Wednesday 28 December 2016

Qnet scam: Rs144 crore recovered so far


M
Jayprakash S Naidu
Jayprakash S Naidu 
Hindustan Times
Highlight Story

Former billiards champion Micheal Ferreira is one of the prime accused in the Qnet scam. (HT Photo )

The Economic Offences Wing (EOW) of the Mumbai Police, probing the money trail in the QNet case, has so far recovered Rs144 crore by freezing several bank accounts of the accused.
The EOW has appealed to investors to come forward and file complaints against the accused, so that their money can be returned.
An EOW official said five lakh investors were affected and that the scam runs into Rs1,000 crore. The Rs144 crore was recovered by freezing bank accounts of the accused and those bank accounts where the money was transferred. A lot of money has been sent out of the country, the official said. The official added that so far, they have received written complaints from only 400 victims from across India and have hence appealed to other investors to come forward.
In all, 30 people have been arrested. The official said Srinivas Rao Vanka, the director of Vihaan Direct Selling India Pvt. Ltd and Michael Joseph Ferreira, former world billiard champion, are among the key accused.

Tuesday 27 December 2016

'MLM' Pitchman, Donald Trump, Picks 'MLM' Racketeer, Betsy DeVos, as Education Secretary.


Donald Trump,Betsy DeVos

http://www.newyorker.com/news/news-desk/betsy-devos-trumps-big-donor-education-secretary 

Earlier today my Blog was swamped with visits to 'Amway' pages. I then discovered that Donald Trump has named Betsy DeVos as Education Secretary.

As Donald Trump gets set to take over as the next US President, media attention has again suddenly focused on what he will do with his business and whether his largely-opaque money making activities represent a conflict of interest prohibited by the US Constitution.


During the campaign,Trump never stopped boasting of his tremendous wealth and business skills. He now claims he will hand complete control of his business to his three eldest children - Donald Jr, Ivanka and Eric. However, this move has done nothing to allay fears that Trump will exploit the presidency to his own financial advantage and to that of his associates.


To date, only a few journalists have delved into Trump's 'MLM' racketeering activities, but perhaps the appointment of Betsy DeVos will change this situation.






For decades, the Utopian 'MLM income opportunity'  lie has been used to bedazzle, blame and steal billions of dollars from, millions of constantly-churning victims around the world. 


See original image


http://www.motherjones.com/politics/2014/01/devos-michigan-labor-politics-gop







See original image



http://www.thedailybeast.com/articles/2016/10/22/blackwater-founder-erik-prince-loves-anti-iraq-war-donald-trump0.html 


The appointment Ms. DeVos to an influential position of government in itself represents a huge conflict of interest. For a start, she is a prominent member of one of the original 'Amway' cultic crime families, whilst her brother, Erik Prince (the instigator of 'Blackwater'), has been one of the most-controversial figures in the USA in recent years.


David Brear (copyright 2016)




Wednesday 28 September 2016

Sudden volte-face by Ministry of Consumer Affairs regarding Multi-Level Marketing

