The Futility of Private MLM Lawsuits and FTC “Cases” | Fitzpatrick (pyramidschemealert.org)
This past week, a civil lawsuit in the name of consumers harmed by MLMs lost in court. That suit charged deception by the most famous of all MLM promoters, Donald Trump, over a 10-year span, documented on national television, multiple speaking engagements and online commercials. After almost 5-years of litigation, the evidence proved insufficient. The class action status was denied and then federal status was thrown out.
This follows the disastrous defeat of the Federal Trade Commission (FTC) a few months earlier against an MLM notable not for being famous like Trump, but for being utterly ordinary, exhibiting all the typical traits of MLMs – snake oil, false income claims, recruiting-based proposition, and withholding relevant financial data. The judge in that case ruled that the MLM in question was no less legitimate than all the other MLMs the FTC treats as “legitimate.” The FTC’s game of pretending “some” MLMs, which it picks out arbitrarily, are pyramids, while declaring “MLM is legitimate” may be over, finally.
These events should close the door, once and for all, on consumer hopes or support for private lawsuits and “cases” brought by the FTC as useful remedies against MLM’s global fraud. The same types of cases have been filed repeatedly for over 40 years. None of them produced any significant change, reduced the spread of MLMs or curtailed the harm, even though the facts presented are valid and losses to millions of people are indisputably documented, and the suits and cases have been useful to some people immediately affected.
Big Lie and Legal Pretense
The reason such private lawsuits and government “cases” are ultimately futile and do not serve as remedies is they do not challenge the Big Lie that underpins and empowers all MLMs. The Big Lie, of course, is that MLM is a legitimate business, or a business at all, that it is direct selling, and that it offers a viable “income opportunity.” The Big Lie was effectively made “official truth” by the FTC in 1979 when it allowed an “endless chain” scheme to continue, calling it “direct selling.” The Lie has been maintained by the FTC ever since, fostering a scam of global proportions and developing into a worldwide economic-cult. Over time, a corrupt revolving-door developed between FTC officials and MLM companies and their lobbying group, the Direct Selling Association. The number of people harmed by maintaining the Lie is incalculable; direct financial losses alone are more than a trillion dollars.
The private lawsuits and the FTC “cases”, intentionally or not, can be seen, not only as futile, but as an integral part of the MLM phenomenon itself. The “cases” and lawsuits are part of what may be called MLM’s “legal pretense.” “Legal pretense” is as crucial to maintaining MLM’s Big Lie as the “income pretense” (financial disguise) and the “direct selling pretense” (business disguise) are. Believing in or going along with the “legal” pretense has the same consequence for consumers as believing the “income” and “direct selling” pretenses – loss, delusion, disappointment, self-blame.
MLM does not function in concealment, as Madoff’s Ponzi scheme did, for example. In MLM, the impossibility of the endless chain proposition and false “income opportunity”, and the absurdity of “direct selling” are all right out in the open, spelled out in the pyramid pay plan, pyramid organizational charts, absurd overpriced “products” used to transfer money and “disclosures” revealing (once decoded) that virtually everyone always loses. Unlike Madoff’s victims who were oblivious to their actual losses until the scam collapsed, MLM losers are everywhere and many try to warn others that MLMs are financial traps.
The Legal Pretense makes lack of prosecution appear as lawfulness and legitimacy, which makes the pyramid model and the losses somehow acceptable. This causes many people that otherwise would recognize the obvious ponzi scheme to not believe their own eyes, intuition or even their personal experience. How can MLM be the fraud it appears to be, if it is “legal”, they ask? If it were a scam, surely the government would stop it! Few understand that the lack of MLM prosecution is purchased with political influence-buying. Fraud is protected and normalized by corruption and official disregard.
The Legal Pretense is reinforced by private lawsuits and individual FTC “cases” where fraud has to be “proved”, affirming the official presumption of legitimacy for the MLM model. MLM wins even if it “settles” and makes small restitution payments or, as happened a few times in the past, an individual MLM might be “shut down” by the FTC, while all the other MLMs continue to operate exactly the same as the ones that were prosecuted.
How the Big Lie Endures
The MLM Big Lie is maintained by the FTC, politicians, universities, Chamber of Commerce and Wall Street, each of which respectively benefits from the Lie even as millions of ordinary citizens are harmed. Politicians take MLM “campaign contributions” and are happy to have MLMs tell voters that the American Dream is as strong as ever. If they happen to be financially struggling from low pay, inflation, debt or discrimination, it must be their own fault, not the government’s or elected officials’. Wall Street feasts on MLM “profits” and “growth”. Universities enjoy grants and endowments from the ill-gotten money.
