Nmart draws flak in Andhra Pradesh High Court

Andhra Pradesh High Court on Friday rejected the plea of NMart to grant a stay on the police investigation into its business activities.

Earlier, NMart filed a writ petition in the High Court appealing to quash the proceedings of investigation into the business activities of the company. It contended that it is into business activities and has customers all over the country. The company supplies provisions to its customers on long basis.

The police interfered into the its business activities of NMart basing on the complaint lodged by a civil society organistion Corporate Frauds Watch, the petitioner said. The counsel on behalf of NMart stated that Corporate Frauds Watch is not a customer of their retail business outlets nor he suffered any loss due to the activities of the company. "It is a frivolous complaint," it averred.

However Justice K C Bhanu after hearing the arguments at length rejected the plea for issuing stay orders stalling the procedure of investigation into the business activities of NMart. The Judge asked the State government and the police to file their counters in three weeks. The Corporate Frauds Watch was also made one of the respondents and was asked to file its counter.

NMart's counsel appealed to the High Court to grant relief for at least one week so that they could carry on its business activities as usual. "It is just a civil matter in which the police interfered," he stated.

However the assistant Government pleader assured the High Court that the police would not interfere in the civil matters of the company.

Justice K C Bhanu asked all the respondents to file their counters in three weeks and posted the petition after three weeks.

In the name of selling provisions, NMart cheated millions

NMart, said to be a retail marketing business outlet, has been cheating the gullible for the last few years by indulging in money circulation scheme in the name of selling provisions.

The modus operandi of this cheating company is simple. The member has to enroll himself with the company through an already enrolled member by paying Rs. 5500. He would be given 48 coupons each worth Rs. 220 which could be exchanged with provisions in any retail NMart show room in the first week of every month. In effect, the customers who pay Rs.5500 up front are given provisions worth Rs.220 every month for the next 48 months i.e. four years.

More, the members could enroll new members to earn more money. For every new member enrolled the upline member would be paid Rs. 200. An ordinary person could identify the scheme as money circulation scheme.

The scheme looks very attractive. If the members could enroll hundred members, he could coolly pocket Rs. 20,000. In fact that is the bait.
These members keep on concentrating on enrolling members wherever they go with the promise of easy and quick money.

Each member may be losing Rs. 5500 but it is easy and quick money for the company. For each member, the enrolling members gets Rs. 200 only. But the company gets Rs. 5300. That way, if a member enrolls 100 persons, he would get Rs. 20,000 but the company coolly pockets Rs. 5,30,000 without any effort. That is why it is easy and quick money for the company. The company is promising returns in the next four years which is unrealistic.

In the Western countries, it is called 'advance fee fraud'. In India it is called money circulation scheme.

They even enroll new members where there are no NMart retail outlets and the coupons they are given would never be exchanged. They could not travel spending Rs. 200 to encash a coupon worth R. 200. But the real bait is enrollment. Enroll more members and earn lot of money.

Vijayawada-based Corporate Frauds Watch, a civil society organisation started by a group of socially-concerned advocates conducted inquiries into the scheme and come to conclusion that it is also a scam like Amway, Herbalife, Forever Living Products and others.

The society secretary lodged a complaint with Machavaram police in the city and later, approached the Economic Offences Wing of CID of Andhra Pradesh police but to no avail.

Later, on learning that the NMart is active in Prakasam district, the secretary went to Kandukuru and lodged a complaint with the police who registered the case under the provisions of Prize Chits & Money Circulation Schemes (Banning) Act, 1978 and Section 420 of Indian Penal Code.

Prakasam police under the guidance of the dynamic superintendent of police, Raghurama Reddy, conducted investigation into the scheme of NMart and finally, the kingpin of the scam, Gopal Singh Shekhawat and his Pratibha were arrested in Surat, Gujarat. However, after Pratibha complained that she was unwell,she was admitted in a hospital.

One may wonder why Section 420 was invoked. The Supreme Court in its 2008 judgement in Kuriachan Chacko case pointed out that the organisers of the scheme knowing fully well that it won't work forever and sooner or later the chain would be broken, are still inducing the public to become members of the scheme. That is why they should be booked also on the charges of cheating under Section 420 of IPC.

The chain is broken and several millions of people lost their hard-earned money.

