Thursday 29 October 2015

Robert FitzPatrick explains Pyramid Politics

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Robert FitzPatrick

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wednesday 28 October 2015

'Herbalife (HLF)' racket on the verge of collapse. 

This extraordinary confession of guilt has only just been recovered and posted on YouTube, by Michelle Celarier of the New York Post. It was made as long ago as 2005, by 'Herbalife' boss, Michael Johnson.

See original image

This video again begs the question:

Why hasn't this vast dissimulated criminal enterprise long-since been halted and Johnson, and his 'Herbalife' associates, held fully to account under the US federal Racketeer Influenced and Corrupt Organisations Act, 1970?

Blog readers are reminded that, at one stage, Michael Johnson was being paid $80 millions annually from the 'Herbalife' racket - and this evidence again proves that he knew exactly how this money was being generated unlawfully.


“It’s the recruiting, meaning bringing new distributors into our company, which is the most vital part of our bloodstream. We bring new distributors in, we grow. It’s that simple. It’s that simple. And the company has built its whole reputation, its whole life, on recruiting.

Our top dogs, Greg calls them The Hunters
out there, our Hunters, our top distributors, our Chairman’s Club, our Price Team, they’re professionals at this [pointing to the word “Recruiting” on the slide behind him]. Nobody can do it better. You get next to Alan Lorenz [] and he’ll recruit taxi cab drivers and busboys and waiters and everybody… He doesn’t care who it is and, boom!, he’s got ‘em in this game. Right away, he’s got everybody. How long he’s got ‘em is another question, but he’s got ‘em in this game [again pointing to the word “Recruiting” on the slide behind him]. And that’s what this company built itself on.

The recruiting tactics…very positive for the most part…sometimes led people down a false road. $4,000, jam it into ‘em, buy an instant distributorship, load that product in. See ya! Good luck! Credit card bill comes, spouse says, “Ahem, how are we gonna pay this? You didn’t sell the stuff that’s in the garage, that’s in the pantry, that’s out there. What are we gonna do?” Well, we could return it to the company. And you know it, in our marketplaces where our recruiting heavy…is very heavy [again pointing to the word “Recruiting” on the slide behind him], and we don’t have a balance of business, we got issues.

So what happens today? Today what are we? Today, we’re recruiting. We’re still a recruiting company, and we’ve got to never not be this
[again pointing to the word “Recruiting” on the slide behind him]…”

Michael Johnson CEO 'Herbalife' ('Herbalife Global Management Meeting' 2005)


See original image

Blog readers are also reminded that the 'Herbalife' racket is neither original nor unique. Although a couple of 'MLM' rackets have recently been prosecuted and closed (as dissimulated pyramid frauds) by US federal agencies, currently, there are approximately 1400 so-called 'MLM/Direct Selling' companies registered in the USA, and many of them hide behind labyrinths of legally-registered corporate structures all over the globe.

In this jaw-dropping video from 2012, Andy Waring, a British shill recruiter for the US-based, blame-the-victim,  'MLM Income Opportunity' cultic racket known as 'Forever Living Products,' quite openly boasts that 'MLM' has precious little to do with selling, and is actually based on 'geometric progression.' In this way, Mr. Waring has been habitually committing fraud on behalf of his American masters; for this video demonstrates that 'FLP' adherents are also taught that they can all receive constantly expanding profits forever, simply by exactly duplicating a 'proven plan' where they all obediently hand over their cash each month whilst attempting to recruit others exactly to duplicate the same 'plan.'

David Brear (copyright 2015)


NY Senator Jeff Klein Calls Herbalife “Shameful” and “House of Cards” with Undercover Video

