Thursday, 29 October 2015

Robert FitzPatrick explains Pyramid Politics

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Robert FitzPatrick

Pyramid Politics -- The Infuence of 
MLM on Congress and the Presidential Race

Recent events show that regulatory, consumer and investor voices have grown strong enough to push multi-level marketing (MLM) promoters to seek political protection from scrutiny and law enforcement.  Fearing regulators, short sellers and consumer whistle-blowers, the MLM "industry" has gone to Washington for protection, touting false claims that MLM is providing "income opportunity" and is all about "direct selling." The effect of MLM lobbying could be very negative for millions of Americans, especially vulnerable groups such as military moms, students, and Latinos who are recently targeted by MLMs.
The Direct Selling Association (DSA), composed mostly of MLM companies,  has organized a "direct selling" caucus  that enrolled 31 members of the House of Representatives, claiming MLM is an "income opportunity" for families. The names of the 31 can be found HERE.
The DSA maintains a powerful political lobby in the infamous lobbyist enclave, K Street in Washington, DC. DSA lobbyists recently influenced the FTC to "exempt" all MLM schemes from any disclosure regulations. That is why today in the USA MLMs solicit financial investments from millions of people, but they do not provide information on income or loss averages, churn or cost rates of previous investors, making due diligence impossible. 

Now MLM appears to be in full-blown survival mode, after FTC regulators recently closed down one of the DSA's award-winning members, Vemma. The FTC said Vemma was scamming more than 200,000 households. Many of the victims were students. 

  • Also, the largest publicly-traded member of the DSA, Herbalife, is under investigation by the FTC, SEC, FBI and Dept. of Justice for possible pyramid fraud charges. Herbalife mostly targets lower income Latinos. 
  • And then, another award-winning attorney-member of the DSA, Kevin Grimes, considered the most prominent attorney for MLMs in the USA, was recently sued by the federal court-appointed Receiver for his role in promoting  an illegal MLM scheme, calledZeek Rewards, which was closed down by the SEC for running a one-million-victim pyramid and Ponzi scheme.
Lobbyists Claiming to be Victims of Lobbying!
Ironically, the DSA is claiming that it is MLM that is the victim of unfair lobbying. It is blaming one hedge fund, Pershing Square, for all its problems. Pershing has taken a "short" position against the stock of the DSA-member, Herbalife, and has offered regulators and the public evidence that Herbalife is an illegal pyramid scheme. 
In reality, Pershing Square's "fraud thesis" against Herbalife and its public campaign to expose the company have brought many facts to light that were already known but obscured from public knowledge. The campaign has provided the first forum for victims of Herbalife's infamous "leads generation" scam and it has led to efforts by Latino groups to expose how Herbalife is exploiting lower income Latinos with its false income promises based on recruiting and the fake nutrition clubs and bogus "university" that are parts of the recruiting scam. 

For an overview of the facts and accusations brought against Herbalife see the Pershing website (also in Spanish), Herbalife Pyramid Scheme.
It is beyond absurd for Herbalife or the MLM "industry" to claim that Pershing caused the regulator attention, class action lawsuits, investor doubts and consumer protests or is unduly affecting government. MLM has a longstanding and huge political influence-buying machine, extending to state legislators, Congress and Attorneys General.  

For a view of MLM's influence at the state legislature and state attorneys general level see the Harpers article, "Pyramid Insurance: Why are multilevel-marketing companies making big donations to state attorney-general candidates?" bJeff Ernsthausen
The facts against Herbalife have been raised by others ever since the scheme was founded and have never stopped. Pershing is just the first organization with resources to bring these facts to a wider audience.
MLM for President!
If readers are not aware of the influence of MLM in national politics, consider also that the two top presidential contenders for the Republican Party (as of this date) are closely associated with MLMs, Donald Trump with the MLM, ACN, and Ben Carson with the MLM, Mannatech.Former presidential candidate Mitt Romney was also closely tied to MLM through Nu Skin and Melaleuca whose leaders were major financial contributors and campaign officials.  
Robert FitzPatrick, Pres.
(copyright 2015)

