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 'The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees of Ingsoc, but to make all other modes of thought impossible. It was intended that when Newspeak had been adopted once and for all and Oldspeak forgotten, a heretical thought — that is, a thought diverging from the principles of Ingsoc — should be literally unthinkable, at least so far as thought is dependent on words. Its vocabulary was so constructed as to give exact and often very subtle expression to every meaning that a Party member could properly wish to express, while excluding all other meanings and also the possibility of arriving at them by indirect methods. This was done partly by the invention of new words, but chiefly by eliminating undesirable words and by stripping such words as remained of unorthodox meanings, and so far as possible of all secondary meanings whatever.'
Georges Orwell (Appendix to 'Nineteen Eighty-Four')
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The purpose of 'MLM Income Opportunity' jargon is not only to provide a medium of expression for the unquestioning world-view and mental habits proper to the core-adherents of 'MLM,' but to make all other critical and evaluative modes of thought impossible. It is intended that when 'MLM Income Opportunity' jargon has been adopted once and for all and traditional language forgotten, a heretical thought — that is, a thought diverging from the 'positive' principles of 'MLM' - should be literally unthinkable, at least so far as thought is dependent on words. Its vocabulary is so constructed as to give exact and often very subtle expression to every 'positive' meaning that an 'MLM Distributor' can properly wish to express, while excluding all other 'negative' meanings and also the possibility of arriving at them by indirect methods. This is done partly by the invention of new 'positive' words and phrases ('Herbalife', 'Amway', 'NuSkin', 'Xango', 'Multi-Level Marketing', 'Distributor' , Independent Business Owner,'), but chiefly by eliminating undesirable 'negative' words and phrases ('cult', 'totalitarian', 'fraud', 'deception', 'brainwashing', 'victims', 'exploitation' , 'de facto slaves') and by stripping such words and phrases as remain of unorthodox meanings, and so far as possible of all secondary meanings whatever. |
More than half a century of quantifiable evidence, proves beyond all reasonable doubt that what has become popularly known as 'Network,' or 'Multi-Level, Marketing' is nothing more than an absurd, cultic, economic pseudo-science, and that 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 organized 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 closed-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, leads,' etc.).
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| Bill Ackman |
In yet another thought-stopping 'MLM' jargon-laced mainstrem media article, Christopher M. Matthews of the Wall St. Journal, reports:
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'Federal prosecutors and the Federal Bureau of Investigation are probing potential manipulation of Herbalife Ltd. stock and have interviewed people hired by hedge-fund billionaire William Ackman, who has led a long-running campaign against the nutritional-products company, people familiar with the matter said.
Prosecutors in the Manhattan U.S. attorney’s office and New York field office of the FBI have conducted interviews and sent document requests in recent months in connection with the investigation, which is looking into whether people, including some hired by Mr. Ackman, made false statements about Herbalife’s business model to regulators and others in order to spur investigations into the company and lower its stock price, the people said. Mr. Ackman’s firm, Pershing Square Capital Management LP, has made a huge bet on Herbalife shares declining.
One of the people familiar with the matter said investigators are scrutinizing public statements and allegations relayed to regulators by the array of consultants and activists who have lobbied against Herbalife, as well as any connections or potential collaboration between those people and Pershing Square.
Neither Mr. Ackman nor Pershing Square has been served with a subpoena or been visited by FBI agents in connection with the probe, another person familiar with the matter said. The investigation could end with no charges being filed.'
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In response to Mr. Matthews' article, when recently interviewed on Bloomberg, Bill Ackman spoke of at least one thousand 'Herbalife' victims having filed complaints in the USA, but even he repeated thought-stopping 'MLM' jargon ('business', 'distributors'). Unfortunately, the so-called 'Herbalife Business' is not a business, has never ever been a business and can never be a business (in the traditional sense of that word), for the simple reason that the demonstrably-counterfeit 'direct selling' company known as 'Herbalife' has been just one part of an ongoing criminogenic phenomenon of historic significance. The fact that this tragicomic charade is still being reported as a commercial story by the mainstream financial media, is a victory in itself for the cultic racketeers who constructed it.
Thus, the irony of Bill Ackman's use of the words, 'business' and 'distributors,' and of Mr. Matthews' phrase:-
'Prosecutors in the Manhattan U.S. attorney’s office and New York field office of the FBI have conducted interviews and sent document requests in recent months in connection with the investigation, which is looking into whether people, including some hired by Mr. Ackman, made false statements about Herbalife’s business model to regulators and others in order to spur investigations into the company and lower its stock price...'
- is close to exquisite, because the thought-stopping jargon term, 'Herbalife's business model,' is itself a false statement which has been repeated ad infinitum by the 'Herbalife' racketeers in order to commit all-manner of criminal acts - wire fraud, advance fee fraud, securities fraud, obstruction of justice, etc.
Well-informed readers will have deduced from this far-from-intellectually-rigorous WSJ article that the 'Herbalife' racketeers are merely continuing to prove the validity of the old adage that:
'He that first cries out stop thief, is often he that has stolen the treasure.'
Indeed, effectively-valueless 'Herbalife' shares apparently recovered slightly, because of this WSJ article. Therefore, it is to be hoped that US law enforcement agents have been scrutinizing the accurate public statements which I have been making on the subject of blame the victim 'MLM income opportunity' racketeering - statements which (in some cases) predate the intervention of Bill Ackman by more than 15 years, but particularly, these three articles (below) which I posted on the tragicomic subject of the WSJ and 'MLM' racketeering, exactly three years ago.
'Prosecutors in the Manhattan U.S. attorney’s office and New York field office of the FBI have conducted interviews and sent document requests in recent months in connection with the investigation, which is looking into whether people, including some hired by Mr. Ackman, made false statements about Herbalife’s business model to regulators and others in order to spur investigations into the company and lower its stock price...'
- is close to exquisite, because the thought-stopping jargon term, 'Herbalife's business model,' is itself a false statement which has been repeated ad infinitum by the 'Herbalife' racketeers in order to commit all-manner of criminal acts - wire fraud, advance fee fraud, securities fraud, obstruction of justice, etc.
Well-informed readers will have deduced from this far-from-intellectually-rigorous WSJ article that the 'Herbalife' racketeers are merely continuing to prove the validity of the old adage that:
'He that first cries out stop thief, is often he that has stolen the treasure.'
Indeed, effectively-valueless 'Herbalife' shares apparently recovered slightly, because of this WSJ article. Therefore, it is to be hoped that US law enforcement agents have been scrutinizing the accurate public statements which I have been making on the subject of blame the victim 'MLM income opportunity' racketeering - statements which (in some cases) predate the intervention of Bill Ackman by more than 15 years, but particularly, these three articles (below) which I posted on the tragicomic subject of the WSJ and 'MLM' racketeering, exactly three years ago.
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The Chairman and CEO of 'Amway' have confessed to running a Ponzi scheme, but the 'Wall Street Journal's' finest has apparently not understood this
I previously stated that, in 1945, whilst most, contemporary mainstream commentators were unable to look beyond the ends of their noses, with a perfect sense of irony, George Orwell (1903-1950) presented fact as fiction in an insightful 'fairy story' entitled, 'Animal Farm.' He revealed that totalitarianism is merely the oppressors' fiction mistaken for fact by the oppressed. In the same universal allegory, Orwell described how, at a time of vulnerability, almost any people's dream of a future, secure, Utopian existence can be hung over the entrance to a totalitarian deception. Indeed, the words that are always banished by totalitarian deceivers are, 'totalitarian' and 'deception.' Sadly, when it comes to examining the same enduring phenomenon, albeit with an ephemeral 'American/Capitalist' label, most contemporary, mainstream commentators have again been unable to look further than the ends of their noses. However, if they followed Orwell's example, and did some serious thinking, this is the reality-inverting nightmare they would find.
Dennis Berman did not bother to reply, so I sent him the following e-mail:
During the interview, and in his previous WSJ article, Dennis Berman made passing reference to the fact that attorneys acting for 'Amway' are currently in the process of settling a class-action lawsuit in California, but he completely failed to mention that this lawsuit was filed by Boies Flexner and Schiller LLP under the Racketeer Influenced and Corrupt Organizations Act, 1970, or that it essentially accused the 'Amway' corporation of being the front for a Ponzi scheme (dissimulated as an 'MLM income opportunity') and related advance fee frauds (dissimulated as the sale of 'Business Support Materials' or 'Tools'). Dennis Berman did, however, briefly mention that, last year, 'Amway's' attorneys offered to pay the equivalent of $155 millions to stop this California case from going to trial. I am reliably informed that a new, agreed-settlement is about to be made public within the next few weeks.
Dennis Berman seemed to be completely unaware that, in order to avoid closure (after a protracted US Federal Trade Commission investigation) the 'Amway' bosses introduced a fake 'rule' which appeared, to casual observers, to require that 70% of all purchases by 'Amway sales people' be resold to at least 10 retail customers before 'Amway sales people' could receive commission payments. Mysteriously, 'Amway' was allowed to continue by a 1979 federal court ruling, apparently on the mistaken assumption that at least 70% of 'Amway' products would, henceforth, be retailed to the public, but the same court failed to determine what this fake '70% retail rule' actually stated or to introduce an independent mechanism to verify that it would be enforced. However, even though 'Amway's' own essentially-meaningless 'rule' very specifically did not refer to 'the public' and has never been enforced, the '7O%' criteria still established whether what 'Amway' describes as 'bonuses' are lawful payments based on external, retail sales transactions, or unlawful internal reward-payments secretly based on recruiting. i.e. if a significant majority of 'Amway's' claimed 'sales' are to the public, 'Amway' is a direct selling company, but, if a significant majority of 'Amway's' alleged 'sales' actually derive only from the recruits' own purchases, 'Amway' is a Ponzi scheme. Thus, by claiming that only 50% of 'Amway' sales are retail, the 'Amway' bosses have now foolishly admitted to running a Ponzi scheme (albeit, not in so many words). Instead, they have steadfastly pretended to be running a 'direct selling' scheme with $10.8 billions in total annual revenue deriving from independent business owners. Yet, the company's own data reveals total annual sales worldwide of just over $6 billions. In other words, the 'Amway' bosses would have us believe that their own '3 millions sales force' buys and consumes, but never sells, around half as much as the rest of the entire world buys from 'Amway.' Now, even a ten year child ought to be able to tell that this mathematically-complex, Utopian/capitalist fairy story does not add up.