It appears that the Ministry of Consumer Affairs has inadvertently issued the advisory to the State governments and Union territories to frame guidelines for the direct selling industry. In other words it is nothing but volte-face on the part of the Consumer Affairs Ministry to issue such contradictory and controversial advisory to the State governments.
Way back in 2003, the same Ministry of Consumer Affairs clarified to the Central Economic Intelligence Bureau, New Delhi over the letter of Wajahat Habibullah, secretary of Consumer Affairs which stated that his department was considering the issue of direct selling/network/multilevel marketing as an alternative form of marketing of goods and the entire issue was looked from that angle. It was further clarified that the Consumer Affairs letter does not cover pyramid structured marketing schemes and that area also does not fall within the purview of the department. 
Earlier, answering to a question on December 20, 2002, in Lok Sabha on RBI action against Amway India, Minister of State in the Ministry of Finance and Company Affairs Shri Anandrao V Adsul stated that the RBI after once again examining the matter on the representation of Amway, had made it clear that the Amway’s activities attracted the provisions of Prize Chits and Money Circulation Schemes (Banning) Act, 1978. The minister also stated that the RBI had forwarded a report in this regard to the police authorities who are empowered under the Act for taking necessary action.
A quick glance at the definition of money circulation scheme under the provisions of the Prize Chits And Money Circulation Schemes (Banning) Act, 1978 reveals:
Section 2(c): “Money circulation scheme” means any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the conservation for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions.
Section 10 of Act says that all offences under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 are cognizable offences. Cognizable offence means police have to initiate action without any complaint from victim or loser or any person.
The Division Bench of the Andhra Pradesh High Court in 2007, held that from the whole analysis of the Amway India’s business scheme and the way in which it is structured it is quite apparent that once a person gets into this scheme he will find it difficult to come out of the web and it becomes a vicious circle for him. In any event the petitioners have not specifically denied the turnover they are achieving and the income they are earning towards the initial enrollment of the distributors, the renewal subscription fee and the minimum sales being achieved by the distributors as alleged in the counter affidavit. By no means can it be said that the money which the first petitioner is earning is not the quick/easy money. By promising payment of commission on the business turned out by the down-line members sponsored either directly or indirectly by the up-line members (which constitutes an event or contingency relative to enrollment of members), the first petitioner is earning quick/easy money from its distributors, apart from ensuring its distributor earn quick/easy money. Thus the two ingredients are satisfied in the case of promoter too.  We are, therefore, of the considered view that the scheme run by the petitioners squarely attracts the definition of “Money Circulation Scheme” as provided in Section 2(c) of the Act. (Para 35).
The Supreme Court of India in the case of Kuriachan Chacko Vs. State of Kerala (2008) 8 SCC 708 held: “The Kerala High Court also upheld the argument of the prosecution that the Scheme was a "mathematical impossibility". The promoters of the Scheme very well knew that it is certain that the Scheme was impracticable and inworkable, making tall promises which the makers of the promises knew trully well that it could not work successfully. It could work for some time. These schemes are like "Paul can be robbed to pay Peter" but ultimately when there is a large mass of Peters, they will be left in the lurch without any remedy as they would by then have been deceived and deprived of their money. (para 41)”.
The High Court of AP in the case of Speak Asia online Vs. State of A.P. CRLP No.5626/2011 heldthat mere informing a scheme, which covered under the money circulation scheme and enrolling members as subscribers, itself is an offence. It is not necessary to further elaborate on the same, since the Sections are unambiguous and clearly indicate the acts which attract an offence.
When the Indian judiciary unequivocally held that enrollment of members attracts the provisions of the PCMC Act and Amway India has exactly been doing that in its business scheme, how the Ministry of Consumer Affairs could turn volte-face and issue advisory to the Statement governments and Union territories for framing guidelines for direct selling industry.
Moreover, the Andhra Pradesh State Government way back in 2008 issued GOMS No 178 restraining Amway India from publishing any material/advertisements containing such material connected with any Prize Chits and Money Circulation Scheme promoted or conducted in contravention of the provisions of the PCMCS Act. The GO also declared that every copy of the newspaper and every copy of the publication containing such material or the advertisement to be forfeited to the State government of Andhra Pradesh.
The official websites of the police departments of Andhra Pradesh and Telangana States warned people not to join the schemes of Amway and others and lose their hard-earned money. The websites also warned people to report to the police in case they suffer any loss due to joining such schemes.
When the issue is crystal clear that the Amway India and other companies under the aegis of Indian Direct Selling Association are into the illegal activities, how the State government could frame guidelines as per the advisory of the Ministry of Consumer Affairs when Amway and other IDSA members are promoting illegal Money Circulation Schemes in the name of direct selling.

Wednesday 21 September 2016

Ferreira rejected bail in QNet scam

New Delhi: Padma Bhushan Michael Ferreira, former world Billiards champion is all set to be arrested after the Supreme Court on Wednesday rejected Anticipatory Bail applications of all prime accused in the QNet scam.
The Supreme Court rejected the bail applications of five including, Srinivas Rao Vanka and Magaral Veervalli Balaji, both directors of Vihaan Directselling (India) Pvt Ltd, Suresh Thimiri, director of Transview Enterprises India Pvt Ltd, Malcolm Nozer Desai, who is a 20 per cent stakeholder in Vihaan and Michael Joseph Ferreira, former world champion of billiards and an 80 per cent stakeholder in Vihaan.
Earlier the Bombay High Court had rejected the anticipatory bail applications of all the accused calling the whole business of QNet as “prima facie illegal business”.
The order mentioned, "The motto of the company 'sell more, earn more' appears very attractive and innocuous. However, this motto is fully camouflaged. The company stands on a basic statement that people can be fooled. Thus, the true motto is 'sell more earn more' by fooling people. In fact it is a chain where a person is fooled and then he is trained to fool others to earn money. For that purpose, workshops are conducted where study and business material is provided with a jugglery of words, promises and dreams. Thus, the deceit and fraud is camouflaged under the name of e-¬marketing and business."
"It has very grave and serious impact on the economic status and mental health of the people on a large scale. On considering parameters of the Section 438 of the Code of Criminal Procedure, I am not inclined to protect the accused. It won't be out of place to mention that such circulation is required to be stopped. It is necessary for the prosecution to take injunctive steps against this business activity, which is prima facie, illegal.”
“The Serious Frauds Investigation Office had termed the whole business of the QI Group in India as a threat to the national security,” said the whistle blower, Gurupreet Anand, who submitted the SFIO report in Bombay High Court as well as the Supreme Court of India along with other documents.
A detailed Status Report was filed by Special Public Prosecutor Pradeep Gharat and after going through the contents of the said report the anticipatory bail applications of all the prime accused was forthwith rejected. Agencies


