Saturday, 30 July 2016

'MonaVie' another 'MLM' racket

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The MonaVie Purple Juice Collapse

MonaVie was a multi level marketing (MLM) company that manufactured and sold fruit juice beverages and supplements. For a time, it was a top player in a growing market—some call a fad, others call “cult-like”—that touted the miraculous health benefits of certain berries and “super” juices.
MonaVie didn’t sell its juice products through retailers. Like all traditional MLMs, it relied on a network of independent distributors who marketed and sold the products and recruited others to follow suit. Multi-level marketing relies on multiple levels of distribution to sustain the business model.
For a few years, it looked like there was no stopping MonaVie’s meteoric rise. In fact, according to an article in Newsweek, MonaVie claimed at one time to be one of the fastest-growing private companies in the world. In 2009, its founder and chairman, Dallin Larsen, was named an Ernst & Young Entrepreneur of the Year.
From the Salt Lake Tribune: “From its start in 2005, MonaVie grew to $854 million in revenue in 2008 and had recruited 1 million distributors, Larsen said at the time.”

How did MonaVie rise and fall so quickly?

Well, first of all, it was the subject of a number of controversies, not the least of which were health claims about its products that were never scientifically verified or OK’s by any regulatory body. What’s more, according to Forbes, MonaVie’s business model resembled a pyramid scheme. Then came all the negative MonaVie reviews that called the business a scam.
In what the Salt Lake Tribune calls “a spectacular failure,” MonaVie’s rise and fall culminated with a default on a $182 million loan and foreclosure in 2015. The company took it the loan in November 2010, the Tribune said, “but, with the company apparently struggling financially, MonaVie in July 2014 announced the retirement of founders Dallin Larsen, Randy Larsen and Henry Marsh.”
In 2008, during MonaVie’s heyday, Newsweek wrote an article titled: “MonaVie Acai Juice: Cure-All or Marketing Scam?” MonaVie’s pitch was two-fold: better health from drinking its juice (which sold for a whopping $40 a bottle), and income from income from being a distributor.
However, Newsweek reported at the time, “not everyone is drinking the Kool-Aid.”
“Critics call MonaVie a ‘legalized scam’ that benefits only a few kingpin executives,” the Newsweek article states. “The product itself, they say, is an overhyped fruit drink that eludes drug regulation by the Food and Drug Administration by letting its distributors (as opposed to MonaVie itself) make the health promises. … A NEWSWEEK reporter who took the MonaVie daily dose—two ounces, twice a day—for two weeks, didn’t experience the drink’s miraculous benefits, and got headaches.”
According to Wikipedia, one “report also noted that ‘MonaVie’s vitamin C level was 5 times lower than that of Welch’s Grape Juice,’ a product priced at a fraction of the cost of MonaVie for the same serving volume.” MonaVie product ingredients were not
What’s more, of all MonaVie distributors at the time, “fewer than 1 percent qualified for commissions and of those, only 10 percent made more than $100 a week,” Newsweek reports. “And the dropout rate, while not disclosed by MonaVie, is around 70 percent, according to a top recruiter.”
The company really came under fire in 2014. In May of that year, “a class-action lawsuit was filed against MonaVie for allegedly deceptively advertising its juices, such as MonaVie Active, MonaVie Essential, MonaVie Pulse,” Truth in Advertising reported. “Among other things, the complaint alleges that the company promises its juices will provide a variety of health benefits—including increased energy and improved joint health—without scientific proof to support such claims. In addition, plaintiffs claim that the company fails to warn consumers that the juices contain ingredients—such as arsenic and lead—that could cause health problems.” The MonaVie pyramid began to crumble.
The unsustainable hype and horrible online MonaVie reviews surrounding the astounding properties of the acai berry and other “super fruits” has led to the demise of several MLMs like MonaVie. Unfortunately, their failures—and the perception that their business models are nothing more than pyramid schemes—tarnish the broader industry of direct sales. Many direct-selling organizations are not MLMs and have solid reputations, sound business models, and viable products lines.
Not all of MonaVie’s problems can be stated in this article. Wikipedia goes into more detail about the issues that eventually brought down this MLM, including poor distributor earnings,poor online reviews, misleading health claims and advertising, pyramid scheme allegations, and litigation.