In reality, believing that they were following a proven-plan to achieve 'total financial freedom,' for more than 50 years, a never-ending chain of tens of millions of temporary, active 'Amway' recruiters have been paid net-loss 'bonuses' on their own monthly purchases of effectively-unsaleable 'Amway' wampum. When they have abandoned this closed-market swindle, almost all of them have never bought from 'Amway' again. Thus, only a fool, or a stooge, would accept that 'billions of dollars of purchases' and 'sales' made by all the tens of millions of constantly-churning 'Amway' recruits have been based solely on 'value' and 'demand', as Messrs. VanAndel and DeVos told the wide-eyed Dennis Berman. Indeed, in the recent lawsuit brought by high-level 'Amway' adherents, the plaintiffs submitted a sworn affidavit stating that 'Amway' products were sold almost entirely to the 'distributors' and never retailed. They also produced an internal 'Amway' study of 2006 which revealed that retail sales to the public were actually less than 4%. In other words, by lying to Dennis Berman about the legality of their enterprise, Doug DeVos and Steve Van Andel have actually used the on-line version of 'The Wall Street Journal' to commit wire fraud.
As if to prove his complicity with the bosses of the 'Amway' mob, Dennis Berman now does not want to talk to anyone rigorously-challenging the authenticity of his so-called 'Big Interview' with Doug Devos and Steve Van Andel.
* ‘Narcissistic Personality Disorder,’ is a psychological term first used in 1971 by Dr. Heinz Kohut (1913-1981). It was recognised as the name for a form of pathological narcissism in ‘The Diagnostic and Statistical Manual of Mental Disorders 1980.’ Narcissistic traits (where a person talks highly of himself/herself to eliminate feelings of worthlessness) are common in, and considered ‘normal’ to, human psychological development. When these traits become accentuated by a failure of the social environment and persist into adulthood, they can intensify to the level of a severe mental disorder. Severe and inflexible NPD is thought to effect less than 1% of the general adult population. It occurs more frequently in men than women. In simple terms, NPD is reality-denying, total self-worship born of its sufferers’ unconscious belief that they are flawed in a way that makes them fundamentally unacceptable to others. In order to shield themselves from the intolerable rejection and isolation which they unconsciously believe would follow if others recognised their defective nature, NPD sufferers go to almost any lengths to control others’ view of, and behaviour towards, them. NPD sufferers often choose partners, and raise children, who exhibit ‘co-narcissism’ (a co-dependent personality disorder like co-alcoholism). Co-narcissists organize themselves around the needs of others (to whom they feel responsible), they accept blame easily, are eager to please, defer to others’ opinions and fear being seen as selfish if they act assertively. NPD was observed, and apparently well-understood, in ancient times. Self-evidently, the term, ‘narcissism,’ comes from the allegorical myth of Narcissus, the beautiful Greek youth who falls in love with his own reflection.
Imagine if a leading financial journalist had been granted an interview with either the high and mighty Charles Ponzi or Bernie Madoff, prior to them being exposed as absurd, but dangerous, economic alchemists running variations of the same outrageous, fake 'investment scheme' without any external source of revenue other than that deriving their own so-called 'investors.' Imagine if that journalist had been given a complete prior-explanation (at his own request) of what Mr. Ponzi or Mr. Madoff was doing, but then failed to ask the obvious key-questions which would have revealed their hidden criminal objectives.
With the benefit of hindsight, what conclusions would any free-thinking observer of such a friendly interview be forced to draw?
In reality, from what we now know of Mr. Ponzi and Mr. Madoff, neither of these severe and inflexible narcissists would have agreed to take part in any interview unless he was confident that the interviewer was financially illiterate, or unless the interview itself was part of the economic hocus-pocus and the interviewer a stooge.
Perhaps a more revealing analogy would be to imagine if a leading financial journalist had been granted an interview with Reed Slatkin, prior to him being exposed as a psychotic economic alchemist who secretly justified 25 years of financial crimes with the scripted lie that he was an enlightened 'Scientologist' - a superior being struggling to clear planet Earth of the invisible forces of evil.
So, how can the following be explained?
It is now one month since this 30 minute propaganda broadcast for the 'Amway' fraud, in the form of an 'interview' appeared on the Net.
Let's be quite clear about this, unless he really is a financially illiterate dope (which is very difficult to believe, considering his job), Dennis Berman (Deputy Bureau Chief, Money and Investing, at Rupert Murdoch's 'Wall Street Journal') conducted a sham interview maliciously designed to obstruct justice and cover up ongoing major racketeering activity; for despite being supplied (at his own request) with a full and accurate deconstruction of how all so-called 'MLM income opportunities' have actually been closed-market swindles (a.k.a. Ponzi schemes, dissimulated behind effectively-unsaleable products, and or services, and based on the specious economic theory that endless-chain recruitment + endless purchases by the recruits = endless profits for the recruits), Dennis Berman failed to ask Messrs. DeVos and Van Andel the obvious questions that might have revealed their hidden criminal objectives:
After Dennis Berman's comic charade with the billionaire 'Amway' bosses appeared on the WSJ Website, for obvious reasons, both Robert FitzPatrick and I contacted him with our many concerns. Furthermore, we also contacted Dennis Berman's Bureau Chief at the WSJ, and I took the trouble to contact Rupert Murdoch ( boss of 'News Corporation'). Indeed, I spoke to Rupert Murdoch's personal assistant, Nancy Porto, at length, and she requested that I send my concerns about Dennis Berman (in the form of an e-mail) to her, to be given to her boss.
In the case of Bernie Madoff, as most people now know, no one seems to have taken much notice of the independent whistle-blower, Harry Markopolos, who applied common sense and came up with essentially the same absurd explanation as McMasters had, 80 years previously.
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Barry Chi and Holly Chen
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As if to prove the validity of my statement, 'The Wall Street Journal' (owned by Rupert Murdoch's 'News Corporation') recently published an article and related video report
about 'Amway' in general, and Barry Chi and Holly Chen (alleged examples of ordinary humans, turned 'Amway' multi-millionaire superhumans) in particular. The article and video described a pay-through-the-nose-to-enter orgy of deluded self-gratification attended by 1100 unquestioning 'Amway' adherents in Las Vegas, but which was conducted in Mandarin Chinese to the glory of a citizen of Taiwan who spoke extensively about 'God' and who was addressed by the assembled multitude as 'Teacher' (the name which the Bible says was used to address Jesus by his Disciples).
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| Dennis K. Berman |
In response, I contacted its author, Dennis K. Berman, by phone and then (at his request) I sent him an e-mail and attachments (February 16th, 2012), in which I gently invited him to look beyond the end of his nose and do some serious thinking:
Dennis
'The "Amway/MLM income opportunity" fraud, is perhaps the biggest self-perpetuating lie (by value) that any gang of latter-day cultic racketeers has ever peddled as the truth. Current estimates (based on"Amway's" own declared numbers of adherents and declared annual drop-out rates) reveal that more than 10 millions Americans have already been churned through "Amway" alone, and more than 50 millions worldwide. When confronted by deluded "Amway/MLM" adherents steadfastly pretending to be earning money lawfully, it is always a good idea to look them in the eye and calmly ask them to produce quantifiable evidence (particularly, income-tax payment receipts). The critical and evaluative faculties of the most-fanatical, insolvent "Amway" adherents do not function. They exhibit what psychologists describe as 'confirmation bias' (i.e. they will cling to any evidence, no matter how flimsy, which appears to confirm their model of reality). Such unquestioning persons are popularly referred to as Ambots. If you try to explain to Ambots that they haven't a hope of achieving their guided-Utopian dream of "total financial freedom," their bewildered, and often angry, reaction, is essentially identical to that of infants if you tell them that "Santa Claus" does not exist and that their parents are, therefore, liars.
I referred Dennis Berman to America's leading independent-authority on 'MLM income opportunity' fraud, Robert L. FitzPatrick http://pyramidschemealert.org/. Dennis Berman was also referred to previous, alarming US media coverage of the 'Amway' fraud:
Dennis Berman did not bother to reply, so I sent him the following e-mail:
I can well-appreciate why you have not yet replied to my previous e-mail; for I (above all people) know that journalists are very busy and that cultism can be a particularly demanding, and disturbing, phenomenon for anyone to try to understand.
However, I would still be fascinated to hear what you (a leading, American, financial journalist and joint-winner of a Pulitzer Prize) now really think about the absurd, but nonetheless pernicious, cultic organization which has been generally referred to as the 'Amway' Corporation,' and which you featured in your recent article in the WSJ.
Sadly, the mere fact that 'Amway/MLM' was covered in the WSJ (even if this wasn't an entirely-flattering portrait), is a major propaganda victory, because 'Amway/MLM' is not, never has been and never will be, a 'business,' in the traditional sense of the word.
'Amway/MLM' is, without a doubt, the reality-inverting title over the entrance to one of the most-sinister, blame-the-victim, cultic control-frauds operating in the world today. This type of organized crime is neither original nor unique. It is always designed to shut-down the critical, and evaluative, faculties of not just its victims, but also those of all casual observers (including journalists, law enforcement agents and legislators). Indeed, in my experience, the more-highly educated a casual observer of cultism is, the less-likely he/she is to want to admit that he/she can be fooled by it.
The secret of understanding how any pernicious cultic group functions, is to make a conscious effort to put your ego/self-esteem to one side, then look beyond the group's Orwellian camouflage, and always describe what you find, using accurate, deconstructed language.
Dennis Berman finally sent me the following question (in large blue type):
Thanks for your note.
A quick question for you…
If you could ask questions of Amway’s chairman and CEO, what would they be?
In response, I sent Dennis Berman the following e-mail:
I think that you must realize that this is essentially the same as asking me:
If you could have asked questions of Charles Ponzi, and/or Bernie Madoff (during the fat years prior to their dramatic downfalls), what would they have been?
I'm sure you will agree that the most-fundamental identifying-criteria of all Ponzi schemes, pyramid scams, money circulation schemes, etc; is that they are all 'dissimulated closed-market swindles,' in which victims are lured (by their own instinctual desires) and fooled (by various strategies designed to shut down their critical, and evaluative, faculties) into buying infinite shares of their own finite money.
The simplest way to explain this age-old con, is to imagine 100 wide-eyed children being persuaded by a psychologically-dominant adult to place one dollar each on a table on the pretext that they can magically all have more money than they started with. Sadly, unless the recipient really does possess super-human powers, then, if the resulting 100 dollars is divided up honestly, the most that each infant contributor can hope to receive in return, is only what he/she started with.
The simplest way to explain this age-old con, is to imagine 100 wide-eyed children being persuaded by a psychologically-dominant adult to place one dollar each on a table on the pretext that they can magically all have more money than they started with. Sadly, unless the recipient really does possess super-human powers, then, if the resulting 100 dollars is divided up honestly, the most that each infant contributor can hope to receive in return, is only what he/she started with.