Monday 19 September 2016

Ministry of Consumer Affairs nails Amway with guidelines

The Ministry of Consumers Affairs has taken a right decision in preparing an advisory issuing the model framework to prepare guidelines by the State governments and Union Territories to expose the illegal activities of the direct selling companies which are in fact indulging in illegal money circulation schemes in the guise of selling products and services. It exposed the true colours of the direct selling companies in general and Amway in particular. With the help of the model framework, now it is easier to pinpoint the illegal activities of these companies.
It has prohibited entry fee/registration fee charged by the companies to enroll members and also collection of renewal fee every year. It may be recalled that the AP High Court pointed out that the Amway has been illegally lining its pockets by charging registration fee and renewal fee from the members which is nothing but easy and quick money. Though the new set of guidelines is almost similar to the guidelines issued earlier, there are only thin differences.
The pyramid scheme is clearly defined in the model framework. Moreover, it prohibits compulsion of these companies to purchase huge quantities of goods which is detriment to the interest of the consumers. These companies encourage the members to stock in large quantities offering commission of 40 per cent or more. They are also compelled to take back the products if the consumer is dissatisfied. However, it should have been made clear that the companies should directly take back the products instead of the present practice of returning through the upline members.
The companies also need to provide a grievance redressal mechanism to solve the grievances in a time-bound manner. In view of the framework, it would be easier for the aggrieved consumers to file criminal cases against these fraudulent direct selling companies.
Some members, who are very senior in the upline, claim huge income after selling products. In fact, they do not pay any sales tax to the commercial tax department. With the condition of compulsory of PAN, they would be compelled to disclose their income if at all they get. Most of the income they claim is on the products purchased by the downline members as if they actually sold them. Now they cannot escape the tax liability. It may be noted here that the Supreme Court held that the income from the purchase of downline members is also easy and quick money. 
Some direct selling companies are euphoric over the framework issued by the Ministry of Consumers Affairs. In fact, this is only the model framework as an advisory to the State governments and Union territories to prepare guidelines in their respective states and union territories. Whenever there is a clash between the guidelines and the legislation, it is not necessary to mention that the legislation prevails over the guidelines. Even the state governments form guidelines, the Kerala experience would recur if the guidelines were ignored by these companies. These companies cannot do business without misrepresenting the facts to the new members and naturally they would come under fire.
The big loss to these companies would be removal of entry fee and renewal fee. This is the main source of income particularly where these companies make easy and quick money.



Ministry of Consumer Affairs nails Amway with guidelines

The Ministry of Consumers Affairs has taken a right decision in preparing an advisory issuing the model framework to prepare guidelines by the State governments and Union Territories to expose the illegal activities of the direct selling companies which are in fact indulging in illegal money circulation schemes in the guise of selling products and services. It exposed the true colours of the direct selling companies in general and Amway in particular. With the help of the model framework, now it is easier to pinpoint the illegal activities of these companies.
It has prohibited entry fee/registration fee charged by the companies to enroll members and also collection of renewal fee every year. It may be recalled that the AP High Court pointed out that the Amway has been illegally lining its pockets by charging registration fee and renewal fee from the members which is nothing but easy and quick money. Though the new set of guidelines is almost similar to the guidelines issued earlier, there are only thin differences.
The pyramid scheme is clearly defined in the model framework. Moreover, it prohibits compulsion of these companies to purchase huge quantities of goods which is detriment to the interest of the consumers. These companies encourage the members to stock in large quantities offering commission of 40 per cent or more. They are also compelled to take back the products if the consumer is dissatisfied. However, it should have been made clear that the companies should directly take back the products instead of the present practice of returning through the upline members.
The companies also need to provide a grievance redressal mechanism to solve the grievances in a time-bound manner. In view of the framework, it would be easier for the aggrieved consumers to file criminal cases against these fraudulent direct selling companies.
Some members, who are very senior in the upline, claim huge income after selling products. In fact, they do not pay any sales tax to the commercial tax department. With the condition of compulsory of PAN, they would be compelled to disclose their income if at all they get. Most of the income they claim is on the products purchased by the downline members as if they actually sold them. Now they cannot escape the tax liability. It may be noted here that the Supreme Court held that the income from the purchase of downline members is also easy and quick money. 
Some direct selling companies are euphoric over the framework issued by the Ministry of Consumers Affairs. In fact, this is only the model framework as an advisory to the State governments and Union territories to prepare guidelines in their respective states and union territories. Whenever there is a clash between the guidelines and the legislation, it is not necessary to mention that the legislation prevails over the guidelines. Even the state governments form guidelines, the Kerala experience would recur if the guidelines were ignored by these companies. These companies cannot do business without misrepresenting the facts to the new members and naturally they would come under fire.
The big loss to these companies would be removal of entry fee and renewal fee. This is the main source of income particularly where these companies make easy and quick money.