Multilevel marketer MonaVie settles employee lawsuit for $19 million

The former top officers and owners of once-high flying nutritional juice company MonaVie and Bankers Trust Co. of South Dakota have agreed to pay $19.8 million to settle a lawsuit over an employee stock program that lost nearly all its value within about two years and was left burdened with a $186 million loan.
The proposed settlement still needs approval by U.S. District Judge Bruce Jenkins but includes a payment of $3.8 million from three founders and top officers of the now defunct South Jordan-based multilevel marketing company, according to a transcript of a recent court hearing. Bankers Trust, trustee of the employee stock ownership program, will pay about $16 million.
 Most of the funds will go to former MonaVie employees who were members in the employee stock ownership program that was created in November of 2010. Bankers Trust helped the employee program acquire 12.8 million shares of MonaVie stock that were valued at $186.5 million and financed by a loan carrying a 10 percent interest rate, according to court documents.
The transaction allowed the company "to unload thousands of MonaVie shares at grossly inflated values and saddle MonaVie's own employees with a crushing loan to finance the transaction," a complaint says.
The employee program lost just over one-third of its value within 44 days of the transaction and by January of 2014 the stock had lost 99.95 percent of its value, the lawsuit says.
Court documents show that the U.S. Department of Labor threatened to take action against Bankers Trust for possible violations of federal laws in its handling of the MonaVie employee stock program, prompting settlement talks.
Greg Porter, a Washington, D.C., attorney who filed the lawsuit, called the results "excellent" for 420 employees of MonaVie who were plan participants.
"We estimate that the average beneficiary of the MonaVie [employee stock program] will receive over $30,000 from this settlement," Porter said. "That money can be rolled into an IRA for retirement savings, with taxes deferred."
Former MonaVie Chairman CEO Dallin Larsen, his brother Randy Larsen, a senior vice president and board member, and company co-founder Henry Marsh, an executive vice president and board member, are expected to pay about $3.8 million.
W. Waldan Lloyd, an attorney for the three former officers, said in a statement, "We are delighted to have achieved an excellent result for the employees of MonaVie. We commend the defendants and the Department of Labor, which participated in the settlement discussions, for working with us to obtain a great financial settlement."
The former officers' payment is voluntary and without admission of wrongdoing, Lloyd said.
Scott Valbert, spokesman for Bankers Trust, said the company has insurance coverages that will pay part of the settlement, "therefore the actual cost to the company will be significantly less" than the $16 million mentioned in the court transcript. He declined further comment.
The employee program transaction in 2010 came about the same time as a company called TSG-MV Financing converted a capital infusion into a $182 million loan to MonaVie, which pledged almost all its assets as collateral, court documents show.
MonaVie defaulted on the loan in early 2010 and a multi-level marketing company called Jeunesse purchased the note for $15 million and then later foreclosed and took over MonaVie.
The juice marketer used a multilevel business plan in which independent distributors can earn commissions on sales to others they recruit. The company once approached $1 billion in annual sales.


  1. wow, i am floored.
    I am very familiar with ESOPs (employee stock ownership plans). they essentially allow a company to issue debt and simultaneously purchase stock to use for future employee benefits - typically the stock is used to match 401(k) contributions. the debt is tax deductible and, assuming the stock price grows, its a very cheap way to fund future employee benefits (assuming the company is legitimate of course)

    I would have never conceived that an MLM would use this vehicle.. i had no idea they had enough 'employees' to even qualify. the distributors are not employees so i assume they are not part of the ESOP. of course, whoever did receive the $180mm in stock ended up with a measly $20mm. Too bad the authorities only approach MonaVie as a standard bankrupt company and not the flat out fraud that it is.

    1. ShakeOilSalesman - Setting the failure of the authorities aside, of interest is the fact that the 'MonaVie' racketeers had obtained insurance cover to protect themselves against exactly this type of lawsuit. One would have thought that before the insurers and under-writers pay out, they will take a long hard look at 'MonaVie' and face the fact that they were deceived by the bosses of a dissimulated criminal enterprise, and take appropriate action


    2. ShakeOilSalesman - A quick Google-search reveals that an insurance company, Torus National, has indeed been involved in litigation and counter-litigation with 'MonaVie' in Utah.

      I haven't got time right now to go through the court documentation, but here's the link.

  2. Objectively, there is always two sides to the story. What I would like to see is how other partners outside of Monavie that have worked with the founders would stand behind them... or not.

    1. How many times have I read the thought-stopping cliche?

      'There are always two sides to the story.'

      In the adult world of quantifiable reality, when it comes to examining cultic frauds like 'MonaVie,' there are always two sides to the story:

      1. The truth.

      2. The pernicious 'negative vs positive' fairy story peddled as the 'truth.'

      In the case of the instigators of the blame-the-victim 'Monavie miraculous fruit juice/ MLM income opportunity/ Prosperity Gospel' racket, their pernicious 'negative vs positive' fairy story was far from original.

  3. A friend attempted to recruit one evening. I went to an open meeting. I sampled the product. Basically non alcoholic wine made from berries. After seeing the business plan, the decision was instantly made not to touch that with a ten foot pole. It seems the decision was the correct one.

    1. horizon61j - Thank-you for your comment. Perhaps you already understand that almost anyone can fall victim to this type of cultic racket if they are approached at a time of vulnerability.

      Behind all the commercial, pseudo-medical and mathematical hocus pocus, 'MLM' racketeers have all been running closed-market swindles aka pyramid schemes.

      Once inside an 'MLM' racket, new adherents are told that they can only achieve 'success' by exactly duplicating a 'plan.'

      The 'plan' always comprises buying a quota of 'MLM' products each month and recruiting other to do the same etc. ad infinitum. Virtually no 'MLM' products get sold on by the adherents to the general public due to their banal quality and exorbitant fixed price. In other words, the 'MLM' products are merely an effectively-valueless fake investment commodity - a means of laundering unlawful losing-investment payments, because the products are bought by 'MLM' adherents based on their false-xpectation of future reward.

      'MLM' adherents are also subjected to co-ordinated devious techniques of social, psychological and physical persuasion designed to shut-down their critical and evaluative faculties whilst giving them the illusion that they are making free-choices.