Tuesday, October 27, 2015
Contact: Abbey Fashouer (518) 429-5102 & Candice Giove (347) 866-6742 (KLEIN), Javier Lacayo (646) 942-1703 (JAMES)
  • New report finds Herbalife International cheating American immigrants out of millions of dollars; Nutrition company running shady pyramid scheme targets low-income Hispanic families in search of the American Dream
  • Klein introduces legislation to increase oversight of Herbalife International, require full financial disclosure of independent Herbalife distributors, and strengthen protections for prospective sellers
  • Klein, James & Make the Road New York: “It’s time to shed the light on Herbalife’s deceptive business practices and bogus claims connected to nutrition products.”
BRONX, NY – State Senator Jeff Klein (D-Bronx/Westchester), together with Public Advocate Letitia James, Council Member Annabel Palma, and Make the Road New York today released a bombshell investigative report “The American Scheme: Herbalife’s Pyramid ‘Shake’down.”
The new report found that Herbalife International is running a get rich quick scheme targeted at low-income immigrant families. Prospective distributors are luredinto the Herbalife hierarchy with the promise of the American Dream – lavish vacations, extravagant mansions, and cold hard cash – in return for peddling Herbalife products. The reality, however, is much darker – a nightmare in which families report losses averaging $20,000, all while high level Herbalife executives pad their pockets.
Senator Jeff Klein said: “Herbalife’s house of cards is tumbling down. This fraudulent company’s efforts to lure in vulnerable New Yorkers and recent immigrants in pursuit of the American Dream is downright shameful. With false promises of wealth and extravagance, a disproportionate number of Hispanic families are falling prey to these schemes and sacrificing their hard earned dollars. This stops now – my new legislation will significantly boost protections for consumers and distributors, drastically strengthen financial reporting requirements for Herbalife independent members and increase oversight of this deceptive company in New York. I’m proud to partner with Public Advocate Letitia James and Make the Road New York to shine light on this company’s dark and deceitful practices.”
Public Advocate Letitia James said: “Herbalife cannot continue to destroy thousands of lives with its despicable and unethical practices. Our undercover investigations show just how blatantly this pyramid scheme is targeting and exploiting immigrants across our City – particularly from the Hispanic community. Together, we are putting Herbalife on notice, and we will ensure that their days of deceit in New York are numbered.”
In October, Senator Klein’s Office, in partnership with The Office of the Public Advocate, and Make The Road New York, conducted an undercover investigation into health product distributor Herbalife International. The alarming investigation found that thousands of New Yorkers – mainly immigrants – were targets of a pyramid scheme disguised as a direct marketing opportunity and sold countless lies about the health benefits of Herbalife products.
Independent Herbalife distributors, which operate more than 60 ‘nutrition clubs’ at locations throughout the five boroughs – 16 in The Bronx, 26 in Queens, and 18 in Brooklyn  – are convinced to pursue this business opportunity by current distributors with the promise of immense financial gains. Herbalife products are also billed as magical cure-alls with disease fighting properties that can help manage weight loss, cure cancer, diabetes, chronic asthma and more.
The company is structured so that Herbalife products can only be purchased from an accredited distributor. These distributors, who are not Herbalife employees, sell and market Herbalife products to family, friends and neighbors in their communities away from fixed retail locations.
Prices vary by distributor since Herbalife sets no cost requirements for its products. In order to get these nutrition shakes, supplements and other health elixirs at discounted rates, consumers are encouraged to become Herbalife members and purchase the products directly from Herbalife or the distributor that introduced them to the company. Prospective recruits are promised low startup costs ranging from $60 to $100, but are often tricked into spending their life savings on the business opportunity by the very person who recruited them. These experienced distributors then profit from their new recruit’s initial purchase and collect royalties on their sales down the line. The average initial investment in Herbalife International is $1,800, with some as high as $10,000.
With nearly 555,000 product distributors in the U.S., it’s estimated that anywhere from 60 to 83 percent of Herbalife distributors are Latino. As New York is home to 3.5 million Hispanics, with approximately 805,000 classified as low-income, it’s clear that New York is a virtual hunting ground for Herbalife’s predatory practices.
Council Member Annabel Palma said: “I applaud Senator Klein for his ongoing efforts in advocating against deceptive and unfair business practices, such as those from Herbalife. The Herbalife Transparency bill will help protect our families from predatory schemes that many multi-level marketing companies promote.  These types of companies claim to provide legitimate entrepreneurial opportunities for those struggling to find work, but after these unwitting victims become Herbalife distributors, they find out that doing business with the company costs them more money than they can make, with many losing their initial investment and more. I support this legislation, and will continue to advocate against these unfair business practices that disproportionately target economically distressed communities.”