Bearing this fully-deconstructed explanation in mind, the obvious questions that would have exposed Ponzi and Madoff as manipulative crooks, they would have simply refused to answer, probably whilst attempting to make the questioner feel guilty, or foolish, for asking them.
e.g. You could have asked Madoff:
Excluding all your own company's documentation, and that issued to its alleged 'successful investors,' what quantifiable evidence can you produce proving that your company's alleged 'permanently profitable hedge fund' has actually had any significant external source of revenue other than its own alleged 'successful investors?'
Whilst you could have asked Ponzi:
Excluding all your own company's documentation, and that issued to its alleged 'successful investors,' what quantifiable evidence can you produce proving that your company's alleged 'permanently profitable system of trading international postal coupons' has actually had any significant external source of revenue other than its own alleged 'successful investors?'
Thus, essentially the same killer question (that the real 'Amway' bosses will simply refuse to answer, probably whilst attempting to make the questioner feel guilty, or foolish, for asking.), concerns the overall total number of alleged 'successful Amway business owners' who have actually been churned through the alleged 'permanently profitable Amway/MLM income opportunity' since its instigation in 1959, and the percentage of these many millions of persons who have managed to show an overall net-profit from the operation of their alleged 'Amway businesses.'
In the most simple terms:
Exactly how many people have signed up for 'Amway' overall and exactly how many overall have got back more than they paid in?
Thus, another killer question is:
Out of all the alleged 'multi-billion dollar Amway sales around the world,' exactly what percentage have been authentic, external, retail transactions to members of the public for a profit, rather than internal transactions between the various 'Amway's' companies and the millions of alleged 'Amway business owners,' but which have been vaguely described as 'sales' in order to dissimulate the operation of a closed-market swindle from which the ill-informed ordinary contributors cannot have hoped to receive any more money than they paid in?
Thus, the ultimate killer question to ask the 'Amway' bosses is:
Excluding all your own corporation's documentation, and that issued to its alleged 'successful distributors,' what quantifiable evidence can you produce proving that your corporation's alleged'permanently profitable multi-Level Marketing income opportunity' has actually had any significant external source of revenue other than its own alleged 'successful distributors?'
Being a practical sort of a guy, what I don't understand, is why on Earth weren't these obvious questions put to 'Amway's' bosses by law enforcement agents in the past, but then why on Earth weren't they put to Charles Ponzi and Bernie Madoff?
Dennis Berman again did not bother to reply to me. Without informing me, three days later, he conducted this thoughtless, 30 minute interview http://online.wsj.com/video/the-big-interview-questioning-the-amway-way/FE12F29C-D022-42B8-8ACD-16A114E0DA96.html in which, not only did he fail to ask Messrs. DeVos and Van Andel the above questions, but he actually behaved like a grinning stooge feeding scripted gag-lines to two grinning comedians. At no time did Dennis Berman challenge any unsubstantiated statement made by Messrs. DeVos and VanAndel whom he kept addressing as 'you guys.'
After approximately 14 minutes of sycophancy, Dennis Berman asked the 'Amway' bosses what percentage of their '$10.8 billion annual sales' are to the general public? He was first told that according to 'Amway's' own estimates, 50%, but in almost the same breath, this 50% figure was quickly qualified as referring to 'customers and end-users.' However, again almost in the same breath, the 'Amway' bosses made the absurd claim that 100% of 'Amway sales are to customers and end-users, because Amway distributors are all customers and end users.' Given the fact that Dennis Berman had access to a perfect deconstruction of how the so-called 'Amway income opportunity' has been a closed-market swindle in which unlawful payments have been laundered as 'sales,' this WSJ interview would appear to be a sham designed to cover-up ongoing major racketeering activity. The video is now all over the Net, and the WSJ is being used to make it appear that the so-called 'Amway business opportunity' might have had some legal problems, but is now legitimate.
During the interview, and in his previous WSJ article, Dennis Berman made passing reference to the fact that attorneys acting for 'Amway' are currently in the process of settling a class-action lawsuit in California, but he completely failed to mention that this lawsuit was filed by Boies Flexner and Schiller LLP under the Racketeer Influenced and Corrupt Organizations Act, 1970, or that it essentially accused the 'Amway' corporation of being the front for a Ponzi scheme (dissimulated as an 'MLM income opportunity') and related advance fee frauds (dissimulated as the sale of 'Business Support Materials' or 'Tools'). Dennis Berman did, however, briefly mention that, last year, 'Amway's' attorneys offered to pay the equivalent of $155 millions to stop this California case from going to trial. I am reliably informed that a new, agreed-settlement is about to be made public within the next few weeks.
Dennis Berman seemed to be completely unaware that, in order to avoid closure (after a protracted US Federal Trade Commission investigation) the 'Amway' bosses introduced a fake 'rule' which appeared, to casual observers, to require that 70% of all purchases by 'Amway sales people' be resold to at least 10 retail customers before 'Amway sales people' could receive commission payments. Mysteriously, 'Amway' was allowed to continue by a 1979 federal court ruling, apparently on the mistaken assumption that at least 70% of 'Amway' products would, henceforth, be retailed to the public, but the same court failed to determine what this fake '70% retail rule' actually stated or to introduce an independent mechanism to verify that it would be enforced. However, even though 'Amway's' own essentially-meaningless 'rule' very specifically did not refer to 'the public' and has never been enforced, the '7O%' criteria still established whether what 'Amway' describes as 'bonuses' are lawful payments based on external, retail sales transactions, or unlawful internal reward-payments secretly based on recruiting. i.e. if a significant majority of 'Amway's' claimed 'sales' are to the public, 'Amway' is a direct selling company, but, if a significant majority of 'Amway's' alleged 'sales' actually derive only from the recruits' own purchases, 'Amway' is a Ponzi scheme. Thus, by claiming that only 50% of 'Amway' sales are retail, the 'Amway' bosses have now foolishly admitted to running a Ponzi scheme (albeit, not in so many words). Instead, they have steadfastly pretended to be running a 'direct selling' scheme with $10.8 billions in total annual revenue deriving from independent business owners. Yet, the company's own data reveals total annual sales worldwide of just over $6 billions. In other words, the 'Amway' bosses would have us believe that their own '3 millions sales force' buys and consumes, but never sells, around half as much as the rest of the entire world buys from 'Amway.' Now, even a ten year child ought to be able to tell that this mathematically-complex, Utopian/capitalist fairy story does not add up.
In reality, believing that they were following a proven-plan to achieve 'total financial freedom,' for more than 50 years, a never-ending chain of tens of millions of temporary, active 'Amway' recruiters have been paid net-loss 'bonuses' on their own monthly purchases of effectively-unsaleable 'Amway' wampum. When they have abandoned this closed-market swindle, almost all of them have never bought from 'Amway' again. Thus, only a fool, or a stooge, would accept that 'billions of dollars of purchases' and 'sales' made by all the tens of millions of constantly-churning 'Amway' recruits have been based solely on 'value' and 'demand', as Messrs. VanAndel and DeVos told the wide-eyed Dennis Berman. Indeed, in the recent lawsuit brought by high-level 'Amway' adherents, the plaintiffs submitted a sworn affidavit stating that 'Amway' products were sold almost entirely to the 'distributors' and never retailed. They also produced an internal 'Amway' study of 2006 which revealed that retail sales to the public were actually less than 4%. In other words, by lying to Dennis Berman about the legality of their enterprise, Doug DeVos and Steve Van Andel have actually used the on-line version of 'The Wall Street Journal' to commit wire fraud.
As if to prove his complicity with the bosses of the 'Amway' mob, Dennis Berman now does not want to talk to anyone rigorously-challenging the authenticity of his so-called 'Big Interview' with Doug Devos and Steve Van Andel.
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After one month, Rupert Murdoch's 'Wall Street Journal' is still covering up the 'Amway' racket
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From 'The Universal Identifying Characteristics of a Cult' ( Axiom Books, copyright David Brear 2005).
Self-appointed sovereign leadership. Pernicious cults are instigated and ruled by psychologically dominant individuals, and/or bodies of psychologically dominant individuals (often with impressive, made-up names, and/or ranks, and/or titles), who hold themselves accountable to no one. These individuals have severe and inflexible Narcissistic Personalities (i.e. they suffer from a chronic psychological disorder, especially when resulting in a grandiose sense of self-importance/ righteousness and the compulsion to take advantage of others and to control others’ views of, and behaviour towards, them).* They steadfastly pretend moral and intellectual authority whilst pursuing various, hidden, criminal objectives (fraudulent, and/or sexual, and/or violent, etc.). The admiration of their adherents only serves to confirm, and magnify, the leaders’ strong sense of self-entitlement and fantasies of unlimited success, power, brilliance, beauty, ideal love, etc.
_____________________________________________________________________________________________
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| Narcissus by Caravaggio c. 1599 |
* ‘Narcissistic Personality Disorder,’ is a psychological term first used in 1971 by Dr. Heinz Kohut (1913-1981). It was recognised as the name for a form of pathological narcissism in ‘The Diagnostic and Statistical Manual of Mental Disorders 1980.’ Narcissistic traits (where a person talks highly of himself/herself to eliminate feelings of worthlessness) are common in, and considered ‘normal’ to, human psychological development. When these traits become accentuated by a failure of the social environment and persist into adulthood, they can intensify to the level of a severe mental disorder. Severe and inflexible NPD is thought to effect less than 1% of the general adult population. It occurs more frequently in men than women. In simple terms, NPD is reality-denying, total self-worship born of its sufferers’ unconscious belief that they are flawed in a way that makes them fundamentally unacceptable to others. In order to shield themselves from the intolerable rejection and isolation which they unconsciously believe would follow if others recognised their defective nature, NPD sufferers go to almost any lengths to control others’ view of, and behaviour towards, them. NPD sufferers often choose partners, and raise children, who exhibit ‘co-narcissism’ (a co-dependent personality disorder like co-alcoholism). Co-narcissists organize themselves around the needs of others (to whom they feel responsible), they accept blame easily, are eager to please, defer to others’ opinions and fear being seen as selfish if they act assertively. NPD was observed, and apparently well-understood, in ancient times. Self-evidently, the term, ‘narcissism,’ comes from the allegorical myth of Narcissus, the beautiful Greek youth who falls in love with his own reflection.
Currently, NPD has nine recognised diagnostic criteria (five of which are required for a diagnosis):
· has a grandiose sense of self-importance.
· is preoccupied with fantasies of unlimited success, power, brilliance, beauty, ideal love, etc.
· believes that he/she is special and unique and can only be understood by other special people.
· requires excessive admiration.
· strong sense of self-entitlement.
· takes advantage of others to achieve his/her own ends.
· lacks empathy.
· is often envious or believes that others are envious of him/her.
· arrogant disposition.