Thursday 28 July 2016

Kingpin of ‘Crypto mining scam’ arrested

Here is yet another multilevel marketing scam which shocked the authorities and the police alike. The crooks started 3Gcoin with the promise of easy and quick money. Finally the kingpin of the scam was arrested.
The kingpin involved in the scam of ‘3gcoin,’ a multi-level marketing company involved in crypto mining (digital currency), was arrested from Bengaluru and produced in a city Court on July 27. A case was registered under various provisions of IPC and IT Act and the police took up investigation.
According to the Cyber Crime police of Cyberabad, the accused, B M Jagadeesha, cheated people to the tune of Rs 2.89 crore during the last two years. Jagadeesha is the head of operations for the company www.3gcoin.eu which is registered in Europe lured gullible IT employees interested in crypto mining. They promised to provide huge profits upon investment. The modus operandi involved active involvement of 500 agents, working on commission basis. The person who introduced the members will get 20 per cent of 30 Euros as commission. The accused promised them that the introducer would continuously get the commission on each introduction. He has collected Rs 2,89,12,500 from one group most of which was distributed as commission to agents. 
At the time of launching the company, they have declared that the value of each Crypto Coin was 30 Euros. They have projected the investors that if they take one crypto coin by investing 30 Euros they would get 128 crypto coins at the end of the second year of investment.

During the investigation it also came to light that there are several other similar websites such as wowcoin, onecoin, richcoin, litcoin, which are involved in similar businesses online. “Hence, it is advised to study about the operations of such companies before investing their hard earned money,” said Md Riyazuddin, Inspector, Cyber Crimes (Cyberabad East), who led the team to Bengaluru.
Corporate Frauds Watch appeals to the people from all over the world not to fall prey to the dubious promises of multilevel marketing companies like Amway. Herbalife, Tupperware which are followed by the crooks like 3gcoin and others.

Thursday 16 June 2016

Will Amway compensate medical & hospital expenses

RAJAN leaves a new comment "Amway is selling Nutrilite as medicine":

I started using AMWAY's Protein Powder, Calcium, Vitamins & few other products in Feb. Mar. 2014. After using for 2 months or so, I used to feel unusually weak & extremely tired. So I discontinued with these. But weakness persisted even after that. Later in Apr. 2014 I had internal bleeding, which somehow I could not recognize at that time & hence I neglected it. I pulled on like this till Nov. 2014 when I happened to do Blood test along with few other Medical tests, I found My Platelets to be alarmingly low - 20,000 ( it went down to 6000 - 4000 level later on ).
Earlier in Jan. 2014, My Platelets were around 1,02,000, as per my medical check up. I never had any disease of any nature earlier so as to bring down my Platelets to this level & that too at such a short period of time. Even Doctors opined that the Food Supplements as these can do harm, particularly blood related. Friends & relatives told me that there are several news items & articles appearing in the News Papers & in the Internet stating that the Food Supplements are capable of reducing one's platelet levels.
It took almost an year & a half for me to recover from this dreadful disease. The sufferings & agony underwent by me is beyond one's imagination. Total medical & hospital expenses are around 4 lakh. Will AMWAY Compensate this to me. Is it possible for AMWAY to compensate the sufferings & agony underwent by me. I am not the only one to have such a Bad experience as this. Many are there, but they either do not realise this Or they do not report their complaints. As regards the other products other than Nutrilites, I feel they are too costly, which I demonstrated to my near & dear. 
Use of natural ingredients in its natural way as prescribed in Ayurveda is the best solution for all health & skin care issues. 
Be Indian Buy Indian. 

Wednesday 9 March 2016

Herbalife's And Other MLMs' 2015 Data Show Their Growth Era Has Ended

Robert FitzPatrick shows 'MLM' growth is finished.

Summary

Apart from fraud charges, the global performance of Herbalife and other large MLMs shows their era of "growth" is over. The change is not cyclical, but inevitable and irreversible.
Growth in MLM is not real. It relies on new geography. There is no sustained base of brand loyalists or successful salespeople.
For individual recruits, MLM "growth" from recruiting is a requirement. No one profits by personal "direct selling."
While expansion is always promised, data now show contraction, revealing to regulators and investors MLMs inherent flaw and its basis in deception.
Herbalife, Nu Skin and Usana illustrate the reality of saturation. All depend now on China and other new markets, the proverbial "last ones in." China "growth" is ending.
Using global and domestic SEC-reported data, I have previously published articles tracking and evaluating the "growth" and "saturation" status of the commercial sector known as "multi-level marketing", MLM.
Recently released data from Herbalife (NYSE:HLF) most clearly illustrate the new reality of the end of the MLM "growth" era, and this nothing to do with the recent controversies of fraud charges against Herbalife.
The MLM sector includes global companies, Herbalife (HLF), Nu Skin (NYSE:NUS), Usana (NYSE:USNA) and Avon (NYSE:AVP), among about 10 others on Wall Street. Its largest private representative is Amway, the progenitor of all current MLMs. Avon predates Amway as a company but adopted the Amway-model only after 2000, and only partially. There are now perhaps over 1,000 MLMs in the USA!

