prototype corporate-front for all subsequent 'Multi-Level Marketing Income Opportunity' cultic rackets.
Despite all the kitsch contemporary advertising, in the early 1950s, 'Nutrilite' was already a highly-controversial trademark owned by Carl F. Rehnborg a.k.a. 'Dr.' Rehnborg, a previously-penniless, American toothpaste-salesman (of German origin) who'd acquired a considerable fortune by reinventing himself as a historically-important, visionary-scientist, autodidactic scholar and philanthropic businessman/saviour. Prosecutors from the US Food and Drug Administration Bureau of Enforcement, who 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 escorted by an echelon of shyster attorneys, who’d combined, and updated, the medicine show and Ponzi-scheme to reflect the spirit of the age. However, Rehnborg was no ordinary charlatan. He almost certainly suffered from severe and inflexible Narcissistic Personality Disorder.
Former penniless science-fiction author, turned multi-millionaire, cultic racketeer, L. Ron Hubbard, a.k.a. 'Dr' 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 also prepared to share this step-by-step secret with anyone (for a price).
Unfortunately, just as with the followers and casual observers of Hubbard, the only information made available to the followers and casual observers of Rehnborg, and to those of Mark Hughes, has been carefully controlled.
|Carl F. Rehnborg circa 1915|
Thus, to date, the world has been led to believe that Rehnborg (who w :-
Carl F. Rehnborg circa 1936
Exactly as with L.Ron Hubbard, scant quantifiable evidence has ever been produced to prove that Rehnborg was qualified (let alone expert) in anything, other than lying to people to get their money. There is even reason to doubt that Rehnborg (who apparently did once work for 'Colgate & Co') was in China in the exact period he claimed during, and after, WW I; whilst 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.
In 1934, Rehnborg (aged 48) created ‘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. However, 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.
Soon, Rehnborg was legally employing dozens of white-coated workers in purpose-built industrial buildings in Buena Park, California. 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 pale-coloured ‘Multi-Mineral Pills.’ 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). 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 (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.
In reality, the new set-up was merely the original lie with a second 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 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 game were obliged by its rules to keep handing-over a monthly payment toMytinger and Casselberry, to be shared with Rehnborg. From all points of view (medical, economic, legal, etc.), ‘XX Supplement’ might have well not existed. It was just a convenient means of laundering illegal payments in a closed-market swindle based on the crack-pot theory of endless-chain recruitment. 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 mystifying 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 ostensibly 'commercial' 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 H. Goodrich|
Even though it wasn’t his area of responsibility, FDA Legal Counsel (1939-1971), William H. Goodrich, was probably the first senior US law enforcement agent to deduce that the innocent baby that Rehnborg, Mytinger and Casselberry had baptised a ‘New Business Model’ (later to become known as: ‘Multilevel 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 alchemy, the 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 public. Yet 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.’ They 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 1950|
Rhenborg 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 organization (as potential recruits) and recorded deluded proselytisers chanting the same absurd, but potentially lethal, 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 Hollywood star, Alan Ladd. Along with his wife and children, Alan Ladd then featured in a kitsch 'Nutrilite' advertising campaign - published in various mainstream magazines right up until 1959.
| Jay VanAndel Richard DeVos|
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-pyramid scams legislation) De Vos and Van Andel hid behind familiar words and images stolen from popular culture. They created the ‘American Way Association’ - the first of what was to become a shoal of red, white and blue herrings.
The original 'Nutrilite' lie was progressively-absorbed back into the spin-off 'Amway' lie, 1972-1994, where it still is peddled as the truth.
Readers will observe that almost ever single thought-stopping technique present in the 'Herbalife' racket, has also been present in the 'Nutrilite' racket. Yesterday's clean-cut Hollywood stars, have been replaced by today's beautiful sports stars.
Down the centuries, in essence, the dramatic 'before and after' ritual imagery used by quacks to ensnare the gullible, never changes
Unfortunately, the bosses of 'Herbalife' and 'Amway' are far from being the only cultic racketers to have employed co-ordinated devious techniques of persuasion (including association with celebrities and opinion makers), in order to commit fraud and prevent their victims from facing reality.
David Brear (copyright 2013)