Thirty-one (31) members of the US House of Representatives have been enrolled into a "direct selling" caucus organized by the Direct Selling Association (DSA), but were these Representatives fully informed when they agreed to support "direct selling"?
The Direct Selling Association (DSA) is the lobbying and PR arm of "multi-level marketing" (MLM). MLM is not Direct Selling.
In a letter sent to each member of this caucus, the Steering Committee of  International Coalition of Consumer Advocates, an hoc group of activists from various countries who are seeking greater regulation and law enforcement on MLM pyramids, warned the Congress members that they may be getting misled into treating MLM as the same as direct selling and they may not be informed about MLM's pyramid character.
The letter points out that MLM is not an "income opportunity" since less than 1% of all participants are profitable each year -- the one percent being the same group at the top that recruits and scams the 99% who churn in-and-out annually.
It makes the basic point that MLM participants do not and cannot make profit from "direct telling" but only if they can recruit a "downline" on an endless chain. Only a tiny few could ever do that.
The letter cautions these members of Congress against lending their names to a system that is based on the "endless chain", causes great losses and deceives people about income potential. It also listed the various connections between recent pyramid prosecutions, investigations and lawsuits involving DSA members that the caucus may be unaware of. It urged the caucus members to become informed about the controversies around MLM and offers the resources, research and experience to assist them.
Donald Trump is getting a lot of attention these days as a Republican Party's leading candidate (at this time) for the highest office in the land, president of the United States. He has aroused anger for calling Mexican immigrants "rapists" and for saying Vietnam vet, Senator John McCain, is not a war hero because he was "captured." 
Presidential Candidate and Official MLM Champion  

But now the media is starting to look into another aspect of Donald Trump. He is the most famous promoter of "multi-level marketing." Trump has been the paid spokesman for the MLM, ACN, headquartered in North Carolina. In endorsing ACN and helping them recruit consumers who pay $499 to join, Trump stated, "ACN has a reputation for success, success that's really synonymous with the Trump name and other successful names, and you can be a part of it."

ACN, for its part, confirms that Trump supports not just ACN but the "industry" of MLM, stating on its website, " 
So why does one of the busiest men in business take time out for ACN? Because he loves and believes in the industry - and more importantly, he believes in ACN!"

Hyping MLM has been very profitable for Trump. In less than one year, Donald Trump was paid by ACN
$450,000 to speak at ACN meetings and promote the company and its MLM "model."

Trump's Own Direct Involvement in MLM Failed
Even while he was still hyping ACN, Trump bought a competitive MLM called Ideal Health and changed the name to Trump Network. See the beautiful presentation with Trump's line of "health" products. It lasted only a short while and was dumped by Trump, some suspect because of the high fees paid to Trump for using his name. The scheme was acquired by one of the "top producers" and is now operating as "Bioceuticals", still selling products that claim to slow or stop aging, non-FDA approved, of course.

"The Get-Rich-Quick Schemers Who Love the GOP:  
Donald Trump, Ben Carson, and Jeb Bush have something in common: "multilevel marketing" companies that prey upon the desperate and broke."

Is the world so big that MLMs can recruit and expand "forever"? MLM promoters tell recruits in Cleveland, for example, that if they can't find enough recruits, then think Ohio. If Oho is already full of MLMers, think USA. Better yet, do you have a cousin in China? Burundi? Albania? Vietnam? The opportunity is "global"! The story is that MLMs can recruit and expand forever. There are no limits, only limited thinking. So, if you don't build a big downline, it's only your own fault.  Of course, this is not true. 

Take the USA, where MLM started and where more MLMs operate than anywhere else.
new report on the publicly traded MLMs shows that these 12 public MLMs and Amway, together, have 2.5 million "salespeople". That leaves only 46 other households in all of America for each of these 2.5 million to recruit.
 (there are 115 million USA households). Remember, MLMs don't allow their members to recruit for more than one MLM and they can't recruit people in their MLM for other MLMs, even after they quit. Here's how the MLM, ACN's sales contract puts it, "During the term of this Agreement and for a period of one (1) year thereafter, I shall not solicit an ACN Company IBO, whether active, inactive, individual or entity, to participate in a network marketing program offered by any other company."