Deutsche Bank's Bill Schmitz, has all but admitted that the 'Nu Skin' Racketeers have conspired to subvert the rule of law in China

Last week, the bosses of the 'Nu Skin' racket very-wisely declined to appear on CNBC to participate in a debate with short-seller, Andrew Left (Citron Research), who has attempted to warn 'Nu Skin' share holders, and potential buyers of 'Nu Skin' shares,  that the market-value of 'Nu Skin Enterprises Inc.'might very-well collapse in the near future due to the fact that a constituent company of this global, criminogenic, corporate labyrinth has clearly been acting in breach of the law in a country, China, where legislators have applied common-sense and identified so-called 'Multi-Level Marketing' as being just another means of dissimulating a pyramid scam. However, any attempt by the bosses of 'Nu Skin' to mislead the viewers of CNBC, or to withhold key-information, would have constituted wire fraud. Consequently, these grinning charlatans sent a very precisely-worded statement to CNBC.  

'We are confident our China operations are in compliance with the applicable ("direct selling") regulations as interpreted and enforced by the government of China. Nu Skin has an eight-year history of doing business inChina under these regulations. Our business modelin China is different than the global business model. We follow all regulations and any member who does not follow company policies issubject to discipline.'

It is interesting to note that, in the above statement, the 'Nu Skin' bosses don't actually claim to be in compliance with Chinese criminal laws prohibiting fraud and corruption. On the contrary, they steadfastly pretend only to be in compliance with current, unnamed, senior Chinese government members' and officials' interpretation of technical regulations which define lawful direct selling and which (apparently) the 'Nu Skin' bosses, and other US-based 'MLM income opportunity' racketeers, had a hand in drafting. Classically of 'MLM' racketeers, the 'Nu Skin' bosses are also steadfastly pretending that they are completely unaware of any regulations having been broken in China, but if they have been broken, 'Nu Skin' itself is not responsible, whilst the company will punish the individual adherents who are.  

The financial institution which (apparently, in complete ignorance of reality) handled part of the unlawful flotation of the 'Nu Skin MLM income opportunity' racket on the New York Stock Exchange, is Deutsche Bank Securities USA. 

Bill Schmitz  

For obvious reasons, Bill Schmitz (Managing Director of Deutsche Bank Securities USA) felt obliged to take part in the CNBC debate in defence of his de facto criminal associates. However, some of the statements which this grinning, young fellow made (apparently, still in complete denial of reality), were the equivalent of admitting that US-based 'MLM income opportunity' racketeers have conspired to subvert the rule of law in China. 

At one point Schmitz foolishly-boasted:

'They (the bosses of "Nu Skin") wrote the law in China. The chairman and CEO was there when the World Federation (of "Direct Selling Associations") satdown with the Chinese Government and scripted the law.'

http://www.myvidster.com/video/7038861/Video_Nu_Skin_Violating_Chinese_Law
http://video.cnbc.com/gallery/?video=3000108202

The latest warnings to existing 'Nu Skin' shareholders, and to potential buyers of 'Nu Skin' shares,  by Citron Research, are contained in this document:

http://www.citronresearch.com/wp-content/uploads/2012/08/NuSkin-Citron-ChinaandUS.pdf


David Brear (copyright 2012)

'MLM income opportunity' fraud has been identified by the mainstream media

Virginia Sole-Smith 

At last, someone from the mainstream media has again begun to investigate the reality- inverting nightmare lurking behind all so-called 'Multi-Level Marketing income opportunities.' Virginia Sole-Smith (an American freelance journalist who recently published an insightful article about 'Mary Kay') has examined the wider-picture, applied common-sense and deduced that 'MLM' is an absurd, but nonetheless dangerous, Utopian fiction which has been peddled as fact  to countless millions of vulnerable individuals around the globe. Virginia Sole-Smith has discovered that there is no quantifiable evidence which proves that any so-called 'MLM income opportunity,' has ever had a significant, and sustainable, revenue other than that deriving from its own participants. 

This means that all so-called 'MLM income opportunities' can only have been dissimulated pyramid scams or closed-market swindles (promoting the crackpot pseudo-economic theory that endless-chain recruitment + endless payments by the recruits = endless profits for the recruits) from which the overwhelming majority of participants could not ultimately have received any more money than they contributed in the first place. In reality, without the possibility of achieving significant, regular retail sales to the general public for a profit, the participants in all so-called 'MLM business opportunities' have been peddled infinite shares of their own finite money. 