Council Member Julissa Ferreras-Copeland said: “For too long, Herbalife International has gone after poor, minority and immigrant groups and exploited their desperation to escape poverty. As a council member representing hundreds of victims in Queens, I stand with my colleagues today to demand that the Federal Trade Commission conduct a thorough investigation of Herbalife’s abusive pyramid scheme and work to protect consumers from these malicious recruitment tactics. If Herbalife is acting illegally by making false income claims to vulnerable New Yorkers, then they must be held responsible.”
The Office of Senator Klein examined 56 complaints filed with the Office of the New York State Attorney General and the Federal Trade Commission. Together, these victims reported financial losses totaling $950,000 and ranging from $90 – $100,000. Of the 56 complaints filed, 93 percent indicated Spanish as their primary language. More than 60 percent of new members made initial investments larger than the required $60 to $100.
Herbalife distributors purport prospective sellers can earn as much as $20,000 per month selling Herbalife nutrition products. The reality is, that nearly 90 percent of new distributors will quit within one year. Moreover, of the 56 complaints filed in New York, only eight victims reported receiving a check directly from Herbalife for their royalty claims. The average amount was $100.
For too long, Herbalife has skirted the law and allowed vulnerable New Yorkers to be taken for a ride. To curb health product franchisors use of deceitful business tactics in New York, Senator Klein has introduced legislation in the state Senate to increase oversight, require full financial disclosure of independent Herbalife distributors, and strengthen protections for prospective sellers. Key provisions include:
  • Mandates that health product franchisors in the state file an annual financial disclosure statement written in plain English and Spanish for the Attorney General to review before submitting to prospective franchisees. The statement includes the number of franchisees in the state, average income claimed by franchisees, percentage of franchisees that fall within various amount parameters as determined by the Attorney General, and the reported turnover rate of franchisees.
  • Requires that prospective franchisees receive their offering prospectus in the primary language of the prospective franchisees.
  • Requires that any pamphlets, circular, form letter, advertisement or other sales literature of advertising communication intended for prospective health product franchises be approved by the Attorney General.
  • Calls for health product franchisor engage in supervision of its franchisees to ensure compliance with the law to prevent fraudulent and deceptive acts by the franchisees.
Francisca Montana, consumer fraud prevention program coordinator at Make the Road New York, said: “Unfortunately, Herbalife sells our community members a dream that will never come true.  Its corporate model preys on the hopes of our community, and promises unreachable success.  Many of our community members have invested their hard-earned savings in an impossible business, and yet they themselves are blamed for any failure while the reality is that only .01% of participants actually obtain the results promised.  Herbalife profits from the vulnerable populations that are looking to realize the American dream:  recent immigrants, English-language learners, the undocumented and low-income, hard-working Latinos.  They are all drawn to what we now know to be a pyramid scheme, hoping to achieve a better life for themselves and their families.”
Florentino Arce, member of Make the Road New York and former Herbalife distributor: “Herbalife betrayed me. In total, I invested about $12,000, participated in Herbalife’s University of Success and Extravaganzas to better learn about the business and the company’s instructions to become successful. I put all of my effort and time into the business and even signed up various people under me. But it was a scam: no matter how hard I tried, it was impossible to achieve what they promised, and I lost all of the money and time I invested. No one should sign up with Herbalife.“
Carmen Salazar, member of Make the Road New York and former Herbalife distributor, said: “I feel relief that someone as important as Senator Klein is paying attention to the multi-level pyramid scheme that is Herbalife. There has never been help before to those who have lost it all believing in their deceitful ways. I hope that this proposal can put a stop to their lies and make everyone take a second look at Herbalife.”
Maria Elena Khochaiche, member of Make the Road New York and former Herbalife distributor: “I tried selling Herbalife products for about six months, but it was a waste of time. No one would buy the products because they were too expensive, and I was told they did not work. Personally, taking Herbalife also never helped my back pain go away. When I tried to recruit more people, no one wanted to join. Eventually, I stopped, because I did not want to lie to my friends about this useless product. I feel scammed. I think I was sold an American Dream that ended up being the American Nightmare.”
To view the undercover video (with subtitles), click the link:
To view the undercover video (without subtitles), click the link: