Will China write the beginning of the end of the pernicious 'MLM' fairy story?

Statutory Warning

More than half a century of quantifiable evidence, proves beyond all reasonable doubt that:

• what has become popularly-known as 'Multi-Level Marketing' (aka 'Network Marketing') is nothing more than an absurd, cultic, economic pseudo-science.

• 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 organised 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 rigged-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, recruitment leads, lead generation systems,' etc.).
• Apart from an insignificant minority of exemplary shills who pretend that anyone can achieve success, the hidden overall loss/churn rate for participation in so-called 'MLM income opportunities,' has always  been effectively 100%.

David Brear (copyright 2017)

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How to Sell the American Dream (Without Getting Banned from China)

By Noelle Mateer, November 14, 2017

© 2017 SH Aoyang Advertising Co., Ltd

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Cui Ning posts Moments on WeChat five times per day. Sometimes they’re re-shares, taken from her friends’ timelines. Sometimes they’re photos of her with colleagues at a cooking class sponsored by eSpring® Water Purifier. Other days it’s a selfie with the latest shade of ARTISTRY® lipstick. If she’s really excited about something, she’ll post photos of it multiple times in one day, like with the ARTISTRY® Intensive Skincare Advanced Vitamin C & HA Treatment.

I often receive personal messages from Cui, though I suspect they’re also being sent to others. Some days, she drops a line to say “nihao” or “you’re great!” Once, she wrote: “Buy RMB1,500 worth of Amway products, get one package of sanitary pads for free.”

No matter what, her grating online presence is about one thing: American mega-corporation Amway. But Cui is more than a fan. She’s a convert and an evangelist. She is, in Amway speak, an Independent Business Owner (IBO).

The Amway Experience Center in Beijing

Amway sells soap, vitamins and makeup, but what it really sells is the American dream. Through seminars, motivational speakers and aggressive recruiting, the company tells anybody who will listen how they, too, can become rich – by purchasing an inventory of Amway products and working as an independent salesperson. It’s what Amway stands for: the American Way.

The corporation is a pioneer in the direct-selling industry (sometimes known as ‘door-to-door sales’) for its ‘multilevel marketing’ (MLM) structure. In an MLM, sales reps can make money from selling soaps, sure – but they can make even more from recruiting more sales reps. This has led to widespread aggressive recruiting tactics that lead some critics to call Amway a pyramid scheme, or worse, a cult. 

In the US, a 1979 court ruling determined that Amway was legal. China, though, did not: after Amway and other MLMs entered the Mainland market in the 90s, hundreds of local copycat schemes exploded – causing widespread riots when they later collapsed. In 1998, the government responded by banning MLMs outright, calling the worst of them “evil cults, secret societies and superstitious and lawless activities.”

The Amway Experience Center in Guangzhou

Amway was banned for years, but China’s 2005 ‘anti-MLM’ regulations, ironically, allowed the company to muscle its way back in. By codifying China's definition of an MLM, the regulations laid out all the steps Amway could take to not be considered one. And so, to sidestep its MLM status (while still operating as an unabashed MLM scheme in nearly every other country it sells in), Amway opened brick-and-mortar stores and and tweaked its payment scheme. Then, Amway stepped up its guanxi game. The company established the Amway Charity Foundation, working in collaboration with the Shanghai Charitable Fund and the Communist Youth League of China. It sponsored China’s team at the 2012 Olympics. And it sent hundreds of Chinese officials to study public management at Harvard (and tour Amway’s headquarters in Ada, Michigan) in a program called ‘Amway Fellows.’

Today, China is by far the company’s largest market. Still, Amway’s rocky history in China impacts its image – and now, Amway has invested heavily in massive, museum-like Amway Experience Centers, currently opening in cities nationwide. Shenzhen’s Amway Experience Center is still under construction, but last year, a Center was unveiled in nearby Guangzhou. Shanghai’s 7,500spm Experience Center opened in 2014. Beijing’s first Amway Experience Center, meanwhile  – a steel and glass behemoth in the center of Sanlitun, the capital’s cosmopolitan heart – debuted just this spring.

Designed to distance the company from the toxic ‘MLM’ tag, these couldn’t be timed better. China is currently experiencing a fresh wave of illegal pyramid schemes, and the government is threatening another MLM crackdown.

“Hello,” says a woman the minute we step inside the Beijing Amway Experience Center, whisking us away on a tour of the complex. Not that we asked for a tour. This is simply what happens – Amway representatives wait for visitors, greet them enthusiastically, and before they know it, they’re 90 minutes deep in Amway lore.

It’s a high-wattage, multi-sensory experience, bouncing throughout the building’s many display rooms: ‘SMART SHOPPING,’ where all-purpose floor cleaners are displayed behind plexiglass like precious objects in a gallery; the eSpring®® room, where short films about Amway’s air and water purifiers play to a Pirates of the Caribbean-style soundtrack; and the Nutrilite hall, where an actual John Deere tractor sits among artificial flowers in an ode to Nutrilite’s organic-farm origins. (Nutrilite is a brand of nutritional supplements Amway took over in 1994.) Here we gaze upon a bronze statue of the Nutrilite founder, and peruse black-and-white photos of his time spent studying in Shanghai in the 1910s and 20s. “Nutrilite and China have a rich history together,” says our guide.