Wall Street Acceptance of MLM, Pyramid Scheme or Not

After years of confusion on Wall Street, it is now widely accepted that "MLM" is a distinct sector, though its definition and legal status are still contested. It is widely understood that, whatever MLM is, the common denominator of the sector is a shared commodity of human recruits who operate under essentially identical legal contracts, unique to MLM and who serve as the direct and ultimate source of almost all revenue. This common revenue source is gained by inducing the recruits to seek financial rewards tied to the hallmark MLM "business opportunity." This shared and virtually identical "business opportunity" offered by all MLMs always depends upon recruits recruiting other new recruits in a classic "endless chain" proposition.
In putting all MLMs together under one sector, it is implicitly understood that the various consumer products offered for sale and their unadvertised brands do not characterize or define individual MLMs. The various products (usually pills, potions and lotions) are merely incidental elements of the shared recruiting and money transfer mechanism. As to the legitimacy of MLM'sdefining pay-to-play, contractor-recruiting-contractor, endless-chain model, Wall Street generally embraces it but presumably only as long it continues to "grow."
For a full economic and philosophical endorsement of the MLM business model see the booklet by a Dr. Lasdwun Luzes who boldly lays out the case, In Defense of the Pyramid Scheme.

The Party is Over

I will publish a comprehensive summary of 5 years of data of publicly traded MLMs, from year-end 2010 with analysis of the demographic and information saturation factors when SEC reports are available. However, 2015 data already reported by several of the largest MLMs support my earlier analysis that the heyday of MLM is finished, never to return. There will never be another MLM ballooning to the size that some of today's MLMs reached a few years ago. This 35-year MLM pandemic occurred while the FTC deliberately ignored it or administratively dithered over arcane definitions of "pyramid scheme" and some FTC officials strolled through the lucrative revolving door between the FTC and the MLM "industry."
Free from law enforcement, MLM's recruiting rampage carried this American racket to every corner of the globe, with China as the last stop. Now, in the face of global saturation, based on growing public awareness and demographic limits, the larger MLMs can no longer claim "momentum" and "explosive" growth to lure in recruits. The current challenge of these companies today is to manage unfolding collapse while still promising "unlimited income" to new recruits.
  • Amway, the oldest MLM with the longest global reach, reports (unverified, since it is a private firm) its global revenue has recently dropped to its lowest point in 5 years. The decline appears to be accelerating, moving from minus 8% in 2014 to minus 12% in 2015. Much of the decline occurred, Amway claims, in China, which had accounted for the previous spike.
  • Avon, the MLM with the largest number of members, suffered a 34% revenue drop since 2010 (including North America revenues in 2015) and has just sold off its entire North American operation, where the company began over a hundred years ago.MLMs classically saturate earlier markets, requiring constant expansion for "growth."
Investors who still hearken to MLM's historic and enigmatic "growth" rates, even in the middle of global recession, should take note that this recent reversal of fortune is not cyclical but inevitable and irreversible.

Growth, Quote UnQuote

"Growth," as it is conventionally understood, must be put in quotes when referencing MLM because MLMs misuse the term to confuse consumers and investors as part of an entire vocabulary of pseudo-business terms and phrases, including the meaningless term, "multi-level marketing" itself ("multi" actually means infinite).
I see firsthand how effective this linguistic flim-flam has been in sowing confusion from talking with countless MLM participants, providing professional consulting to dozens of Wall Street analysts on MLM, and being interviewed by journalists assigned to report on this or that MLM stirring up local discontent across the world. Consumers cannot discern the indecipherable MLM play plan and are not told of MLM's epic turnover rates among recruits. Without a good grasp of algebra few can untangle the misleading "income disclosures" - among the few MLMs that offer them at all - revealing 99% loss rates. Aiding and betting the concealment and NewSpeak, the FTC specifically exempted MLMs from all financial disclosure requirements as they solicit investments from millions of people each year.