Each MLMer is competing to find new recruits against every other MLMer on their own chain and all those in the all the other MLMs too. The Direct Selling Association claims there are now 1,400 MLMs in the USA and more being started all the time!

12 publicly-traded MLMs and Amway have 2.5 million salespeople
in the USA, one for every 46 households in the entire country
The DSA claims there are now 1,400 MLMs in the USA!


  1. "12 publicly-traded MLMs and Amway have 2.5 million salespeople
    in the USA, one for every 46 households in the entire country.
    The DSA claims there are now 1,400 MLMs in the USA!"

    I live in the UK where Facebook is crawling with 'oh so successful' MLMers. Do you know how many MLMs are now in Britain, how many salespeople they claim and what this represents per UK household?

    1. Anonymous - Robert's quoted-figures, if anything, are generous, because they don't include the big privately-owned 'MLM' rackets.

      Currently, there are approximately 27 millions households in the UK.

      The so-called 'UK DSA' claims 400 thousands so-called 'direct sellers' in the UK (88 thousands of whom are apparently under 25), but provides zero quantifiable evidence that any member of this constantly-churning flock of Britons has generated an overall net-profit by regularly retailing products or services to members of the general public (based on value and demand).

      A quick calculation reveals that, on the above figures, there is a so-called 'direct seller' for approximately every 65-70 households in the UK. The so-called 'UK DSA' comprises most of the big US-based 'MLM' rackets + some home-grown ones.

      Frighteningly, Lynda Mills, director general of the so-called 'UK DSA,' is quoted as recently saying:

      “Direct selling is becoming more mainstream and offering a whole range of people a real alternative to traditional employment. The industry has been growing in popularity over the last few years and we’ve now reached the stage where younger people see it as an appealing career option.”

  2. How can you be so sure no one makes money out of direct selling?

    1. Anonymous - It depends what you mean by this deeply-ambiguous question, because certain racketeers have made billions of dollars out of so-called 'direct selling'. Plenty of amoral attorneys, bankers, accountants, politicians, former regulators, etc., have also pocketed piles of stolen cash.

      Please apply a little common sense, and confront the simple truth that in 'MLM' rackets, on the pretext that by 'exactly duplicating a plan to achieve financial freedom,' victims (arbitrarily described as 'distributors') have been required regularly to buy wampum products ( i.e. effectively-unsaleable, banal merchandise often of a highly-dubious pseudo-medical nature) for exorbitant fixed prices.

      Thus, the only net-profits which have been made out of this economically-suicidal game of make-believe have gone to the minority of racketeers who keep setting it up (along with their associates), not to the majority of ill-informed players.

  3. This is truly scary. I am a UK Victim that has escaped, ( and had moved up the marketing plan) although still registered. Now I am away from the brain washing I can see how bad they are. They work just like a cult and we lost a packet, though still pretended we were doing that's what you did. Yes we were constantly trained to 'Fake it till you make it'. There was always that little niggle inside that didn't sit with our core values and ethics, in spite of being constantly told how ethical the Company was. It is all lies. I used to train too and inspired more victims to carry on. I am not stupid so it shows just how powerful these cults are and how you can be sucked in. I genuinely thought I had found a great business to work hard in to make money and help others. After a time I found out that there was a 99% failure rate and nobody would give me an answer when I asked about this. I wish more would come forward like Craig, but they are so powerful and the venom that can be sent out on line by the cult members, is just what I don't need right now. Happy to help with any information as can confirm a LOT of what has been said re the UK and Times article. One of the real problems is I really liked some of the people we met and worked with, who became friends...BUT they still " believe" so we have had to reduce those friendships as I know they love the friendship and recognition more than making money. This is also one of the ways they keep members so loyal. Its very sad.

    1. Anonymous - You might prefer to contact me via e-mail

      Your story is very important and I'd like to thank you for having the courage to come forward.

      Kindest regards