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| Charles Ponzi Bernard Madoff |
Imagine if a leading financial journalist had been granted an interview with either the high and mighty Charles Ponzi or Bernie Madoff, prior to them being exposed as absurd, but dangerous, economic alchemists running variations of the same outrageous, fake 'investment scheme' without any external source of revenue other than that deriving their own so-called 'investors.' Imagine if that journalist had been given a complete prior-explanation (at his own request) of what Mr. Ponzi or Mr. Madoff was doing, but then failed to ask the obvious key-questions which would have revealed their hidden criminal objectives.
With the benefit of hindsight, what conclusions would any free-thinking observer of such a friendly interview be forced to draw?
In reality, from what we now know of Mr. Ponzi and Mr. Madoff, neither of these severe and inflexible narcissists would have agreed to take part in any interview unless he was confident that the interviewer was financially illiterate, or unless the interview itself was part of the economic hocus-pocus and the interviewer a stooge.
 |
| Reed Elliot Slatkin, admired and respected 'Scientology Minister,' sentenced in California in 2003 to 14 years prison for mail fraud, wire fraud, money laundering and obstructing justice. |
Perhaps a more revealing analogy would be to imagine if a leading financial journalist had been granted an interview with Reed Slatkin, prior to him being exposed as a psychotic economic alchemist who secretly justified 25 years of financial crimes with the scripted lie that he was an enlightened 'Scientologist' - a superior being struggling to clear planet Earth of the invisible forces of evil.
So, how can the following be explained?
It is now one month since this 30 minute propaganda broadcast for the 'Amway' fraud, in the form of an 'interview' appeared on the Net.
|
| Dennis K. Berman |
Let's be quite clear about this, unless he really is a financially illiterate dope (which is very difficult to believe, considering his job), Dennis Berman (Deputy Bureau Chief, Money and Investing, at Rupert Murdoch's 'Wall Street Journal') conducted a sham interview maliciously designed to obstruct justice and cover up ongoing major racketeering activity; for despite being supplied (at his own request) with a full and accurate deconstruction of how all so-called 'MLM income opportunities' have actually been closed-market swindles (a.k.a. Ponzi schemes, dissimulated behind effectively-unsaleable products, and or services, and based on the specious economic theory that endless-chain recruitment + endless purchases by the recruits = endless profits for the recruits), Dennis Berman failed to ask Messrs. DeVos and Van Andel the obvious questions that might have revealed their hidden criminal objectives:
Excluding all the 'Amway' corporation's own unsubstantiated documentation, and all unsubstantiated verbal statements made by yourselves and by your alleged 'sales force,' what independent evidence can you produce that would prove that your enterprise's alleged 'permanently profitable and expanding Multi-Level Marketing income opportunity' has actually had any significant external source of revenue other than that deriving from its own constantly-churning participants? i.e. Can you produce the audited accounts of a significant number of persons who have been under contract to 'Amway' as alleged 'business owners,' showing that their alleged 'businesses' have been authentic and that these persons have paid income-tax on profits accruing lawfully from their having regularly retailed a significant quantity of 'Amway' products, and/or services, directly to the public?
Self-evidently, during the alleged interview, Dennis Berman behaved like a grinning stooge feeding scripted gag-lines to two grinning comedians. Laughably, at no time did he challenge any unsubstantiated statement made by Messrs. DeVos and Van Andel whom he kept addressing as 'you guys.'
After approximately 14 minutes of sycophancy, Dennis Berman asked the 'Amway' bosses what percentage of their '$10.8 billion annual sales' are to the general public? He was first told that according to 'Amway's' own estimates, 50%, but in almost the same breath, this 50% figure was quickly qualified as referring to 'customers and end-users.' However, again almost in the same breath, the 'Amway' bosses made the absurd claim that 100% of 'Amway sales are to customers and end-users, because Amway distributors are all customers and end users.'In other words, 'Amway' adherents have been both buyers and sellers in an economically-unviable closed-market. To the ill-informed, this mystifying economic hocus-pocus might sound impressive. However, it is a classic piece of Orwellian 'double-think,' but then, the quantifiable evidence proves that 'MLM income opportunity' lie has been maintained, by shutting down the critical and evaluative faculties of its victims using co-ordinated devious techniques of social, psychological and physical persuasion (without their fully-informed consent). Indeed, in a recent lawsuit brought by a group of distressed American 'Amway' adherents, an internal report (from 2006) was produced as evidence. This unchallenged document (which had been deliberately withheld from the public) showed that less than 4% of alleged 'Amway sales' were, in fact, authentic retail transactions to the public. However, even this ridiculously low score is a distortion of reality, because most 'Amway customers,' who have not been adherents of the organization, turn out to have been relatives or close friends of adherents.
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| Rupert Murdoch |
After Dennis Berman's comic charade with the billionaire 'Amway' bosses appeared on the WSJ Website, for obvious reasons, both Robert FitzPatrick and I contacted him with our many concerns. Furthermore, we also contacted Dennis Berman's Bureau Chief at the WSJ, and I took the trouble to contact Rupert Murdoch ( boss of 'News Corporation'). Indeed, I spoke to Rupert Murdoch's personal assistant, Nancy Porto, at length, and she requested that I send my concerns about Dennis Berman (in the form of an e-mail) to her, to be given to her boss.
After one month, neither Robert FitzPatrick nor I, have received so much as an acknowledgement, let alone an intelligible reply, from any employee or officer of the 'WSJ' or 'News Corporation.'
In this instance, Rupert Murdoch cannot say that he was completely unaware that a 'News Corporation' employee has been participating in corrupt activities.
In this instance, Rupert Murdoch cannot say that he was completely unaware that a 'News Corporation' employee has been participating in corrupt activities.
 |
| William H. McMasters |
It is interesting to note that one of Ponzi's 'business' associates/employees, a sharp-witted publicist, William H. McMasters (who, for 10 days during 1920, helped Charles Ponzi, to expand his fraud dramatically by arranging for him to be interviewed by wide-eyed journalists who then published articles which were the equivalent of free advertisments), sold the explanation of what Ponzi was really doing to the 'Boston Post,' and that this publication later received the 1921 Pulitzer Prize for its reporting of the story. McMasters saw that Ponzi was a blithering idiot who couldn't even add up. He immediately applied common sense, and deduced that what Ponzi said (that his 'Securities Exchange Company' had been sending millions of dollars of its investors' money to a network of agents who had been buying international postal reply coupons in countries with currencies weakened by WWI, and then shipping them to the USA, where he had exchanged them for equivalent US postage stamps which he had then sold for a 400% profit) was far too good to be true. McMasters, who was not an economist, simply observed that all Ponzi was doing was taking his later victims' money to pay out imaginary 'profits' to his earlier contributors. Ponzi wasn't actually sending money abroad or trading in anything. He was peddling his victims infinite shares of their own finite money. It was later discovered that Ponzi had only ever bought a handful of international postal coupons (which could not be redeemed for a profit), and that the entire world supply of these documents was vastly-inferior to the phenomenal quantity which Ponzi had claimed to have traded.
In the case of Bernie Madoff, as most people now know, no one seems to have taken much notice of the independent whistle-blower, Harry Markopolos, who applied common sense and came up with essentially the same absurd explanation as McMasters had, 80 years previously.
Bernie Madoff's narcissistic lie entitled, 'the world's largest hedge fund' (but which appears almost insignificant in comparison with the narcissistic lie entitled 'MLM income opportunity'), had been allowed to grow to such titanic proportions, that the truth had become almost unthinkable.
______________________________________________________________________
Robert FitzPatrick has asked the 'Wall Street Journal' to investigate 'Amway'
I was not the only person to have taken the trouble to explain to Dennis Berman of the 'Wall Street Journal' how 'MLM income opportunity' fraud functions, and what questions to ask the billionaire bosses of the 'Amway' mob in order to uncover their clandestine criminal objectives. The following is a copy of an e-mail sent to Dennis Berman February 27th 2012 by Robert L. FitzPatrick (President of Pyramid Scheme Alert) and to which Dennis Berman did not respond:
Dennis
If I had an expectation of a direct and factual answer and with verification (tax data to show actual net profits earned, and national demographics or surveys of retail customer base, etc., I would ask…
1. Business Opportunity: Over the last 10 years, how many citizens worldwide were enrolled as Amway IBOs and what percentage of them earned more from the business than they spent in total?
2. Business Identity and Legality: What percentage of all Amway goods are retailed to the public by the IBOs?
I have provided Amway payout analysis in several court cases in the USA and Canada as well as to Chinese officials who were deliberating whether or not to legalize the Amway compensation system (they chose to outlaw it). The data show that far less than even 1% of all who are recruited ever make a profit. Based on that loss rate, if you add up the total investments of all IBOs over a 10 year period, the losses far exceed those caused by Bernard Madoff and affected a staggering number of people at the lower end of income scales (those less able to afford losses).
At the heart of all controversies about Amway's viability and legality is the the simple question, "Where does the money come from?" Or, drilling down a bit further, "When Amway pays its commissions, what is the ultimate source of those reward funds?" According to the criteria used by the FTC for determining legality, and the tests it has applied to other multi-level marketing companies it has prosecuted, the ultimate source must be retail end-users, not newly recruited IBOs. If it is primarily IBOs, Amway is, by definition, a closed market, a money transfer, a pyramid scheme. Rewards are paid to top level IBOs to recruit lower level IBOs who are offered the right and the incentives to continue to expand the chain. The reward funds come, ultimately and finally, from those recruited and any reward they might obtain is contingent on their recruiting more IBOs, with the reward funds coming from the investment of the later recruits, ad infinitum.
The claim that Amway is a closed market pyramid scheme, not a direct selling company is the charge of the current class action lawsuit in the USA for which Amway has already offered $150 million to settle.
Will be glad to discuss this with you.
Sincerely
Without informing Robert FitzPatrick, three days later, Dennis Berman conducted this thoughtless, 30 minute interview in which, not only did he fail to ask Messrs. DeVos and Van Andel the above questions, but he actually behaved like a grinning stooge feeding scripted gag-lines to two grinning comedians. At no time did Dennis Berman challenge any unsubstantiated statement made by Messrs. DeVos and VanAndel whom he kept addressing as 'you guys.'
________________________________________________________________________
The following is a copy of another e-mail sent to Dennis Berman by Robert FitzPatrick and to which Dennis Berman again did not respond:
Dennis
I watched with great interest your 30-minute interview with Doug DeVos and Steve VanAndel of Amway. I believe this is the first interview of Amway's leaders by a professional journalist that has been published in recent years.
One question you posed was enormously significant. Upon the answer hangs the legality of the entire Amway enterprise, which you noted is frequently challenged.
The question was, what percentage of the goods that Amway sells to the distributors are resold to end users who are not also distributors? This was analogous to asking Bernie Madoff what trades he actually did to generate 12% per year returns, year after year, or asking Charles Ponzi how many international postage coupons he traded to pay a 50% return to all his investors.
The answer given to you by the two Amway executives was that approximately one-half of the sales made to the salespeople (which would be $5.4 billion) was subsequently retailed to the general public (people who are not also Amway salespeople).