Explaining the Unexplainable

Wall Street researchers, charged with due diligence on behalf of investor groups, earnestly try to apply conventional metrics to MLM in the naïve belief that MLMs compete and grow like real companies. They imagine MLMs gaining customers from competitors with similar products or creating new markets that add to an existing year-upon-year base of brand loyalists. They further imagine that new customers are won over by profitable salespeople who sell products based on market factors like pricing, quality, technology advantage or some valuable differentiation, resulting in profit to them and "growth" to the MLM enterprise.
Yet, these researchers are invariably flummoxed to explain a seemingly inexplicable factor that contradicts their "sales" thesis. This is the extraordinary attrition among adherents, reaching virtually 100% in several years. After signing contracts and paying fees, why would salespeople or even customers abandon a "growing" company with loyal buyers in such numbers and so rapidly? To reconcile the mysterious phenomenon, they bravely search for other market-based factors like variations in start-up fees.
For investor purposes, analysts do their best to exclude deception and fraud as factors. They must do this in the face of otherwise inexplicable consumer behavior, massive consumer loss rates, cult marketing techniques by MLMs and continuous churning of what they define as "salespeople" and "customers" without being able to determine exactly who is selling to whom or what the real products are.
In reality, none of these market-based factors applies or has anything to do with growth or decline in MLM. Quitting rates turn out to be the same across the board, having nothing to do rational buying, fee levels, or diligent investing. Indeed, conscious buying or investing "choice" isimpossible in MLM since no one is ever fully or adequately informed when recruited. MLMs sell anon-existent income opportunity. Therefore, conventional sales and marketing laws and definitions that govern real commerce, in which actual value is exchanged, do not apply.

Non-existent Opportunity

In describing the marketed MLM "income opportunity", I call it "non-existent" not editorially but based on a tedious analysis of the bizarre MLM pay formulas that transfer most commission dollars, per transaction, to the top of an enormous recruiting chain, and impose burdensome pay-to-play purchase requirements on new recruits, serving as the chief revenue source. My description is further supported by de-constructing the available income disclosures that reveal 99% loss rates among all MLM adherents, year in and year out, including those who pay the much higher fees to start out at higher potential pay rates.

Take the Test

Here's a test, requiring only arithmetic, that should settle all question about the existence or absence of an MLM "income opportunity." Take any of the larger MLMs and add together all the people that have ever paid money to become eligible for the fabled "income opportunity", dating from the company's inception, and then ask how many or what percentage of all of them ever did earn a profit or are gaining it now. No one does this in the media or on Wall Street, perhaps because the answer would be too shocking to accept. Hundreds of millions of people, over three decades were obviously churned through a mill of false income promise only to "fail." Even those the MLMs claim are only "discount buyers" universally disappeared. A tiny cadre of recruiters at the top profit directly from those losses, year in and year out. Yet, millions more are still successfully recruited? The specter of commercial deception on such a scale, while the FTC looks on, is literally unthinkable for some analysts and reporters, much less ordinary consumers.

Not Growth

Referring to growth, I employ the phrase, "as it is conventionally understood," because MLMs do not grow according to how that term is conventionally used in business. MLMs that "grow" are only outpacing attrition each year. There is no large base of salespeople or customers upon which to "grow." There are no loyal or repeat customers of any consequence. Only if recruiting outpaces attrition, can revenues be larger YOY. The sales force and the customers did not grow. They were replaced. Collapse occurred more slowly than recruiting accelerated, and the scheme was thus able to give an outward appearance of organic growth, unless one looks more closely. Real growth requires success and satisfaction of earlier buyers and salespeople. MLMs, however, leave almost total failure, abandonment and disappointment in their wake.

The Meaning of No-Growth in MLM

Before citing more of the available company data and their significance, it is important to consider the meaning of MLM's recently arrived at "no-growth" status from the consumer' interests, not just the investors'. A no-growth conventional company can obviously remain profitable and valuable to customers. However, in MLM, growth is not a market condition; it is a promise on which value-for-payment-received is based. It is therefore an existential requirement. But, without capacity for outpacing collapse, MLMs now have no basis at all for claiming that new recruits have a chance at success and therefore cannot plausibly pretend to offer value in exchange for payment.
Let us be clear in recognizing that individual success in all MLMs is not based on personal sales or "direct selling" as it is called. In 15 years of work in MLM, I have not found an individual who earned sustainable profit without recruiting other recruiters. No one in MLM has or does gain sustainable profit from individual door-to-door selling, an outmoded and unnecessary method of product distribution. Add in absurdly high prices, an upside-down commission plan that rewards the recruiter and oppresses the street-level retailer, unprotected territories, constant inundation of competitive salespeople, no advertising allowed, punishing inventory purchase requirements, and the MLM "direct selling" business is revealed as an utter sham.
MLM "growth" is not an added benefit but a requirement, since 50-80% of the entire sales force and customer base (for the most part, one and the same) disappear annually and the remaining market shrinks. Yet, for any significant number of new recruits to succeed, the overall chain must get larger and longer. It is this contradiction that leads to the conclusion of many experts that the business model is "inherently" unsustainable and deceptive. An MLM enterprise can thrive only on the failure of its churning and "losing" adherents.

Mimicking Growth

Up to recent times, geographic expansion and brief periods of local increases in prospects, usually brought on by economic distress, could at least mimic sustainable growth or perhaps support the claim that recruiting could alwaysoutpace attrition, giving some recruits a chance to "win" though at the expense of their recruits. But, if revenue records show local and globalcontraction, on what basis can the MLM company base even a bogus promise to the "last ones in" of viable profit opportunity based on "infinite" recruiting?
Properly understood, the new status of no-growth-due-to-saturation lays bare the realities of MLM for regulators and investors who might still be charmed by MLM's historic "growth", promises of perpetual growth or the newest predictions of return to growth.