Even many in the “anti-MLM” community have their own reasons to not challenge the Big Lie openly. For some, to do so puts them at odds with the FTC and other authorities. For some others, maintaining the legal pretense avoids confronting unsavory realities of political corruption and predatory business. Some want to avoid the disturbing conclusion that MLM is a gigantic, destructive cult, a frightening social reality with ramifications far beyond financial losses. For others, the pretense is maintained just because they don’t see any alternative for making a change.
Impossible Legal Hurdles
Since MLM’s Big Lie stands as “official truth”, all the individual “cases” must prove, somehow, that the targeted MLMs are “different” from “legitimate” MLM. The cases and lawsuits cannot just point to the “endless chain” (pyramid recruiting) model itself and explain in simple terms how it is designed to defraud. Rather, they are forced to parse the practices, one by one, of the targeted MLMs to “prove” intentional harm. The evidence that is cited turns out to be nothing more than standard practices of all MLMs, but years must be spent documenting policies and actions and depicting them as shocking, unusual or unique. Then, the cases must also show how these individual “acts” harm large numbers of people, not just the people bringing the lawsuit, and, further, that MLM’s broad “disclaimers”, complex contract terms, tiny-print warnings, or confusing “disclosures” are insufficient, as if MLM might only be “risky” business that millions of people foolishly invest their money in.
This has largely been impossible for plaintiffs in private suits, resulting, at best, in small “settlements” that balance meager restitution against further legal bills. Until recently, the FTC was able to prosecute and shut down a few individual MLMs by pitting the full power of the US government against smaller MLMs that could not put up much of a fight. FTC “victories” over inconsequential MLMs, less than one case a year or so, did not reduce MLM in size or impact. Even when court rulings seem to make certain practices, which are universal among MLMs, illegal, the FTC never argued the practices are endemic or widespread. To the contrary, it continues to proclaim that the MLM model is “legitimate”, though it will not name a single MLM as an example of this “legitimacy.” In the rare instances of MLMs being shut down by the FTC, the perpetrators melt into the ranks of hundreds of other MLMs to continue scamming or they start up new MLMs under new names.
Using MLM and Its Victims
The Donald Trump lawsuit illustrates not only MLM’s “legal pretense” but, worse, how lawsuits and other “anti-MLM” activity can serve purposes having nothing to do with protecting consumers. In the failed class action lawsuit against Donald Trump, MLM was central to claims of deception, but no MLM was named as a defendant! Only Trump himself and his family were defendants.
Trump did not own or operate an MLM. His alleged fraud, the suit claimed, was to endorse the MLMs. The main evidence that this is fraud, according to the suit, is that nearly all the people who paid money to the MLMs that he endorsed never made a profit – as if the percent of losers in all other MLMs were any less. He lent his name and reputation for pay, just as MLM “top guns”, motivation speakers, clergy, sports stars, and other celebrities do for MLMs all over the world. Effectively, the suit diminished the terrible truth of MLM fraud by portraying an endorser as more culpable than the endorsed MLM!
This Trump lawsuit was obviously a political maneuver, using MLM and MLM victims for partisan purposes. Its naked political goal was likely the reason the lawsuit never generated any news media interest in MLM. I was interviewed once and in-person by the late CNN correspondent Drew Griffin in 2020 about the role of MLM in the lawsuit. Though he traveled to where I lived and brought a camera crew for the half-day of interviewing about MLM, the story never aired. No other news stories about the lawsuit ever delved into the nature of MLM fraud, though MLM was at the core of the fraud claim.
That political lawsuit was in the same league with the financial short-sell maneuver that Wall Street gadfly, Bill Ackman tried to pull off, using the MLM, Herbalife and its victims in his bid to make billions on the stock market. News stories never looked beyond the one MLM, and even then were overshadowed by stock market antics and Wall Street egos. Ackman totally lost, making him the world’s biggest loser, financially, in MLM history. Neither Ackman’s MLM-financial scheme nor the MLM-political lawsuit gambit against Trump had anything to do with stopping “MLM.” Neither confronted the Big Lie. They reinforced it.
Where to Turn?
So, if lawyers and regulators and billionaire short-sellers will not save us, what to do and where to turn? That answer begins with self-reflection and self-empowerment. Effective remedy will begin when we in the anti-MLM community drop the legal pretense, as so many have already abandoned the business and financial pretenses, and directly confront MLM as a cultic fraud, corruptly protected by government. When the cheap disguises of “direct selling”, “income opportunity” and “legitimacy” are removed, the power of the truth itself will be unleashed. The shift occurs, first, by no longer accepting or using the language of disguise, e.g., business, industry, sales, income, legitimate, teams, network, etc.
Declaring the full truth of MLM as a cultic fraud will break the pattern of millions of consumers losing in one MLM only to join another, thinking it is one of the “legitimate” ones. It will hasten the time when “anti-MLM” moves from complaint, which is valid, to power, which is necessary. The process is already underway.
Robert L. FitzPatrick
(copyright 2024)