Given the importance of that question, I was astonished that you did not ask for verification or pursue the question further. The answer they gave – if it is true – was shocking and a flaming red flag. With a bit more financial analysis, a 50% retail sales level (if it is true) reveals that Amway almost certainly would fail the FTC's test of legality. It also shows that the salespeople cannot, on average, make money from retailing. It shows that the recruiting rewards paid by Amway cannot be sourced from retail revenue (the key to legality.)
If it is to be believed, Mr. Devos and Mr. VanAndel gave you the data on which to determine Amway's legality and that data shows that Amway almost certainly fails established tests for legality. I will be happy to discuss this with you and go through this data. Harry Markopolis offered similar calculations to journalist, John Wilke, at your magazine regarding Madoff's operation. History records that WSJ missed the greatest story of our time.
>From Markopolis' testimony to Congress:
<>
I can show you that the figure proves that the sales force cannot be profitable from retail selling. You mistakenly stated that it is "easy to make a little money" at Amway. In fact, the data shows that less than 1% make any money. In reality, to make even a little profit is extremely difficult, and almost no one does.
Additionally, the two Amway execs went on to claim that the salespeople also serve as "end-users." As you may know, this argument is not accepted by US courts or the FTC and the argument was recently rejected also by a court in Belgium that has now declared that Herbalife is an illegal pyramid scheme. Herbalife could not offer evidence of a retail customer base (as Amway also cannot do) but claimed its own salespeople's purchases served as retail sales and that those purchases were based on the usual consumer factors of demand and value.
In Amway's case, with virtually no brand awareness, no advertising, and generally higher prices, it is is not reasonable to think such a demand exists. As for value, Amway's execs offered you nothing to show their products are differentiated. Also, few consumers continue to buy Amway goods after they quit the income scheme. Do you know even one person who ever told you they are looking to buy Amway products based on need or value or price, without any regard for the income scheme?
The answer to the question you posed to Amway's leaders adds fuel to of the current class action lawsuit against Amway. I serve as an expert witness in that case. The original prosecution of Amway by the FTC in 1975-9 rested upon this very same question you posed. The 50% answer is grounds for that court case to be re-opened. And the reason the UK government recently sought to close down Amway in that country was similarly based on this question. Lack of evidence or retail sales in the UK meant that the only rewards to be gained came from "bonuses" tied to recruiting. Data showed that less than 1% of the sales force earned enough bonuses to be profitable -- in a 30 year period!
For purposes of fraud analysis, the question may be stated slightly differently: Where does the money for recruiting rewards come from? When Amway sends bonus payments to its upline recruiters based on the investments (purchases, not sales) of the downline distributors, legality requires that the ultimate source of those bonus reward funds must be from retail sales, just as Madoff's payments had to come from actual profitable trades, not from the funds of other investors.
Without adequate levels of retail sales, Amway's rewards must be money transfers from the recruits to the recruiters. If little of the revenue for the rewards is retail-based, the Amway business becomes a closed market, based on endless chain recruiting, just as Madoff's hedge fund payments were mere transfers from later investors to earlier ones and therefore required an endless supply of new investors. Without adequate retail revenue to cover the nearly $3 billion in upline bonus payments, and all other business costs, Amway becomes an internal money transfer, commonly called a pyramid scheme.
The loss rates in a pyramid scheme will be near total and they are built into the model. "Hard work" will make no difference to the outcome.
Since 1979, Amway has famously required that 70% of all purchases by the sales people must be resold to at least 10 retail customers in order to qualify for the performance bonuses. Amway's operation was tentatively permitted in a 1979 federal court ruling on the grounds that at least 70% of its products were retailed. The retailing level establishes whether Amway "bonuses" are actually advances on future retail sales activity, as Amway told the court, or are rewards for recruiting. If they are retail sourced, Amway is a direct selling company. If they are sourced from investments of the recruits, it's a Ponzi scheme.
Amway claims to be a "direct selling" company with $10.8 billion in revenue gained directly from independent contractors. Yet, its own data indicates total retail sales worldwide of just over $6 billion. (half the sales to the distributors, plus their retail margin). It shows that the sales force consumes and never sells about half as much as the entire world buys retail from Amway. Something is horribly wrong with that picture.
The picture becomes clear only when you factor in that Amway pays recruiters (investors in the pay plan) almost $3 billion to bring in new investors who are induced to make inventory purchases. In fact, the recruits are even paid bonus points on their OWN purchases! In short, the salespeople are financially rewarded to buy as part of the pay plan. Then, when they quit the financial scheme, almost all never buy again. No reasonable analyst could conclude that the purchases are based on "value" or "demand", as VanAndel and DeVos told you.
Dennis, I will be glad to walk you through these calculation and their significance.
For legality purposes, the FTC can now test Amway's numbers, based on its claim of 50% retail sale, which you uncovered, to see it total retail revenue exceeds cost of goods, overhead, bonuses and retail profit. Whatever the shortfall is, that amount is what the company is paying for recruiting. If the shortfall is a high percentage of the bonus payments, Amway is, by definition, a pyramid scheme.
The data show that Amway's bonuses are likely funded almost entirely from investments made by the recruits. They are, de facto, recruitment rewards. All this data flows from DeVos/VanAndel's statement to you that only 50% of its products are ever retailed. That data is combined with its payout data and its compensation plan figures.
For my part, I am preparing a letter to the FTC today, with copies to your editors, in which I will refer FTC regulators to your interview and formally request an investigation. I will ill cite the specific data and calculations that I only referenced above. I am happy to discuss this with you and walk you through the data.
Are you following up this interview with an analysis of Amway's legality? Or are the words of the two executives on these questions to be taken as final?
Sincerely,
Robert L. FitzPatrick (March 8th 2012)
________________________________________________________________________
The following, is a copy of a letter sent by Robert FitzPatrick to Alex Martin, Bureau Chief, Money and Investing, at the 'WALL STREET JOURNAL,' 1211 Avenue of the Americas, New York, NY 10036.
Dear Alex:
This letter follows my March 13, 2012 phone call to you to ask your bureau to investigate
information presented in a videotaped interview that Deputy Bureau Chief, Dennis Berman,
recently conducted with Amway executives, Doug DeVos and Steve Van Andel.
As a court certified expert on pyramid and Ponzi schemes, I also offer my knowledge and
experience in this field and with the Amway Corporation in particular, if you choose to make
an inquiry.
Amway’s statements deserve extraordinary journalistic scrutiny because of (1) the
company’s record of regulatory infractions, (2) verifiable data revealing multi-billion dollar
consumer losses among those who invest in Amway’s income proposition, (3) repeated
credible accusations made in lawsuits and regulatory prosecutions, backed with verifiable
data, that Amway is operating a massive and financially destructive pyramid scheme and (4)
past statements and documents from Amway and Amway insiders that contradict claims
Amway’s executives made to Mr. Berman regarding the source of Amway’s revenue.
Amway’s statements to Mr. Berman deserve scrutiny from WSJ because on the question of
their truthfulness rests the legality or illegality of the entire enterprise. It deserves scrutiny
also because the company’s practices have a significant financial impact on Main Street.
Amway currently claims to have over 650,000 distributors in North America alone. The
question is whether or not Amway is operating a Ponzi scheme on a scale larger, over time,
than Bernard Madoff’s. Credible and substantial evidence is available for that determination.
Amway is charged with running a pyramid scheme involving false promises of income to
millions of people in a financial scheme based upon endless chain expansion of the
investor/salespeople. The charge is made of a fraud disguised as a direct selling but which
lacks requisite retail sales to qualify as one. Rather than from direct selling of products,
revenue is gained by inducing investments from consumer/investors in a pay plan with the
false claims of a lucrative “business opportunity.” Rather than investing in a valid direct
selling income opportunity as they believed they were, millions of people are lured into a
closed market scam in which they cannot possibly gain a profit. An enormous loss rate is the
inevitable consequence of a closed market endless chain.
The Amway Corporation was recently accused of systematic fraud by the government of
England, which sought to have the entire Amway business closed in that country. The
regulatory action was based on data showing that 99% of all UK salespeople had lost money
over a 30-year period. Additionally, Amway has been accused recently by consumers in
Canada and USA in two separate class action suits of operating an illegal pyramid scheme.
The primary evidence offered by the consumers is lack of retail sales revenue, resulting in the
true business being the sale of an endless chain investment scheme. Officials in India and
China have similarly accused the company of the same fraud. And, high level distributors,
who are effective insiders, have charged that the company is operating a disguised pyramid
scheme, having little or no retail sales revenue.
Contrary to Amway executives’ statements to Mr. Berman, compelling evidence exists that
little of Amway’s product are ever sold to the public, making what it calls sales transactions
merely internal transfers, and requiring continuous expansion of the investor/sales force for
existing investor/salespeople to gain a profit. This is called an endless chain.
Mr. Berman contacted me by email to ask for questions to submit to the Amway executives. I
spent considerable time to explain the extraordinary significance of two key questions about
the retail sales level and consumer losses, and I provided the information to him via email. I
emphasised to him that Amway’s legality is based upon these questions.
Mr. Berman did not question the Amway officials about consumer losses. Instead, he
inexplicably volunteered to them that he personally believed it was “easy to earn a little
money” in Amway. The data show this is not true and no verifiable evidence is available to
support the statement. Mr. Berman may have been misled by Amway’s published data about
an average annual gross income of $2,424 for “active” distributors, who constitute just 46%
of the sales force. The other 54% earn no discernible profit and receive no payments from
Amway.
He might not have realized that the unverified figure of $202 per month on which the $2,424
figure is based is a mean average, not a median. It includes the enormous payments made to
the top fractions of the top 1%. In no way does it indicate that the majority of participants
gain this much revenue per month. Amway explicitly divulges that the $2,424 figure is an
“annualized” projection based on a mean monthly average of payments. It is not an annual
average income of participants. The vast majority of Amway salespeople are not active for a
year. The company suffers a 50+% churn rate among the salespeople, which is not factored.
The data also completely omits the financial plight of 54% of all the salespeople who are
reclassified as “inactive.” In any event, the data of “income” is only gross revenue, not net
income after expenses.
The average income figure, according to Amway, includes “retail” profits, without any basis
for determining them. When an objective analysis is made, it is evident that it is nearly
impossible to earn even “a little” net income and, indeed, almost no one does. I will be happy
to walk through an analysis with you. I provide similar analyses as a consultant or expert
witness in court and to financial institutions.
Regarding retail sales, Amway officials told Mr. Berman that 50% of all sales to the sales
force are subsequently retailed. Despite the extraordinary importance of this figure, he asked
for no verification and posed no follow-up question at all. In fact, there is abundant evidence
that this figure is false. And if it is false, Mr. Berman has prima facie evidence –
mathematical – that the charges against Amway of operating a massive pyramid scheme are
true.