Nu Skin: Pop and Drop

It has already been shown that MLM's greatest icons, Amway and Avon, have experienced dramatic drops in revenue recently. Nu Skin, also one of the larger and older MLMs, serves as a further illustration of the trends in maturity and reveals "growth" as merely a reflection of the "last ones in."
Nu Skin's China "growth" exploded almost 400% between 2012 and 2013, catapulting China to Nu Skin's largest market and accounting for 32% of total revenues. Then in just two years, revenue was nearly cut in half. Between 2013 and 2015, Nu Skin's global revenue dropped by $929.7 million. The drop in one market, China, accounted for about half of that global drop.

Usana: Chasing Nu Skin

Usana is a commercial clone of Nu Skin, both enterprises coming out of Utah, that font of MLM startups and "food supplements." In saturation status it is only a year or so behind Nu Skin before hitting the China Wall. Extreme slowdown has already been reached.
Consider the drastic change in rates reflected in language in the end of Q4 8Ks of 2014 and 2015. In 2014, Usana trumpeted net sales growth in Asia Pacific (including mainland China) of 34.1% compared to same period a year before. It also added that it achieved a 25.4% "sequential" increase over the 3rd quarter of that year. This is the classic MLM "exponential" growth achieved with mesmerizing and illusory endless chain incentives offered to virgin recruits in newly invaded territories. A year later, there is no bragging of a sequential increase. It had dropped to just over 2% and annual "growth" for the quarter was just 5.4% over the same period a year ago.
Between 2013 and 2015, Usana "grew" by $200.5 million globally, now edging close to a billion in total revenue. But during this same time frame, it "grew" in Greater China by $169.47. China, a market that Usana only recently entered, accounted for 85% of Usana's global "growth" in the 2013-2015 period. It opened in mainland China with an entirely new line of goods from a small, obscure China-based company selling "baby" products in a country that limits families to one child! Yet, with a new product, in a new land, Usana reports that Greater China is now approximately half the company's total global revenue! Breaking it down even closer, reveals thatUsana is dropping in the areas of Greater China where it entered first, like Hong Kong. Go figure.
Analysts may deduce that all the rest of the world, accounted for only 15% of Usana's "growth" in the last two years. Excluding Greater China, Usana grew just 4% in the last two years. China, the "last ones in", sustained the company and enabled it to tell hopeful recruits in all other countries that it was explosively "growing", though in many places, even its home country, the USA, it was actually in contraction. Unless you have cousins in China, the actual data showed that the chance of your building a large local downline based on friends and family, ignoring the financial consequences to them, was bleak indeed.

Usana USA "Growth" Obscured?

Analysts that question the sustainability of Usana's earlier rocket-like growth (almost entirely in China, it turns out) might want to know of Usana's performance in the USA, where it all started. Shouldn't this be the strongest area, where it is best known, faces no currency "headwind" and should have the largest base of satisfied adherents over more than 20 years of operation?
This is a question I have special interest in since "saturation" in MLMs occurs in earlier markets where demographics and actual failure rates finally take their toll. It turns out that Usana makes it difficult to know for sure USA revenue and recruiting status. Is the "drop" concealed while the "pop" is touted?
The reported data does show steady but modest declines in the USA revenue, -10%, while mainland China grew +332%, but, incredibly, Usana has confused the definition of "USA." In 2000, Usana began merging parts of Europe's data with the USA's.
From Usana's Q-2, 2000, "Since the beginning of the second quarter of 2000, the Company's United Kingdom market has been serviced from the United States and Is no longer an operating segment of the company. The company's operating segments are based on operating geographic regions." Usana reported in Q1 2012: "North America - United States (including direct sales from the United States to the United Kingdom and the Netherlands), Canada, Mexico, France(1), and Belgium(1) … The Company commenced operations in France and Belgium during the last week of the first quarter of 2012. Net sales and customer count information for these two markets have been included with the United States for the quarter ended March 31, 2012."
Say what? Europe is counted with North America for net sales and customer count? And Usanais adding new countries in Europe, making "North America" an expanding market?
The seemingly modest and gradual decreases in the "USA" that Usana reported to the SEC are contradicted by Usana's income disclosure reports to consumers, not to the SEC. These disclosures are based only on the real North America, not a fictional one presented to shareholders and the SEC. In its North American Average Total Earnings for 2011 the total of USA Associates that purchased at least one product (active) was reported as 135,590.
Then, when Usana updated this USA data disclosure with 2014 data, only for geographic North America, Usana reports only 61,400 associates qualified as active by making one purchase. That's a 54.7% domestic decline in three years. Shareholders seeking insight into Usana'sfuture, especially its future in "explosive China" may want to know exactly how Usana is doing in the 50 states of the USA, really. It is the harbinger for China.