In order to avoid being held to account for conspiring to commit fraud and obstruct justice, numerous gangs of wealthy 'MLM' racketeers have cowered behind their echelons of shyster attorneys and steadfastly pretended that:

they are American patriots - religiously-inspired, law-abiding capitalists and philanthropists.

they are vehemently opposed to pyramid fraud and support tough legislation to control it.

they believe that their companies' products (i.e. effectively-unsaleable wampum) have been regularly sold to the public for a profit, but, sadly, they can only 'estimate' distributor retail sales.

'MLM distributors'' own purchases (i.e. unlawful internal payment/investments made on the false expectation of earning an income) were, in fact, lawful external retail sales based on value and demand, because 'MLM distributors are consumers and end-users.'  

the majority of 'MLM income opportunity' participants have only signed up to buy discounted, 'MLM' products without any expectation of earning an income.

This carefully-scripted propaganda clearly forms part of an overall pattern of ongoing, major racketeering activity (as defined by the US federal Racketeer Influenced and Corrupt Organizations Act, 1970).

David Brear (copyright 2012)

________________________________________________________________________

The following is Virginia Sole-Smith's latest article:

'Why Mary Kay is Only the Beginning.'

http://www.theinvestigativefund.org/reporters/virginiasolesmith/http://www.theinvestigativefund.org/blog/1671/why_mary_kay_is_only_the_beginning

In my Investigative Fund article,  "The Pink Pyramid Scheme," which appeared as the cover story of the August issue of Harper's, cosmetics direct sales giant Mary Kay claimed "it employs multiple sales directors who earn more than $1 million a year." But the figure that surprised me more was this: of the 600,000 Mary Kay consultants currently working in the United States, only 300 of them are making a six-figure income — off the commissions they earn when the women on their sales teams buy products. That paints a stark picture: A very small, select group of folks (0.05% of the workforce) at the top of the pyramid, earning money off the vast numbers of people working the lower levels.

In fact, when you look at the direct sales industry as a whole, the picture gets even bleaker. There are 15.6 million Americans (and many more across the world) working for a direct sales brand like Amway, Scentsy, Herbalife, Nu Skin, Stampin' Up!, and of course, Mary Kay. The Direct Selling Association, a trade association which represents the interests of these companies in Washington DC, claims that the industry posted almost $30 billion in retail sales last year.

'Mary Kay's chief attorney, Laura Beitler: 'We can't, and don't, track retail sales'.(i.e. The corporate officers of'Mary Kay' have neither confirmed nor denied that have been committing pyramid fraud).  

This is problematic for two reasons.

First: Nobody in the direct selling industry actually tracks their retail sales — at least, not that they'll admit in public. Mary Kay boasts of $3 billion in global wholesale sales, but all that number tells us is how much Mary Kay consultants paid to be in business with the company by purchasing their $100 starter kit and subsequently making giant investments in inventory, which they try to retail at skincare classes, parties, or Mary Kay-hosted websites. "We can't and don't track retail sales," Mary Kay Vice President of Compliance Laura Beitler admitted to me on NPR's On Point earlier this week. The DSA most likely estimates its retail sales figure off the industry's collective wholesale sales, assuming everyone sells all the inventory they buy. Mary Kay, for example, promises that you'll earn a 50 percent commission on every product you sell. If we use that as a ballpark, all the $30 billion retail claim tells us is that 15.6 million sellers spent $15 billion on direct sales products last year.

Second: Even if we presume that every last direct seller sold every bit of inventory he or she purchased (while incurring no business expenses) so the $30 billion in retail sales could be accurate, direct sellers aren't making much money. Divide the sales figure by the number of sellers and you get an average of $1923.08 per year, or $160 per month. Of course, as the industry argues over and over: People join direct sales for different reasons. Some "just love the products" and are happy earning a small stipend; others are trying to launch a full-time career and this range may skew the average paycheck. But Mary Kay will honor hundreds of top saleswomen this week at its Dallas convention with its "Court of Sales," which requires a minimum of $18,000 in annual wholesale orders to qualify; at the top, a handful place as much as $25,000. Again, assuming a 100 percent sales success rate and no business expenses, these women would only pocket $18,000 to $25,000 per year. Hardly the "great part-time choice" or the "lucrative full-time opportunity" that Mary Kay claims on their website's "Make Money" page. Or the "financial independence" that Amway advertises and "earning what you're worth" as Herbalife puts it.

The only way to make real money in any of these multi-level marketing (MLM) companies is to forget about selling to the retail market and focus on recruiting members of your "downline," who will buy lots of inventory for their own businesses, from which you earn a percent. "My wife has made a lot of money in a Multi-Level Marketing company and I have the tax returns to prove it," said one caller to On Point on Monday. "But we didn't feel good about it because we knew we were doing it on the backs of tons of people."