1. Until about 2000, as a result of an earlier prosecution of pyramid fraud against Amway by
the Wisconsin Attorney General, Amway provided all consumers with the document, Sales
Aid 4400 (enclosed). This document revealed that the average retail sales level was 18% of
what distributors purchase on average.
2. In a lawsuit against Amway, the Procter & Gamble Corporation asserted that retail sales
level to be less than 18% and charged that Amway was an illegal pyramid scheme.
3. In a recent lawsuit brought by high level Amway distributors, the plaintiffs offered the
court a sworn affidavit that Amway products were sold almost entirely to the distributors
only and were not subsequently retailed. They also cited an Amway study in 2006 that they
said concluded that retail sales were less than 4%. (see page 13, lines 5-13 which is
enclosed).
Even if Amway’s retail sales were 50% of sales to the distributors, as Mr. DeVos and Van
Andel told Mr. Berman, Amway would clearly fail the FTC test for legality which has been
applied in previous prosecutions of “multi-level marketing” companies. I have reproduced
the test in class action cases. Using the criteria of the FTC, which is based on numerous court
decisions, 50% would be an insufficient retail base to cover the more than $2.5 billion that
Amway pays its recruiters annually in “bonuses.” The courts have repeatedly affirmed that
legality of recruitment-based rewards requires that these payments to recruiters be covered by
subsequent retail revenue. The bonuses cannot be ultimately sourced from those who are
recruited, who in turn are offered the same proposition to gain rewards from recruiting yet
more investor/salespeople, ad infinitum. The courts and the FTC have also rejected the claim
that sales to contractor/dealers (salespeople) constitute retail sales yet Amway officials made
the assertion to Mr. Berman that sales to distributors are retail sales, and he did not challenge
it.
At 50% retail sales, Amway would a “direct selling” company with reportedly $10.8 billion
in revenue but no more than about $7 billion in sales to the public. Even with the alleged
50% retail sales level, $3-4 billion would have been sold only to the Amway sales channel
without ever being resold. And there is no reasonable basis for the claim that these purchases
by the salespeople were driven by market forces of price, quality or demand and are
unconnected to the distributors’ pay plan or Amway’s claims of income potential.
The 50% retail claim to Mr. Berman, if it were true, would also mean that the maximum
average gross profit from retail sales available to the 1.38 million “active” distributors is less
than $1600 a year (based on a 29% average gross retail profit), while the average amount
purchased by all distributors and not resold is $1800.
Without a viable retail sales opportunity, what remains for the consumer/investor is an
income proposition that is based on recruiting more salespeople and profiting from their
investments, i.e., the endless chain proposition.
I am available to you for discussion or explanation.
Sincerely,
Robert L. FitzPatrick, March 14th 2012
_____________________________________________________________________________________________
Predictably, Doug DeVos and Steve Van Andel are simply ignoring my overt charge that they are a pair of cultic racketeers posing as 'philanthropic Christian capitalists,' who have maliciously infiltrated the Internet-based version of the 'Wall Street Journal' to commit wire fraud.
 |
| Robert Fitzpatrick |
|
| Dennis K. Berman |
Dennis
If I had an expectation of a direct and factual answer and with verification (tax data to show actual net profits earned, and national demographics or surveys of retail customer base, etc., I would ask…
1. Business Opportunity: Over the last 10 years, how many citizens worldwide were enrolled as Amway IBOs and what percentage of them earned more from the business than they spent in total?
2. Business Identity and Legality: What percentage of all Amway goods are retailed to the public by the IBOs?
I have provided Amway payout analysis in several court cases in the USA and Canada as well as to Chinese officials who were deliberating whether or not to legalize the Amway compensation system (they chose to outlaw it). The data show that far less than even 1% of all who are recruited ever make a profit. Based on that loss rate, if you add up the total investments of all IBOs over a 10 year period, the losses far exceed those caused by Bernard Madoff and affected a staggering number of people at the lower end of income scales (those less able to afford losses).
At the heart of all controversies about Amway's viability and legality is the the simple question, "Where does the money come from?" Or, drilling down a bit further, "When Amway pays its commissions, what is the ultimate source of those reward funds?" According to the criteria used by the FTC for determining legality, and the tests it has applied to other multi-level marketing companies it has prosecuted, the ultimate source must be retail end-users, not newly recruited IBOs. If it is primarily IBOs, Amway is, by definition, a closed market, a money transfer, a pyramid scheme. Rewards are paid to top level IBOs to recruit lower level IBOs who are offered the right and the incentives to continue to expand the chain. The reward funds come, ultimately and finally, from those recruited and any reward they might obtain is contingent on their recruiting more IBOs, with the reward funds coming from the investment of the later recruits, ad infinitum.
The claim that Amway is a closed market pyramid scheme, not a direct selling company is the charge of the current class action lawsuit in the USA for which Amway has already offered $150 million to settle.
Will be glad to discuss this with you.
Sincerely
Robert L. FitzPatrick.
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Without informing Robert FitzPatrick, three days later, Dennis Berman conducted this thoughtless, 30 minute interview in which, not only did he fail to ask Messrs. DeVos and Van Andel the above questions, but he actually behaved like a grinning stooge feeding scripted gag-lines to two grinning comedians. At no time did Dennis Berman challenge any unsubstantiated statement made by Messrs. DeVos and VanAndel whom he kept addressing as 'you guys.'
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| Charles Ponzi Bernard Madoff |
Dennis
I watched with great interest your 30-minute interview with Doug DeVos and Steve VanAndel of Amway. I believe this is the first interview of Amway's leaders by a professional journalist that has been published in recent years.
One question you posed was enormously significant. Upon the answer hangs the legality of the entire Amway enterprise, which you noted is frequently challenged.
The question was, what percentage of the goods that Amway sells to the distributors are resold to end users who are not also distributors? This was analogous to asking Bernie Madoff what trades he actually did to generate 12% per year returns, year after year, or asking Charles Ponzi how many international postage coupons he traded to pay a 50% return to all his investors.
The answer given to you by the two Amway executives was that approximately one-half of the sales made to the salespeople (which would be $5.4 billion) was subsequently retailed to the general public (people who are not also Amway salespeople).
Given the importance of that question, I was astonished that you did not ask for verification or pursue the question further. The answer they gave – if it is true – was shocking and a flaming red flag. With a bit more financial analysis, a 50% retail sales level (if it is true) reveals that Amway almost certainly would fail the FTC's test of legality. It also shows that the salespeople cannot, on average, make money from retailing. It shows that the recruiting rewards paid by Amway cannot be sourced from retail revenue (the key to legality.)
If it is to be believed, Mr. Devos and Mr. VanAndel gave you the data on which to determine Amway's legality and that data shows that Amway almost certainly fails established tests for legality. I will be happy to discuss this with you and go through this data. Harry Markopolis offered similar calculations to journalist, John Wilke, at your magazine regarding Madoff's operation. History records that WSJ missed the greatest story of our time.
>From Markopolis' testimony to Congress:
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I can show you that the figure proves that the sales force cannot be profitable from retail selling. You mistakenly stated that it is "easy to make a little money" at Amway. In fact, the data shows that less than 1% make any money. In reality, to make even a little profit is extremely difficult, and almost no one does.
Additionally, the two Amway execs went on to claim that the salespeople also serve as "end-users." As you may know, this argument is not accepted by US courts or the FTC and the argument was recently rejected also by a court in Belgium that has now declared that Herbalife is an illegal pyramid scheme. Herbalife could not offer evidence of a retail customer base (as Amway also cannot do) but claimed its own salespeople's purchases served as retail sales and that those purchases were based on the usual consumer factors of demand and value.
In Amway's case, with virtually no brand awareness, no advertising, and generally higher prices, it is is not reasonable to think such a demand exists. As for value, Amway's execs offered you nothing to show their products are differentiated. Also, few consumers continue to buy Amway goods after they quit the income scheme. Do you know even one person who ever told you they are looking to buy Amway products based on need or value or price, without any regard for the income scheme?
The answer to the question you posed to Amway's leaders adds fuel to of the current class action lawsuit against Amway. I serve as an expert witness in that case. The original prosecution of Amway by the FTC in 1975-9 rested upon this very same question you posed. The 50% answer is grounds for that court case to be re-opened. And the reason the UK government recently sought to close down Amway in that country was similarly based on this question. Lack of evidence or retail sales in the UK meant that the only rewards to be gained came from "bonuses" tied to recruiting. Data showed that less than 1% of the sales force earned enough bonuses to be profitable -- in a 30 year period!
For purposes of fraud analysis, the question may be stated slightly differently: Where does the money for recruiting rewards come from? When Amway sends bonus payments to its upline recruiters based on the investments (purchases, not sales) of the downline distributors, legality requires that the ultimate source of those bonus reward funds must be from retail sales, just as Madoff's payments had to come from actual profitable trades, not from the funds of other investors.
Without adequate levels of retail sales, Amway's rewards must be money transfers from the recruits to the recruiters. If little of the revenue for the rewards is retail-based, the Amway business becomes a closed market, based on endless chain recruiting, just as Madoff's hedge fund payments were mere transfers from later investors to earlier ones and therefore required an endless supply of new investors. Without adequate retail revenue to cover the nearly $3 billion in upline bonus payments, and all other business costs, Amway becomes an internal money transfer, commonly called a pyramid scheme.
The loss rates in a pyramid scheme will be near total and they are built into the model. "Hard work" will make no difference to the outcome.
Since 1979, Amway has famously required that 70% of all purchases by the sales people must be resold to at least 10 retail customers in order to qualify for the performance bonuses. Amway's operation was tentatively permitted in a 1979 federal court ruling on the grounds that at least 70% of its products were retailed. The retailing level establishes whether Amway "bonuses" are actually advances on future retail sales activity, as Amway told the court, or are rewards for recruiting. If they are retail sourced, Amway is a direct selling company. If they are sourced from investments of the recruits, it's a Ponzi scheme.
Amway claims to be a "direct selling" company with $10.8 billion in revenue gained directly from independent contractors. Yet, its own data indicates total retail sales worldwide of just over $6 billion. (half the sales to the distributors, plus their retail margin). It shows that the sales force consumes and never sells about half as much as the entire world buys retail from Amway. Something is horribly wrong with that picture.
The picture becomes clear only when you factor in that Amway pays recruiters (investors in the pay plan) almost $3 billion to bring in new investors who are induced to make inventory purchases. In fact, the recruits are even paid bonus points on their OWN purchases! In short, the salespeople are financially rewarded to buy as part of the pay plan. Then, when they quit the financial scheme, almost all never buy again. No reasonable analyst could conclude that the purchases are based on "value" or "demand", as VanAndel and DeVos told you.