Home Living, a kitchen space showcasing Amway products

Flattering depictions of nondescript Western men are everywhere in the Experience Center, but especially within ‘AMWAY CULTURE.’ After watching a short film about founders Rich DeVos’ and Jay Van Andel’s perfectly average middle-class upbringings, we come across a photo of former US President George W. Bush, onstage at Beijing’s own Wukesong Arena. In 2015, Amway flew Bush to Beijing to speak at Amway China’s 20th anniversary. Over 12,000 Amway IBOs were in attendance. Bush and Chairman Steve Van Andel spoke onstage about leadership.

“The US government likes Amway very much,” says our guide. “I’ll send you a picture later of Betsy, on WeChat.”

Betsy DeVos is the wife of Dick DeVos, Amway's former president, and the sister-in-law of Doug DeVos, Amway’s current co-CEO. Betsy and her family have donated roughly USD$200 million to Republican causes and campaigns over the years. In December, Trump named her as his pick for Secretary of Education.

This, of course, is largely skipped over in an Amway Center tour. (At a tour of the Experience Center in Guangzhou, meanwhile, guide Sun Rong says, “One of the founders was definitely influential in the Republican Party… in finance... or something.”)

Former US President George W. Bush poses onstage at Beijing's Wukesong Arena for Amway China's 20th Anniversary, in 2015

Anti-pyramid scheme expert Robert FitzPatrick knows Amway’s lobbying practices by heart. The activist has been fighting against the company – which he personally considers a pyramid scheme – for decades. So when China banned direct selling in 1998, he was thrilled.

“I thought, ‘This is remarkable,’” he says. “‘This is the first country that appears to be showing a willingness not to let these [MLMs] ravage its nation.’”

In the run-up to China’s 2005 anti-MLM legislation, Chinese officials allegedly sought out FitzPatrick’s expertise. He met with professor Yang Qian and his translator in Washington, DC. FitzPatrick says the professor was consulting for Chinese officials drafting the 2005 regulations. (That’s was unable to independently confirm this.)

“It appears to us that MLMs have very little affect economically,” said Yang through his translator, at the meeting. FitzPatrick says this was an astute observation.

“Very little product is actually moved through MLMs,” he explains. “If MLMs went away tomorrow, it would have no effect at all in terms of getting products to the public.”

Displays in Beijing's ‘Amway Culture’ hall

After all, he says, it’s not like China would run out of all-purpose floor cleaners. Instead, he believes that Yang and his colleagues understood that MLMs have “very little economic value, but an incredible social purpose.” Their real product isn’t makeup or supplements – it’s hope.

“People invest in MLMs because they see them as an alternative to low-paying jobs, debt and the rising cost of education,” he says. “They believe they can truly get rich."

Rooms in the Amway Experience Center where Nutrilite employees offer health exams and fitness classes to Amway IBOs

On the second floor of the Experience Center, the tone of our tour changes. Our guide is no longer selling Amway products, but the Amway lifestyle. We watch a slideshow of Amway China staffers on vacation in Alaska, taking selfies with glaciers from the deck of their cruise ship. Here we learn the benefits of life as an Amway employee – top sellers get all-expenses-paid vacations to destinations like Bali and Australia. Then our guide raises the stakes.

“Would you like to meet our manager?” she asks. Yes, we would. She whisks us downstairs, where we promptly shake hands with him. I begin to ask if he has time to answer some questions, but he’s too busy leading us elsewhere. This choreographed dance takes us to Rich & Jay, a cafe named for Amway’s founders, where he seats us by a massive poster of the two men. Their faces are everywhere – on the shop’s logo, on each styrofoam cup, on the Starbucks-style merch that pairs their logo (faces) with icons of Beijing. 

Rich & Jay, the cafe in the Amway Experience Center

A personality cult is a weird marketing strategy for such normal-looking dudes, I think. But they are rich, white, corporate American men, and perhaps that is reason enough for many to adore them.

Here is where we first meet Cui Ning. Cui is writing down a series of numbers on a sheet of white paper, and the numbers keep getting larger and larger. These are our fortunes, and they’re growing the more we invest in Amway. Our That’s intern, Vivian, turns to me and whispers: “That’s a lot of money.”

That money can be ours, Cui says, if we sign on to become Independent Business Owners today. Once we’re IBOs, we can buy Amway products at wholesale prices, and then sell those at retail prices to our friends, family members, colleagues and WeChat contacts. The more we buy, the more we can sell. We’ll be rich in no time. (Elsewhere in the world, IBOs make money by recruiting more people to sign up, and then making commission off their sales. But that’s unabashed multilevel marketing, which is illegal in China, so Cui can’t do that. She can, however, get a bonus for signing us up.)

The two men at our table, both in their 20s, sign up immediately. Then Cui turns to Vivian and asks, “How old are you?” She’s 17.

“Oh, when’s your 18th birthday?” she asks. “You can join then.” When I look at the other tables in Rich & Jay, everyone is having this same conversation. The brand-new Dunkin Donuts next door is empty.

The founder of Nutrilite, immortalized in bronze, next to photos of his time spent in Shanghai

Dong Chao, a blogger from Shanghai who writes regularly about Amway, says his father has been an IBO for decades, but hasn’t made any profit.

“The worst part, for me, is that their sinister intentions are disguised by benevolent appearances,” he tells That’s. Still, Dong’s father believes in the American Way: “He sees himself as the deliverer of health. And the friendly atmosphere in Amway’s classes makes him happy. It makes him want to stay in it. Because of those meetings, he’s always absent from home.”

It’s this devotion to the brand over all reason – even after years of no success – that leads critics to brand Amway as a cult. Indeed, IBOs regularly gather at Experience Centers to listen to motivational speeches, not unlike sermons, about the value of hard work. Last month, Cui posted a photo of someone who’d experienced a miracle: The week’s speaker was an old, handicapped woman who, after attending a Nutrilite talk on healthy living, found herself able to walk again (for five minutes at a time, anyway).