And none of these harsh realities are disclosed to a new direct sales recruit. In 1976, the Federal Trade Commission passed a franchise disclosure rule, which requires a franchiser to provide a wealth of data to interested franchisees, including accurate income estimates, the location of competing franchises, and overhead costs. But any business with a starter fee of less than $500 was exempted from the rule — making it very easy for MLMs to stay under the radar. In 2006, the FTC proposed a disclosure rule specifically for MLMs, which would have required documented earning claims as well as a "cooling off period" where recruits would get a week to think over their decision. "The industry spent millions of dollars fighting that rule," Douglas Brooks, a Boston-based attorney who has litigated numerous class-action suits against MLMs told me in a phone interview. "The companies got thousands of sellers to swamp the FTC with comments." In 2008, the FTC gave in and exempted MLMs from the new rule — it went into effect this past March but only applies to minor businesses like vending machines.

Brooks reports that the DSA is now going state by state, pushing to get a law passed that purports to protect consumers against pyramid schemes — but in reality, re-classifies all those wholesale orders as "retail sales," protecting the companies from pyramid scheme charges. And they're not afraid to buy political muscle either: Mother Jones reported in May that Mormon-founded Nu Skin donated $50,000 to Mitt Romney's 2008 campaign. Wrote Stephanie Mencimer:

Nu Skin isn't Romney's only connection to the MLM industry. Gordon Morton, cofounder of the supplement company Xango (the self-described creator of the mangosteen beverage "category"), served on his 2008 campaign's finance committee. This past January, David Lisonbee, founder of the Sandy, Utah-based MLM company 4Life Research, donated $500,000 to Restore Our Future. And Romney's current finance chair, Frank VanderSloot, is the CEO of Idaho-based Melaleuca, a multilevel-marketing company that sells green cleaning products and nutritional supplements. Melaleuca and its subsidiaries contributed $1 million to Restore Our Future last year.

Romney has gone on record about his love for Melaleuca and its "promise of enhancing the lives of people." He also worked with Nu Skin, as Mencimer reported last year, when he oversaw the 2002 Salt Lake Olympic Games and persuaded the peddler of dietary supplements to help sponsor the games with a $20 million contribution; Romney appeared at Nu Skin's 10th international committee in return, telling the crowd that Nu Skin, like the Olympics, is "about taking control of your life and managing your own destiny." 

I focused my story on Mary Kay because I wanted to explore how the company uses a"you can have it all" fantasy of modern womanhood to manipulate women. But the truth is, that's just one marketing tactic employed by an industry baiting dozens of expensive traps with persuasive rhetoric about bootstraps and the American dream. The number one question I've gotten since publishing the piece is: "But is this company any better?" Usually this query comes from folks who've already invested time and money with an MLM or two and are wondering if maybe, just maybe, they picked the company who does things right. For the most part, the depressing answer is no. "We could go company by company through the DSA's members and applied the FTC's anti-pyramid scheme test," says Brooks. "Very few companies would pass."

Viginia Sole-Smith (copyright 2012)

Amway admits in Andhra Pradesh High Court there is no stay to continue Ads in the media

Amway India on Friday virtually begged the Andhra Pradesh High Court to give more time to enable it to bring a senior counsel from New Delhi to argue in the writ petition filed by it.

It may be recalled that Amway filed a writ petition challenging the Government Order (G.O.) issued by the Andhra Pradesh State Government banning the advertisements by Amway India in any media.

Corporate Frauds Watch filed an implead petition in the same writ.

The Larger Bench of the High Court heard the arguments of Amway’s counsel but not without caustic remarks.

The Amway’s counsel, placing his arguments before the High Court, started narrating the business model of Amway India to which the Large Bench objected saying the counsel is trying to convince the High Court that the business model of Amway is not a money circulation scheme. “The Bench won’t reopen the case which was already concluded, “ the counsel was told.

The counsel admitted openly for the first time that Amway was not granted any stay orders to misuse or abuse its position. The Bench wondered then how come the Amway is still advertising in all types of the media.

The helpless counsel then appealed to the Larger Bench to give time to bring a senor counsel from New Delhi to argue on behalf of Amway. The Bench wondered that in such case why the counsel started the narration of the scheme in the first place.

The dumb stuck counsel virtually begged the Larger Bench to give time to bring the senior counsel Harish Salve from New Delhi. After much deliberation the Larger Bench agreed to give time but confirmed the next date to September 13.