Dennis, I will be glad to walk you through these calculation and their significance.
For legality purposes, the FTC can now test Amway's numbers, based on its claim of 50% retail sale, which you uncovered, to see it total retail revenue exceeds cost of goods, overhead, bonuses and retail profit. Whatever the shortfall is, that amount is what the company is paying for recruiting. If the shortfall is a high percentage of the bonus payments, Amway is, by definition, a pyramid scheme.
The data show that Amway's bonuses are likely funded almost entirely from investments made by the recruits. They are, de facto, recruitment rewards. All this data flows from DeVos/VanAndel's statement to you that only 50% of its products are ever retailed. That data is combined with its payout data and its compensation plan figures.
For my part, I am preparing a letter to the FTC today, with copies to your editors, in which I will refer FTC regulators to your interview and formally request an investigation. I will ill cite the specific data and calculations that I only referenced above. I am happy to discuss this with you and walk you through the data.
Are you following up this interview with an analysis of Amway's legality? Or are the words of the two executives on these questions to be taken as final?
Sincerely,
Robert L. FitzPatrick (March 8th 2012)
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The following, is a copy of a letter sent by Robert FitzPatrick to Alex Martin, Bureau Chief, Money and Investing, at the 'WALL STREET JOURNAL,' 1211 Avenue of the Americas, New York, NY 10036.
Dear Alex:
This letter follows my March 13, 2012 phone call to you to ask your bureau to investigate
information presented in a videotaped interview that Deputy Bureau Chief, Dennis Berman,
recently conducted with Amway executives, Doug DeVos and Steve Van Andel.
As a court certified expert on pyramid and Ponzi schemes, I also offer my knowledge and
experience in this field and with the Amway Corporation in particular, if you choose to make
an inquiry.
Amway’s statements deserve extraordinary journalistic scrutiny because of (1) the
company’s record of regulatory infractions, (2) verifiable data revealing multi-billion dollar
consumer losses among those who invest in Amway’s income proposition, (3) repeated
credible accusations made in lawsuits and regulatory prosecutions, backed with verifiable
data, that Amway is operating a massive and financially destructive pyramid scheme and (4)
past statements and documents from Amway and Amway insiders that contradict claims
Amway’s executives made to Mr. Berman regarding the source of Amway’s revenue.
Amway’s statements to Mr. Berman deserve scrutiny from WSJ because on the question of
their truthfulness rests the legality or illegality of the entire enterprise. It deserves scrutiny
also because the company’s practices have a significant financial impact on Main Street.
Amway currently claims to have over 650,000 distributors in North America alone. The
question is whether or not Amway is operating a Ponzi scheme on a scale larger, over time,
than Bernard Madoff’s. Credible and substantial evidence is available for that determination.
Amway is charged with running a pyramid scheme involving false promises of income to
millions of people in a financial scheme based upon endless chain expansion of the
investor/salespeople. The charge is made of a fraud disguised as a direct selling but which
lacks requisite retail sales to qualify as one. Rather than from direct selling of products,
revenue is gained by inducing investments from consumer/investors in a pay plan with the
false claims of a lucrative “business opportunity.” Rather than investing in a valid direct
selling income opportunity as they believed they were, millions of people are lured into a
closed market scam in which they cannot possibly gain a profit. An enormous loss rate is the
inevitable consequence of a closed market endless chain.
The Amway Corporation was recently accused of systematic fraud by the government of
England, which sought to have the entire Amway business closed in that country. The
regulatory action was based on data showing that 99% of all UK salespeople had lost money
over a 30-year period. Additionally, Amway has been accused recently by consumers in
Canada and USA in two separate class action suits of operating an illegal pyramid scheme.
The primary evidence offered by the consumers is lack of retail sales revenue, resulting in the
true business being the sale of an endless chain investment scheme. Officials in India and
China have similarly accused the company of the same fraud. And, high level distributors,
who are effective insiders, have charged that the company is operating a disguised pyramid
scheme, having little or no retail sales revenue.
Contrary to Amway executives’ statements to Mr. Berman, compelling evidence exists that
little of Amway’s product are ever sold to the public, making what it calls sales transactions
merely internal transfers, and requiring continuous expansion of the investor/sales force for
existing investor/salespeople to gain a profit. This is called an endless chain.
Mr. Berman contacted me by email to ask for questions to submit to the Amway executives. I
spent considerable time to explain the extraordinary significance of two key questions about
the retail sales level and consumer losses, and I provided the information to him via email. I
emphasised to him that Amway’s legality is based upon these questions.
Mr. Berman did not question the Amway officials about consumer losses. Instead, he
inexplicably volunteered to them that he personally believed it was “easy to earn a little
money” in Amway. The data show this is not true and no verifiable evidence is available to
support the statement. Mr. Berman may have been misled by Amway’s published data about
an average annual gross income of $2,424 for “active” distributors, who constitute just 46%
of the sales force. The other 54% earn no discernible profit and receive no payments from
Amway.
He might not have realized that the unverified figure of $202 per month on which the $2,424
figure is based is a mean average, not a median. It includes the enormous payments made to
the top fractions of the top 1%. In no way does it indicate that the majority of participants
gain this much revenue per month. Amway explicitly divulges that the $2,424 figure is an
“annualized” projection based on a mean monthly average of payments. It is not an annual
average income of participants. The vast majority of Amway salespeople are not active for a
year. The company suffers a 50+% churn rate among the salespeople, which is not factored.
The data also completely omits the financial plight of 54% of all the salespeople who are
reclassified as “inactive.” In any event, the data of “income” is only gross revenue, not net
income after expenses.
The average income figure, according to Amway, includes “retail” profits, without any basis
for determining them. When an objective analysis is made, it is evident that it is nearly
impossible to earn even “a little” net income and, indeed, almost no one does. I will be happy
to walk through an analysis with you. I provide similar analyses as a consultant or expert
witness in court and to financial institutions.
Regarding retail sales, Amway officials told Mr. Berman that 50% of all sales to the sales
force are subsequently retailed. Despite the extraordinary importance of this figure, he asked
for no verification and posed no follow-up question at all. In fact, there is abundant evidence
that this figure is false. And if it is false, Mr. Berman has prima facie evidence –
mathematical – that the charges against Amway of operating a massive pyramid scheme are
true.
1. Until about 2000, as a result of an earlier prosecution of pyramid fraud against Amway by
the Wisconsin Attorney General, Amway provided all consumers with the document, Sales
Aid 4400 (enclosed). This document revealed that the average retail sales level was 18% of
what distributors purchase on average.
2. In a lawsuit against Amway, the Procter & Gamble Corporation asserted that retail sales
level to be less than 18% and charged that Amway was an illegal pyramid scheme.
3. In a recent lawsuit brought by high level Amway distributors, the plaintiffs offered the
court a sworn affidavit that Amway products were sold almost entirely to the distributors
only and were not subsequently retailed. They also cited an Amway study in 2006 that they
said concluded that retail sales were less than 4%. (see page 13, lines 5-13 which is
enclosed).
Even if Amway’s retail sales were 50% of sales to the distributors, as Mr. DeVos and Van
Andel told Mr. Berman, Amway would clearly fail the FTC test for legality which has been
applied in previous prosecutions of “multi-level marketing” companies. I have reproduced
the test in class action cases. Using the criteria of the FTC, which is based on numerous court
decisions, 50% would be an insufficient retail base to cover the more than $2.5 billion that
Amway pays its recruiters annually in “bonuses.” The courts have repeatedly affirmed that
legality of recruitment-based rewards requires that these payments to recruiters be covered by
subsequent retail revenue. The bonuses cannot be ultimately sourced from those who are
recruited, who in turn are offered the same proposition to gain rewards from recruiting yet
more investor/salespeople, ad infinitum. The courts and the FTC have also rejected the claim
that sales to contractor/dealers (salespeople) constitute retail sales yet Amway officials made
the assertion to Mr. Berman that sales to distributors are retail sales, and he did not challenge
it.
At 50% retail sales, Amway would a “direct selling” company with reportedly $10.8 billion
in revenue but no more than about $7 billion in sales to the public. Even with the alleged
50% retail sales level, $3-4 billion would have been sold only to the Amway sales channel
without ever being resold. And there is no reasonable basis for the claim that these purchases
by the salespeople were driven by market forces of price, quality or demand and are
unconnected to the distributors’ pay plan or Amway’s claims of income potential.
The 50% retail claim to Mr. Berman, if it were true, would also mean that the maximum
average gross profit from retail sales available to the 1.38 million “active” distributors is less
than $1600 a year (based on a 29% average gross retail profit), while the average amount
purchased by all distributors and not resold is $1800.
Without a viable retail sales opportunity, what remains for the consumer/investor is an
income proposition that is based on recruiting more salespeople and profiting from their
investments, i.e., the endless chain proposition.
I am available to you for discussion or explanation.
Sincerely,
Robert L. FitzPatrick, March 14th 2012
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Predictably, Doug DeVos and Steve Van Andel are simply ignoring my overt charge that they are a pair of cultic racketeers posing as 'philanthropic Christian capitalists,' who have maliciously infiltrated the Internet-based version of the 'Wall Street Journal' to commit wire fraud.
David Brear (copyright 2015)
My God, did you really say all that to Dennis Berman? It's no wonder he didn't reply.
ReplyDeleteHe behaved like a creepy little groupie with a couple of rock stars
Anonymous - I also called young Mr. Berman to tell him off for wasting my time, but, what a surprise, he had a plane to catch. Dennis was a guest speaker at an important event.
ReplyDeleteMeanwhile back in the adult world of quantifiable reality, the astonishingly low moral, and intellectual, calibre of persons who form the financial media, combined with their astonishingly large egos, explains why Bernie Madoff's absurdly-obvious financial crimes went undetected, and ureported, for decades.
The Dennis Bermans of this world don't seem to be able to reconize a fraud, even when it falls on their heads.
In the articles you accuse Dennis Berman and the WSJ of covering up a fraud, but in this comment you accuse him of being stupid?
ReplyDeleteAnonymous - Just to be perfectly clear, I'm actually ridiculing the members of the mainstream financial media who have collectively- failed to spot 'MLM' racketeering - some of whom must be corrupt, some of whom must be stupid and some of whom are evidently both corrupt and stupid.
DeleteSadly, most financial journalists seem to have egos the size of houses, which means that they don't have a sense of humour when it comes to looking at themselves.
In my opinion, with a few notable exceptions, the members of the mainstream financial media are a flock of po-faced dunces with diplomas who lost their right to offer opinions on pyramids and Ponzis, when it emerged that they had collectively failed to detect Bernie Madoff's closed-market swindle for decades. During this period, the mainstream financial media became a significant part of Madoff's deception, but (for obvious reasons) the members of the financial media, have never admitted this.
Obviously, there were many financial journalists who privately knew damn-well that Madoff was a sociopathic crook, but who remained publicly-'objective', in the same way that there must be many financial journalists who privately know damn-well that the instigators of so-called 'MLM income opportunities' are sociopathic crooks, but who are currently remaining publicly 'objective.'
The problem with all deceptions, is that if you ignore them, or report them with misplaced objectivity, you risk becoming part of them. Sadly, most journalists don't understand this common-sense analysis, because they have been trained to remain 'objective.'
In the final analysis, the explanation of Dennis Berman's, and indeed Christopher M. Matthews', misplaced-objectivity concerning 'MLM' rackets, is not that important, because the financial media (with a few notable exceptions) has proved itself to be not that important.
Right on.
ReplyDeleteIf recruiting rewards are greater than sales rewards, people will recruit, not sell, and a recruiting scheme is the definition of a pyramid scheme.
Meanwhile the 99% (tax) loss rate means that the odds of winning in MLM are worse than playing a color in roulette, which is treated as a hobby, and allows expense deductions only to offset the winnings, but gambling losses are not deductible. Therefore the most sane remedy is simply to disallow MLM business deductions, except to the extent of hobby losses. Thereby automatically MLM companies would be promoting tax evasion, if they promote the deductibility of business expenses, as they commonly do.
The net result would stop the action instantly, and buy the FTC and SEC another 35 years or more to come up with the appropriate framework for criminal prosecutions.
However, the situation might be more urgent than that, since by definition recruiting anyone into an MLM in the knowledge of what actually happens in the industry, is fraud in the inducement, and at least the companies know full well what the realities are. On a criminal basis therefore, non quantifiable losses (for tax purposes), such as time and goodwill (be that family life or reputation), are by definition part and parcel of any damage claims.
Clearly the promotion of tax deductability of "business expenses (in"cluding company trainings) is used by the companies to reinforce the (false) perception that their "opportunity" indeed constitutes a business. Thus the economic losses inflicted by MLM companies are in fact a multiple of their sales.
The IRS could stop Al Capone. They could stop MLM. That would be a start.
Rogier van Vlissingen - Even the '99% (tax) loss rate' figure is an exaggeration of the economic-viability of so-called 'MLM income opportunities,' because this doesn't take into account the hidden, effectively-100%, overall net-insolvency / churn rates which have been universal to blame the victim 'MLM income opportunity' cultic rackets.
DeleteIt's interesting to note that these gangs of racketeers dressed as businessmen, never describe their fraudulent shemes as 'Net-income opportunities.'
The 'Amway' racket alone has churned tens of milions of individuals . In recent years, the 'Herbalife' racket has been churning a couple of millions annually. When you take this into account, you can extrapolate that, for decades, effectively no one has ever generated an overall net-profit from operating a so-called 'MLM business.'
It is a cruel joke that anyone should have been allowed to declare their unpaid 'MLM' recruitment acitivity, as a 'business.'
Remember, governments around the world have been profiting from 'MLM' rackets, because the 'MLM' racketeers have voluteered to pay sales-taxes on internal transactions between their front companies and their contantly-churning insolvent adherents. This has had the added effect of making countless billions $ of losing investment payments (based on the false-expectation of future reward) look even more like retail sales (based on value and demand).
Self-evidently, retail sales tax should only accrue on authentic retail sales to the general public.
A far more appropriate 'gambling' comparison, is to identify 'MLM' rackets as a form of unlawful variable-odds 'Paris Mutuel' or 'Totalizer' or 'Lottery' system, where only the participants' money is collected and paid out, but where no one can actually win except the crooks who retain absolute control over (what is secretly) a fixed-system using shills to lure the unwary.
My advice to all observers of 'MLM' rackets is, ignore the insignificant minority of shills (who stick around for several years pretending to be ordinary humans: transformed into superhumans) and concentrate on the overwhelming majority of contantly-churning rank and file victims.
In response to Rogier van Vlissingen comment above, I too have alleged many times that those Amway 'distributors' who actively recruited others while knowing that the scheme works by inducing others to buy and recruit others to buy is a crime: Intent to defraud.
DeleteWhen my ex-wife's daughter and son in law attempted to recruit me, I questioned the daughter about how Amway works. The explanation made it apparent to me that they knew that selling (distributing) the products to outside neighbors, associates, and friends wasn't really part of the game. The game involved recruiting others to recruit others to infinity. Each erstwhile recruit would 'pay into the system' by religiously buying a monthly 'quota' (called PV) of products that they would normally buy and use anyway. I immediately became alarmed by the extortionate price of common items like trash bags and toilet paper, amongst vitamins, energy bars and energy drinks that my wife's daughter began buying using my ex-wife's credit card number. (My ex-wife was basically 'brow-beat' by her daughter into being just one of Amway's drones.) The whole affair ruined our relationship. The daughter sought to 'disconnect' me. I had no intention of being screwed by Amway. I discovered first hand how Amway drives wedges and destroys families.
The 'business plan' presented to me proved that my wife's daughter and son in law intended to not only defraud me, my wife, and as many others as they could recruit into Amway's scheme, but that they themselves were unwitting victims of their own scheme. I was told that we would all go 'diamond' and cruise on Amway's luxury liner and enjoy all the beaches of the world. That I could junk my Toyota and drive a Mercedes. Such grand dreams they had for themselves, my wife and me.
The IRS has determined that Amway is a 'hobby' business, having found that participants have no real expectation of ever turning a profit and routinely deny Amway business expenses as tax deductions. It amazes me that if the IRS can rightly discern the scheme, while the Federal Trade Commission continues to condone Amway's screwball Ponzi scheme.
Losing participants adopt an incredible "fake" prosperity, an intentional ruse to further defraud others. They 'fake it till they don't make it." Indeed the odds of winning at gambling is much better than winning in Amway.
Anyway, I urge anyone being exposed to the Amway scheme to run, not walk away. Mr. Brear is correct in saying that the 'churn' of losing participants is used to pay the few shills that boast that Amway is the greatest opportunity in the world. Amway believers are not 'entrepreneurs' but fools on a carousel of greed.
quixtarisacult - When my brother first tried to recruit me into 'Amway' he never actually mentioned that it was 'Amway'. As it happens, at that time, I'd never heard of 'Amway,' but I did know about product-based pyramid schemes.
DeleteAlarm bells rang when my brother quite openly said that trying to sell his sponsoring company's products at a 30% mark-up was only for those 'Distributors' who weren't really interested in making money. My brother went on to explain that if you were really serious about making big money in 'Network Narketing,' there was no need to sell anything. All you had to do was exactly duplicate a proven 'Business Building Plan' and buy 200 PV of products each month and recruit others to duplicate the same 'Plan'.
My brother openly boasted that profits automatically multiplied in 'MLM' as your own number of recruits multiplied. He also spoke about how MLM was a 'limitless income opportunity.'
In groups like 'Amway' and 'Herbalife,' adherents all tell the same scripted lies, but when there is any investigation, the apologists of these groups throw up their hands in horror and point to their own 'rules' and 'codes of ethics' which appear to prohibit all the scripted lies which their adherents have been programmed to recite.
Obviously these 'rules' and 'codes' have never really been enforced, except when external investigations have begun to loom. Their real function has been to obstruct rigorous investigation in order to continue to commit fraud.
David,
DeleteYour brother basically told the same get rich prosperity bullshit that I heard. Like the Mission Impossible TV show: Amway disavows any knowledge of their agent's misrepresentations--the big lie.
Some anonymous Amway apologist comments on my blog allege that I was a failed Amway distributor who didn't work hard enough to make it. (This must be a 'tape speak' response to disparage anyone critical of their 'business.') Others say that since I've never been an Amway distributor myself that I couldn't possibly understand the wonderful opportunity that I'm besmirching and I don't know what I'm talking about.
The message I want to promote is that you don't have to be taken in by these criminals to understand and avoid their snare. If I happen to hurt some Ambot's feelings, possibly it will be the light they need to find an exit from the Amway labyrinth and save them some time, money and respect. (I'm not likely to get a thank you.)
I am alarmed by all the copy cat MLM schemes springing up. At the same time, the proliferation of these pyramids will eventually hasten their demise by saturating the market. An Amway drone tries to recruit a Mary Kay drone, who tries to recruit a Forever Living drone, who tries to recruit a Lyoness drone, who tries to recruit a Movavie drone, who tries to recruit a Herbalife drone, who tries to recruit a BeachBody drone, who tries to recruit a Melaleuca drone, and on into infinity. A person buying a burger at McDonalds will not be able to avoid some crackpot trying to find a new mark for their unheard of business opportunity. How many times can a person hear that their job is a pyramid scheme or about their "Just Over Broke" job? I find this logic very insulting. The nice girl ringing up my burger is making much more money than the pretender besmirching working for a living.
quixtarisacult- Recently, I've been receiving comments from Emma Cooper, a 33 year old former woman police officer in the UK, who is currently a poster-girl for the 'MLM' racket known as Forever Living Products.
DeleteMs. Cooper is in the classic delusional euphoric state, mainly because she has had some initial recruitment success apparently with other police officers. Ms Cooper is a very pleasant young woman with a bubbly personality and young family , but she has completely fallen for the 'MLM' fairy story and I am genuinely concerned for her, and for her friends and family.
I linked a video of one of Ms. Cooper's disturbing 'FLP' on stage performances to an article on this particular group .
http://mlmtheamericandreammadenightmare.blogspot.fr/2013/02/forever-living-products-flp-is-mlm.html
To date, my 'FLP' article has had more than 100 000 page visits.
Ms. Cooper responded by ordering me to remove reference to her from Blog, particularly reference to her vulnerable emotional state when she was recruited. She also told me that I am 'a scorned former MLM promoter with too much time on my hands.'
The same lies are present in almost all 'MLM' rackets, because they all use essentially the same script.
David, what a great post!
ReplyDeleteIn the face of the mounting evidence against Amway, Devos and Van Andel are bald faced liars. The 'entrepreneur' angle the company is constantly promoting is a sham to say the least.
It is probably too bad that not many losing participants (Amway victims) read 'negative' blogs about Amway. I have a suggestion for them:
Sue!
It is apparent that nearly all former distributors that have followed this course of action have accumulated substantial out of court settlements--with one of the more recent ones netting 150 million U.S. dollars. These distributors (making pyramid scheme allegations amongst other related charges) prevailed upon Amway to settle out of court. (Although I don't advocate out of court settlements because I'd rather see the charges be determined by a Jury so Amway couldn't continue to deny the validity of the charges.)
I agree that the 'soft ball' interview was an absurdity. DeVos claims that all end users are customers to deny pyramid scheme allegations. The Amway business model is a fraud, and the Wall Street Journal is complicit in helping these charlatans continue to perpetrate it.