“[Amway] evokes a reaction from people that is like religious fervor,” says FitzPatrick. “It operates like a cult.

“That was the big concern about pyramid schemes in ’98, when they shut them all down. It was a concern from a security point of view. It caused riots.”

This past July, protests erupted in Beijing. Hundreds of people, some from far away, demonstrated against a government crackdown on Shanxinhui, an MLM that it has since been branded in state media as a ‘business cult.’ Since then, the State Administration for Industry and Commerce announced it will work with the Ministry of Public Security to further combat pyramid schemes in China, which are on the rise. Police investigated over 2,000 pyramid scheme cases in 2016, nearly 20 percent more than in 2015, according to Xinhua.

A September New York Times article connects this rise in illegal pyramid selling to China’s slowing economy. But Ouyang Wenzhang, director of China’s national Direct Selling Network, believes otherwise.

“This is not related to unemployment, because in China, unemployment is not very high,” he says a rich, slow Beijing accent. “According to government departments, the unemployment rate is 4 to 4.3 percent. In 2012, America claimed that it was 6.5, and in 2013, 6.4. So actually, some foreigners will misunderstand that the unemployment rate in China is high. This is not the main reason for the proliferation.”

Ouyang represents China’s official attitude towards direct-selling corporations today. He is quick to condemn illegal pyramid schemes like Shanxinhui – but equally quick to defend licensed corporations like Amway.

“Amway has many positive influences on Chinese society,” he reads, from a stack of printouts he’s brought to our interview. “They have become a model for direct selling in China. Amway has also formed a specific and unique way to promote trade corporation between the US and China.”

If it’s not unemployed people who are joining these companies, then, I ask who is. He reads a list consisting of three types of people: those who want to start their own business, those who are employed in companies that “operate in the traditional way, but who met some challenges that were extremely difficult to overcome, and therefore turned to direct selling,” and finally, “young people who have dreams and want to achieve something big.”

Ouyang Wenzhang, the director of China's Direct Selling Network

I ask if there’s anything Ouyang would like to say off his prepared script, but no, he says, he would prefer to read. When I contact Amway China’s public relations department later, I’m told no one is available to comment. A week later, I get a call from an Amway China PR representative, imploring me to send her my piece before I publish it. I refuse. She says, “Are you interested in politics?” Yeah. “We have nothing to do with politics,” she tells me. “We’re just a company.”

Later that afternoon, I finally get an official statement: “In China, pyramid fraud is called ‘MLM.’ Amway is not a pyramid scheme.” Included in the statement are a list of reasons why: Amway’s ultimate goal is the sale of products; to join Amway, IBOs do not have to pay ‘entry fees’ (they do, however, have to invest in Amway products); IBOs are compensated based on their sales performance; Amway has over 50 years of history and operates in over 100 countries; and also, employees can quit at any time. 

Applauding one’s company for allowing employees to quit of their own free will seems a bit bizarre to me. But luckily for Amway China, IBOs are doing a lot of the PR work for them. When I ask Cui what she thinks of people who consider Amway a pyramid scheme, she tells me: “Only a good, big, established company would receive that kind of attention, and have other people be jealous of it. Some people are bitter or salty.”

Beijing's new Amway Experience Center

Two weeks later, I’m back at the Experience Center. I wander through the displays, this time without a guide, but with my colleague, Iris, instead. Behind us, a group of women talk about Nutrilite. One says her husband’s kidney problems cleared up after he took the supplements. Another mentions an elderly friend of hers who’s unusually energetic, thanks to the brand. Iris turns to me and whispers.

“People in China are so afraid of dying now,” she says. “Before, life was hard. Even just 10 or 15 years ago, life was much harder. But now, people see that things are getting better and better. They want to be around for the future. I think that’s why things like Nutrilite do so well here.”

Amway’s best product, after all, is hope. And I get the feeling Cui still hopes that I’ll buy her products. When I get back to the office that afternoon, I have a notification from WeChat. It’s a message from Cui saying, “Hey, you’re great!”

© 2017 SH Aoyang Advertising Co., Ltd

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'Amway/Nutrilite' to 'Herbalife' - all 'MLM' racketeers have peddled the same pernicious fairy story.

Today, 'MLM income opportunity' is a lie which has been repeated so often, that many people around the world (sadly including, regulators, legislators, journalists, academics, etc.) have come to believe that it must be true.

This week, the question of exactly where and when the ritualisation of the pernicious 'MLM' fairy story began, has again been raised. 

About 20 years ago, I was told by a retired US Food and Drug Administration Attorney that (as far as he was aware) the phrase, 'Multi Level Marketing,' had first appeared in print in the early 1950s (or possibly even in late 1940s) in a privately-owned American magazine, 'Nutrilite News.'  

Prof. William W. Goodrich

www.washingtonpost.com/archive/local/1998/03/11/william-goodrich-dies/37c7355a-08db-41ea-8631-f20b754fad7f/?utm_term=.231d1418f2fa )

Although, I have never seen the evidence, I have no reason to doubt that my informant (who worked with FDA legend,  Prof. William W. Goodrich) was correct. Indeed, if readers look on the Net, it is generally claimed that,'although Multi-Level Marketing-style companies existed in the 1920s and 1930s, the first real MLM system was created in 1945 by the owner of Nutrilite, Carl F. Rehnborg.' 

Interestingly, however, the peddlers of the 'MLM' fairy story have preferred not to reveal exactly where or when the thought-stopping jargon term, 'MLM,' was coined or who actually coined it, because 'Multi-Level'  was adopted to hide the fact that these schemes are 'Infinite Level' and are, therefore, intrinsically fraudulent.

Carl F. Rehnborg (1887-1973)

Carl F. Rehnborg and his first family, circa 1920

Throughout the 1940s and 1950s, 'Nutrilite' was already a highly-controversial trademark owned by Carl F. Rehnborg (a.k.a. 'Dr.' Rehnborg), a previously-penniless, American former salesman (of Swedish/German descent) who'd acquired a considerable fortune by reinventing himself as a historically-important, visionary-scientist, autodidactic scholar and philanthropic businessman. Attorneys at the US Food and Drug Administration Bureau of Enforcement (who applied common-sense, as well as the law, and successfully-challenged the authenticity of some of Rehnborg's many absurd lies in the federal courts during two decades), privately knew him to be nothing more than one of a trio of sinister quacks protected by an echelon of aggressive attorneys who had combined, and updated, the medicine show and Ponzi-scheme to reflect the spirit of the age.

Former penniless science-fiction author, turned multi-millionaire, cultic racketeer, L. Ron Hubbard, posing as a historically-important,visionary scientist and philanthropist who had discovered the secret of how ordinary humans can become healthy, wealthy happy and free super humans. Hubbard was prepared to share this secret with anyone (for a price).

There are certain observers who consider that Carl F. Rehnborg's role in the creation of the 'MLM' lie was only secondary and that, although he was a quack, he was somehow a dupe who was used himself. However, just like his contemporary, L. Ron Hubbard, Rehnborg was no ordinary quack; for he was a particularly dangerous performer who undoubtedly became totally convinced that his own ego-protecting, elaborate game of all-American capitalist make-believe was reality. 

http://www.reuters.com/article/2014/07/08/amway-nutrilite-story-idUSnPn8QvBVx+96+PRN20140708

http://nutriliteerode.blogspot.fr/p/history-of-nutrilite.html

http://www.amway.com/nutrition/nutrilite/about-nutrilite/nutrilite-history

Tellingly, Rehnborg's own comic-book version of his life and achievements as set-down in various non-independent propaganda films and publications (including a book signed by his son, and heir, Sam Rehnborg), reads uncannily like the autobiography dreamt-up by 'Scientology' instigator, L. Ron Hubbard (a man who was once famously described as 'a combination of  Baron Münchausen and Adolf Hitler'). Unfortunately, just as with the followers and casual observers of Hubbard, the only information made available to the followers and casual observers of Rehnborg, has been carefully controlled and all other sources systematically excluded, and condemned, as fake.

Rehnborg, Circa 1927.

Thus, to date, the world has been led to believe that Rehnborg (who was born in 1887 in   Florida) :- 

- was a noted-child-prodigy who read voraciously and who amazed his teachers with his detailed knowledge of: philosophy, religion, history, politics, astronomy, mathematics, aerodynamics, chemistry and human rights. 

- became  fluent in many languages, including Chinese. 

- was not a believer, but he studied Christianity, making a boyhood pilgrimage to Palestine and Egypt.

- had a great passion in his teen-age years - the study of planet Earth, its population, its food reserves, and the 'technology of conservation of natural products, but his first love was always the science of nutrition. 

 - was, by the tender age of 27, already a 'doctor of chemistry' who had moved to Tianjin in China to work as a salesman and then an accountant for an American Oil company.

- ran a shipbuilding company, before becoming the representative of the 'American Dairy Company' and, eventually, the representative of 'Colgate Products Company' in Shanghai.

 - witnessed ‘mass-starvation’ in China, before surviving a ‘siege of Shanghai’ by supplementing his diet (and that of his starving friends) with an improvised, vitamin and mineral-enriched broth made from grasses, vegetables, powdered limestone, ground-up bones and rusty nails, etc.

- sailed across the Pacific (studying its many island-cultures on the way) and landed on the West Coast of the USA, where, despite having no money, he managed to establish a 'research laboratory’ in his modest loft-apartment on California’s Balboa Island.

- selflessly dedicated 6 years of his life (1927-1934) to develop a ‘Revolutionary New Food Supplement’ to save mankind from starvation, assisted only by his second wife.

- first naively tried to give his wonderful new formula away, but the cynical world wasn’t interested, so, in 1934, he reluctantly decided to create ‘California Vitamins Inc.’ 

- moved his flourishing  ‘Business’ to a ‘Manufacturing and Processing Facility’ in Buena Park, California, and created the ‘Nutrilite Products Company Inc.’ in 1939. 

- acting in association with a ‘Network Sponsoring Company’, ‘Mytinger and Casselberry Inc.’ (to whom he’d sold ‘Exclusive Nutrilite Distribution Rights’) created the ‘World’s First Multi-Level Marketing Scheme’ in 1945.

-  tried, but failed, to prevent Messrs, Mytinger and Casselberry from making exaggerated 'cure-all' claims about 'Nutrilite.'

- had lived the American dream, starting from nothing to become an admired and respected millionaire through ‘Helping thousands of fellow Americans to build their own MLM Businesses.’ 

Carl F. Rehnborg  circa 1939

Like L.Ron Hubbard, no independent quantifiable evidence has been produced to prove that Rehnborg was qualified (let alone expert) in anything, other than lying to vulnerable people to get their money. Again, like Hubbard, Rehnborg's lies, and exaggerations, usually contained elements of the truth. Apparently, he did once work as a salesman for 'Carnation Milk' and the 'Colgate & Co,' and he was in China during, and after, WWI, but all the other exciting episodes in his various occidental and oriental odysseys are largely anecdotal. However, the truth about Rehnborg’s convoluted ‘Rags to Riches’ American fairy story, is an entirely different matter.

In 1934, Rehnborg (aged 48) legally-registered ‘California Vitamins Inc.’, allegedly to manufacture and distribute what he arbitrarily defined as 'the World’s First Multi-Mineral/Multivitamin Plant-Based Food Supplement - a Unique Combination of Vitamins and Minerals in a Special Base.’  At first, this so-called ‘Health Tonic’ was brewed up, and peddled as 'Vita-6'  a.k.a. 'Vitasol,' in insignificant quantities. Consequently, it was of no particular interest to regulators.

Anyone with an ounce of common sense could immediately tell that Rehnborg’s ‘invention’ was just another essentially-inert potion (in the absurd tradition of the medicine show); a random mixture of cheaply-procured common substances with an expensive price tag. It had probably taken Rehnborg 6 hours to concoct, not 6 years.

By 1939, Rehnborg had spotted the existing term, 'Nutrilites' (probably in an old scientific magazine). So he legally-changed the name of his pay-to-play game of make-believe to the technical-sounding ‘Nutrilite Products Company Inc.’ and moved his quackery onto an almost unprecedented scale. Soon, Rehnborg was legally employing dozens of white-coated workers in purpose-built industrial buildings in Buena Park, California. He also acquired an alfalfa farm near to the city of Hemet in California's San Jacinto valley, but it is unclear exactly where he suddenly found all the necessary capital to pay for these impressive sites and their modern equipment. To his followers and casual observers, Rehnborg’s activity looked like any other lawful enterprise. His staff were ordinary honest folk, to whom the truth was also unthinkable.

At this time, Rehnborg rechristened his potion ‘Nutrilite Double X (‘XX’) Supplement.’ He now proposed to offer it as two ‘complimentary products’ in one pack -  comprising little green bottles of bright red ‘Multivitamin Capsules’ and boxes of pale-coloured ‘Multi-Mineral Tablets.’ The product was deliberately designed to look modern and scientific (like a proprietary medicine), but, tellingly, the price was fixed at just less than $20 a box (the equivalent of several hundred dollars today). 

Perhaps it's just a coincidence, but in 1940 Charlie Chaplin's celebrated satire of 'Nazi' Germany, 'The Great Dictator', had transformed the Swastika into the 'Double Cross.'

Rehnborg claimed that the ‘XX’ brand-name was derived from the Roman numeral representing twenty. It should have been read as ‘double cross;’ for when the former toothpaste salesman’s pricey wampum was routinely analysed by independent chemists working for the FDA, it was discovered that (although it contained essentially what it said on the labels and was quite harmless) ‘XX Supplement’ really did mostly comprise a random mixture of cheaply-procured, common substances in which vitamins and minerals naturally occur (dried vegetable extracts: alfalfa; parsley; watercress; yeast; etc.). FDA experts later estimated that ‘XX Supplement’  cost no more than a few cents a pack to produce. Thus, FDA lawyers must have known that Rehnborg was, in fact, using authentic pharmaceutical equipment to mass-produce a precisely-measured, harmless placebo, but labelled as a ‘Health Tonic’ (a meaningless term), and peddling it at an exorbitant mark-up (certainly, more than 1000%). This crack-pot pseudo-scientific swindle, which was tantamount to a self-styled 'alchemist' stamping a valueless amalgam of base-metals, 'Pure Gold,' and selling it for the price of pure gold, could have been quickly nipped in the bud, simply by charging Rehnborg with criminal fraud. Apparently, prosecutors never considered the possibility that they might be dealing with someone with severe psychological problems whose own inflexible delusions were contagious. Instead, at first, FDA lawyers felt obliged to take no action; reasoning that, by truthfully listing the banal ingredients, but avoiding making any specific therapeutic claims, on his packaging, Rehnborg had found a loophole in federal laws concerning criminal misbranding of medicines. As result, an up-dated version of an age-old fiction was permitted to be mass-marketed as fact to an unsuspecting public. Unfortunately, the lack of any rigorous, official challenge only brought its author more credibility. Not surprisingly, a host of copy-cat 'Unique Vitamin and Mineral Health-Tonic’ scams quickly sprang up.

As WWII drew to its close, ‘Nutrilite’ had lost its novelty, so Rehnborg (who was approaching 60) had teamed-up with two respectable-looking associates, Lee S. Mytinger and William S. Casselberry (later described by FDA officials as a ‘cemetery-plot salesman’ and a ‘psychologist’). The result was ‘Mytinger and Casselberry Inc.,’ a second corporate structure peddling ‘Exclusive Commission-Agency Rights’ to ‘Distribute XX Supplement’ using (what was first defined by the company’s owners as) a ‘New Business Model.’ In theory… you could try to sell ‘XX  Supplement’ to your social contacts for a small profit, but, if you wanted to make big money, you didn’t need to sell anything… you could buy a monthly quota of ‘XX Supplement’ yourself and sign-up your social contacts to do the same… your ‘Sponsored Recruits’ would then ‘Sponsor’ their own social contacts, etc., ‘compensation’ would automatically multiply in an infinitely-expanding geometric progression. 

‘Mytinger and Casselberry Inc.’ offered a mind-numbing ‘contract’ in which the ‘company’ undertook to pay its ‘Independent Distributors’ an escalating ‘monthly commission’ on the totality of their escalating ‘Business Volume’(i.e. their own regular monthly purchases, falsely defined as ‘sales’, added to the regular monthly purchases, falsely defined as ‘sales’, of their ‘Sponsored Recruits’, and those of the recruits of their recruits, etc. etc. ad infinitum).

In reality, the new set-up was merely the original mystifying lie with a second mystifying chapter added, but to casual observers ‘Nutrilite Products Company Inc.’ appeared to be exclusively manufacturing for, and wholesaling ‘XX Supplement’ to, ‘Mytinger and Casselberry Inc.,’ whose commission agents, in turn, appeared to be retailing it to the public for a profit. Although ‘XX Supplement’ was presented as ‘Unique,’ it mostly comprised substances which could easily be bought at a fraction of their exorbitant, assembled fixed-price, in traditional retail outlets. The product was effectively-impossible to sell to the general public for a profit on the open market. Therefore, the overwhelming majority of its final customers were merely the non-salaried agents of the second corporate structure, which itself was the sole agent of the first corporate structure. In order for them to maintain the false hope that if they signed-up further contributing participants they would automatically become rich, the participants in this dissimulated money circulation game were obliged by its rules to keep handing-over a monthly payment to Mytinger and Casselberry, to be shared with Rehnborg. From all rational points of view (medical, economic, legal, etc.), ‘XX Supplement’ might have well not existed; for it was just a convenient means of laundering illegal losing investment payments in a classic rigged-market swindle, or pyramid scheme, based on the crack-pot, non-rational theory that endless-chain recruitment + endless payments by the recruits = endless profits for the recruits. New victims were supplied with a $49.50 ‘Business Kit’ (i.e. a large cardboard box stuffed with a month’s supply of ‘XX Supplement’ and a fat folder containing page after page of mind-numbing pseudo-economic/medical presentations and diagrams, and instructions in how to go about remembering, contacting and recruiting everyone they’d ever known during their lives). These presentations contained the concrete evidence which FDA lawyers could use to prosecute Rehnborg, Mytinger and Casselberry. Contributing participants were being instructed to smile, project excitement and enthusiasm, and to recite a precisely-worded script which proclaimed ‘Nutrilite XX Supplement’ to be ‘good value,’ because it could ‘cure or prevent,’ virtually any known human illness.

William W. Goodrich

www.fda.gov/downloads/AboutFDA/WhatWeDo/History/OralHistories/SelectedOralHistoryTranscripts/UCM372999.pdf

Even though it wasn’t his area of responsibility, FDA Legal Counsel (1939-1971), Prof. William W. Goodrich, was probably the first senior US law enforcement agent to deduce that the innocent baby that Rehnborg, Mytinger and Casselberry had first baptised a ‘New Business Model’ (later to become popularly known as: ‘Multi-Level Marketing’) was actually the same old delinquent previously known a 'pyramid scam.’ Again, anyone with an ounce of common-sense could work out immediately that, since Rehnborg had been peddling medical alchemy, the strong likelihood was that Mytinger and Casselberry were peddling economic alchemy. The sinister trio of quacks were obviously acting in association, but agents of the Food and Drug Administration and those of the Federal Trade Commission acted independently. At this time, anti-racketeering legislation did not yet exist in the USA. However, in the late 1940s, the rapidly-expanding ‘XX Supplement’ dossier was already in the hands of FTC lawyers. Apparently, prosecutors still never considered the possibility that they might be dealing with persons suffering from severe psychological problems and whose own inflexible delusions were contagious. Instead, they still felt obliged to take no action; this time reasoning that Mytinger and Casselberry appeared to have found a loophole in federal law prohibiting fraud. For even today, the fundamental identifying characteristic of all pyramid scams and Ponzi schemes, has not yet been accurately defined by legislators. As a result, another updated version of an age-old fiction was permitted to be mass-marketed as fact to an unsuspecting public. Yet again, the lack of any rigorous official challenge only brought its authors more credibility. Not surprisingly, a host of copy-cat 'income opportunity' swindles (camouflaged by banal, but pricey, wampum) quickly sprang up.

By 1947, Rehnborg, Mytinger and Casselberry were steadfastly pretending  ‘15 000 Successful Distributorships in the USA,’ with ‘sales’ totalling ‘$500 000 dollars per month.’ Mytinger and Casselberry had also organised the production of a ‘Free’ booklet, ‘How to Get Well and Stay Well’, in which they further pretended that ‘Nutrilite Double X Supplement’ had ‘cured or greatly helped such common ailments’ as : ‘Low blood pressure, Ulcers, Mental depression, Pyorrhoea, Muscular twitching, rickets, Worry over small things, Tonsillitis, Hay Fever, Sensitivity to noise, Underweight, Easily tired, Gas in stomach, Cuts heal slowly, Faulty vision, Headache, Constipation, Anaemia Boils, Flabby tissues, Hysterical tendency, Eczema, Overweight, Faulty memory, Lack of ambition, Certain Bone conditions, Nervousness, Nosebleed, Insomnia, Allergies, Asthma, Restlessness, Bad skin colour, Poor appetite, Biliousness, Neuritis, Night blindness, Migraine, High blood pressure, Sinus trouble, Lack of concentration, Dental caries, Irregular heartbeat, Colitis, Craving for sour foods, Arthritis, Rheumatism, Neuralgia, Deafness, Subject to colds.’

Carl.F. Rehnborg circa 1947

Rehnborg now cast himself in the role of ‘Scientific Adviser’ to ‘Mytinger and Casselberry Inc.’ He toured the USA preaching the gospel to wide-eyed ‘Distributors’ - ‘for less than $20 a month’, ‘Nutrilite Double X Supplement’ was the ‘Answer to Man’s Search for Health.’ After both companies’ owners were approached by FDA officials and warned that they could face criminal prosecution for misbranding, the booklet was ‘revised.’ Specific therapeutic claims were supposed to be eliminated. ‘All illnesses’ suddenly became a ‘state of nonhealth’ produced by ‘chemical imbalance’.… ‘Nutrilite XX Supplement’ cured nothing, it merely ‘enabled people to Get Well and stay Well’ by themselves. However, pages 41-52 of the booklet still recounted alleged case-histories explaining that ‘Nutrilite brought relief from such ailments as diabetes, feeble mindedness, stomach pains, sneezing and weeping.’ Not surprisingly, the FDA officials were not impressed, so they finally launched a number of raids, and seizures of ‘Nutrilite XX Supplement’ and associated publications.

In 1951, after a series of lawsuits, appeals and counter suits (in which Mytinger and Casselberry hired top lawyers who portrayed their clients as American capitalist heroes being crushed by Soviet-style bureaucracy), the FDA obtained (on behalf of the people) a permanent Supreme Court injunction against ‘Mytinger and Casselberry Inc.’ preventing ‘Distributors’ from referring to 50 publications making false claims about ‘Health Tonics and Food Supplements’ (including various ‘Revised Editions’ of ‘How to Get Well and Stay Well’). FDA agents soon found that the injunction was being flouted. As a result of mounting complaints, they infiltrated the organisation (as potential recruits) and recorded deluded proselytisers chanting the same cure-all mantra about ‘XX Supplement.’ Faced with more litigation and fearing that their monopoly of information might be lost, in 1954, Rehnborg, Mytinger and Casselberry hired a leading advertising agency which handled the clean-cut, but fading, Hollywood star, Alan Ladd. Along with his wife and children, Alan Ladd then briefly-featured in a kitsch 'Nutrilite' advertising campaign - published in various mainstream magazines right up until 1959. Alan Ladd (who secretly suffered from chronic depression and who had problems with alcohol and narcotics) was, however, soon to be air-brushed out of the 'Nutrilite' fairy story.

Almost certainly in an attempt to dodge the permanent US Supreme Court injunction, in the Mid 1950s (using his third wife's name), Carl Rehnborg introduced yet another grossly-overpriced, effectively-unsaleable investment commodity into the 'Nutrilite/MLM' fairy story - 'Juvalite / Edith Rehnborg Cosmetics (ERC).' This would later be rebranded 'Artistry.'

 

The charlatan-trio, 'Mytinger, Casselberry and Rehnborg,' also paid a team of Hollywood professionals to produce a 20 minute colour propaganda film, ‘From the Ground up’ (featuring themselves as three nice ordinary American guys turned philanthropic scientists and industrialists). They also revamped their own propaganda magazine, ‘Nutrilite News' (stuffing it with ritual photos of happy, healthy and wealthy ‘Distributors' and their dutiful wives).

Richard DeVos and Jay Van Andel (2nd and 3rd from the right, front row), Carl F. Rehnborg (immediately behind Van Andel, second row), circa 1950.

Soon, the 'Nutrilite' show was touring the USA on a motor coach (like a 'Tent Revivalist' group).  Mytinger, Casselberry and Rehnborg had begun organising pay-to-enter ‘Rallies and Seminars'’ (addressed by allegedly ‘Successful Christian Distributors’ like Rich De Vos and Jay Van Andel). No quantifiable evidence (in the form of audited accounts) was ever produced to prove what percentage of claimed ‘sales'’ were authentic retail transactions to the general public for a profit (based on value and demand), or how many people who’d signed a ‘contract'’ with ‘Mytinger and Casselberry Inc.' had actually generated an overall net-profit from the operation of what its instigators arbitrarily defined as an ‘MLM income opportunity’. Excluding the tiny percentage of grinning shills at the top of the pyramid, the hidden, rolling insolvency/churn-rate was 100%. Since there was no significant or sustainable external revenue, participants were actually buying infinite shares in their own finite money. 

 Richard DeVos                                                Jay Van Andel

Circa 1950

circa 1965

In 1959, when it seemed that ‘Mytinger and Casselberry/Nutrilite Products Inc.’ might finally be shut down (under the ‘Federal Food, Drug and Cosmetic Act 3381-3383’, rather than anti-fraud legislation) De Vos and Van Andel hid behind familiar, patriotic words and images stolen from contemporary popular culture. They created the ‘American Way Association’ - the first of what was to become a shoal of red, white and blue herrings.

Previously, the two up-and-coming charlatans, Mytinger and Casselberry, gravitated towards the established (but ageing) Rehnborg, and vice versa. Rehnborg seems to have reflected the pair's own narcissistic delusions as reality and behaved as though they were important businessmen/psychologists, whilst the pair treated him as though he really was an important and respected scientist/ philanthropic businessman. This was the point at which'Nutrilite Inc.' (a legally-registered, and industrialised, pseudo-scientific swindle), began to transform into a highly-organised, self-perpetuating, blame-the-victim 'Prosperity Gospel' cultic racket - tailor-made to fit the existing beliefs and instinctual desires of a broad range of people - peddling a perversion of the 'American Dream' whilst giving victims the illusion that they were making free choices. 

Evidently, US law enforcement agents never fully-understood that Rehnborg, Mytinger, Casselberry, DeVos, Van Andel and their close-associates, were dangerous manipulators who magnified each others' narcissistic delusions. The longer they went unchallenged: the more adherents they ensnared and the more-capital they acquired. The more capital they acquired: the easier it became to deceive more adherents and the more severe, and inflexible, their own delusions became. Sadly, and exactly like L. Ron Hubbard, the more convinced of their importance Rehnborg, Mytinger, Casselberry, DeVos and Van Andel became: the more convincing they became.

On September 6^th 1949 (along with Michael Pacetti), two, clean-cut, hitherto-unremarkable USAAF veterans of Dutch Protestant origin, Richard DeVos (aged 23) and Jay Van Andel (aged 25), registered the ‘Ja-Ri Corporation.’ However, throughout the 1950s, this (apparently independent) company was solely the agent of both ‘Nutrilite Products Company Inc.' and of  'Mytinger and Casselberry Inc.'

The two Pentacostalists, DeVos and Van Andel spent ten years perfecting their own sanctimonious 'MLM' act, before finally setting up a copy-cat 'income opportunity' racket.

 'Amway' frst operated as an affinity fraud targeting the flag-waving adherents of Evangelical Churches in the Bible Belt. Most early 'Amway' adherents were already trained to defer systematically to the moral and intellectual authority of their pastors - so De Vos and Van Andel simply dressed up, and behaved, exactly like respectable Church pastors. They taught their male followers to duplicate their clean-cut example. Thus, alcohol, cigarettes and even beards were forbidden. Amway men had to wear a suit and tie, whilst Amway women were forbidden to wear pants or anything too sexy. Indeed, until relatively recently, 'Amway Network Leaders' were commonly referred to as 'Black Hats.'

The classic movie, 'Elmer Gantry' (released in 1960), was written and directed by Richard Brooks and is loosely-based on a novel of 1927 by the Nobel prize-winning author, Sinclair Lewis. In the Movie, 'Gantry' (played by Burt Lancaster) is a grinning charlatan in a loud suit - a hard-drinking whore-chasing travelling-salesman, who, for sexual and financial motives, attaches himself to the beautiful 'Sister Sharon' (played by Jean Simmons), the focus of a profitable 'Tent Revivalist' group working the Bible-Belt during Prohibition (1920-1933). 'Elmer Gantry' keeps his grin, but he dons a sombre suit and black hat, and is reborn as 'Brother Gantry' 'Charismatic Preacher' and 'Moral Crusader'. He soon discovers that he has the power to create mass-hysteria, and reap tens of thousands of dollars, by manipulating individuals' existing beliefs and instinctual desires. At a key-moment in the movie, a Protestant Minister (bedazzled by 'Brother Gantry's' offer to fill his church coffers) abandons the traditional Christian message and proclaims: 'Business is business, that's the American Way'.

Perhaps it's just a coincidence, but at almost exactly the time that 'The American way Association' first appeared, 'Elmer Gantry' was playing to packed movie theatres all over the USA.

Initially (and with an irony that is close to exquisite), in order to dodge being drawn into the ongoing FDA investigation of 'Nutrilite,' De Vos and Van Andel got rid of the pills and potions and now laundered all the unlawful investment payments into their copy-cat, dissimulated, rigged-market swindle, behind the claim that they were selling a laundry detergent  (i.e. banal, but effectively-unsaleable, non-'medicinal' pseudo-scientific wampum of their own fabrication). Again, the updated snake oil stain remover was deliberately designed to look modern and scientific, whilst De Vos and Van Andel grinned from ear as they too steadfastly pretended that these strangely-familiar, cheaply-procured mixtures of common substances, were all-American, exclusive, good-value and unique.

The original 'Nutrilite/Artistry' lie was progressively-absorbed back into the spin-off 'Amway' (a.k.a. 'Quixtar') lie, 1972-1994, where an up-dated 'organic/ anti-ageing ' version is still peddled as the truth. 

Only after the 'MLM' virus had spread to almost every State of the Union, did the US Federal Trade Commission finally make a half-hearted attempt to close-down 'Amway.' After receiving a significant number of complaints,  FTC prosecutors, advised by specialist economists, recognised that what they were faced with, was not a direct selling scheme, but as a classic pyramid scam, without a significant or sustainable source of revenue other than its own victims, but hidden behind a smokescreen of banal products. However, after years of investigations and hearings, in 1979, a naive, and/or corrupt, federal judge ruled that although 'Amway' had previously been massively in breach of the law and would have to pay fines, the company would be allowed to continue to trade. This was because the judge accepted the latest unbelievable chapter of the 'MLM' fairy story. i.e. That 'Amway' s owners were respectable Christian businessmen who were vehemently opposed to  pyramid schemes and that, consequently, they had stopped fixing prices and introduced their own rules which would, henceforth, oblige the members of 'Amway's' sales force to sell at least 70% (by value) of the products which they had bought wholesale from the company, to at least 10 customers, before they could receive commission payments. Amazingly, no independent, common-sense mechanism was created to ensure that this latest twist in the fairy story was true, and that 'Amway' would now be in compliance with the law.

Not surprisingly, this tragicomic judgement was seen as an open-invitation to thieve, and, consequently, a whole host of 'Amway' copy-cat 'MLM' rackets soon began to appear. 


  

Today the so-called 'Direct Selling Association,' is a demonstrable lie - a false beacon that has attracted, and continues to attract, millions of vulnerable persons into de facto slavery by fooling them into believing they can become 'business owners.'  The so-called 'Direct Selling Association' is financed and controlled by the bosses of a classic, organised crime syndicate.

David Brear (copyright 2017)