Herbalife: China and Latinos Sustain the Illusion of "Growth"

Herbalife came into being two years after a controversial FTC decision reversed earlier rulings against MLMs and allowed Amway's pyramid plan to continue, based on its sworn testimony that it was a retail sales company, not a recruiting scheme. Herbalife cloned the Amway play plan and after 20 years of operation, Herbalife entered the China market in 2001, one of the earlierMLMs to go there.
Now, after just 14 years in China, revenue from that country is almost entirely sustaining Herbalife, offsetting saturation in most of the rest of the world, including the USA, its home market.
  • Between 2013 and 2015, Herbalife declined in global revenue by $142 million. But in the same period revenue "grew" in China by $370.9 million. Excepting for increases in China, Herbalife's global revenue would have dropped over 9% in the last two years instead of -0.34%. As with Amway, Nu Skin and Usana, China is Herbalife's "last ones in," keeping afloat any claim at all for "growth."
  • In the last five years, Herbalife's reported annual revenue increased by $1.7 billion. 38% of that "growth" occurred in mainland China alone and at the same time, Herbalife entered 16 other new countries, adding to the "growth." Without geographic expansion,Herbalife's is in significant decline, but it is now running out of new countries.
  • Between the end of 2012, when scrutiny was focused on Herbalife by the Pershing Square fraud thesis presentation, global revenue "grew" by $397.7 million, while China alone grew by $567.7 million. If you take out the China "growth", (increase in China only) during these three years of controversy, Herbalife global revenue, would show a negative 4%. Even with China and other new countries entered, Herbalife still showed global revenue decline in the last two years.
  • If globally Herbalife is dependent on China, in the USA, it is clinging to the lifeline of Latino immigrants, a virtually new country it invaded inside the USA to offset information and demographic saturation among the rest of the population. Yet, despite this new base of vulnerable recruits, revenue declined in the USA over the last two years after spiking upon a massive and customized recruiting campaign aimed at low income Latinos and other new immigrants.

Robert FitzPatrick (copyright 2016)

Wednesday 2 March 2016

Serious Fraud Investigation Office asked to probe fraud by 258 companies in last 4­year: Government

NEW DELHI: Serious Fraud Investigation Office (SFIO) has been ordered to probe alleged fraud in 258 companies in the last four years, Parliament was informed.
Of the 258 cases, investigations have been completed in 116 cases and reports have been submitted in this regard to the ministry while in 8 cases, probe have been stayed by the courts, Corporate Affairs
Minister Arun Jaitley informed Lok Sabha in a written reply.
Further, the ministry has ordered filing of prosecution against companies, directors and other officers for several non­compliance under the Companies Act as recommended in the investigation report in 102 cases, where the probe has been completed. SFIO is the investigation arm of the Corporate Affairs Ministry. "From 2012­13 and up to January 31, 2016, the ministry has ordered investigations through SFIO into the affairs of 258 companies allegedly indulging in fraudulent or  illegal activities," Jaitley said.
He also said the government has taken various other measures to curb frauds like defining 'fraud' in the new Companies Act, stricter corporate governance norms and statutory status to SFIO.
In a separate reply, the minister said several complaints have been received pertaining to cheating of small investors, particularly by the companies involved in Chit Fund or  Multilevel Marketing activities.
On the basis of such complaints, SFIO has been directed to probe 167 such companies till January 2016. Of these, investigation has been completed in 77 cases and directions to file prosecution have been ordered in 68 cases.

Tuesday 19 January 2016

Mumsnet Members create 'Timeless Vie' (the cryptic antithesis of 'Forever Living').


See original image



See original image


Readers of this Blog might like to visit 'Timeless Vie' (the cryptic antithesis of 'Forever Living').

https://timelessvie.wordpress.com/2016/01/17/in-memory-of-friends-family-lost-to-juice-plus-herbalife-younique-forever-living-stella-dot-nuskin-etc/



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After witnessing robotic 'MLM' recruiters amongst their own friends and families, a number of members of the British Internet forum, Mumsnet, created the concept of Bot-Watching (i.e. laughing at the scripted antics of 'MLM'adherents, but with the serious goal of shining a light on the problem).

Mumsnet members have recently created 'Timeless Vie' -  a outrageously funny exposure of 'MLM' cultic rackets in general, but particularly those which have mainly preyed on women. 'Forever Living Products' seems to be the most virulent 'MLM' racket of this type, currently infesting the UK.

Mumsnet has brought together the most significant group of insightful, and determined, people in the UK ever to start to examine the 'MLM' phenomenon. They have quickly uncovered the extraordinary scale, and underlying cultic nature, of the problem: the disturbing results of which have been all-too evident on social media.

 'Timeless Vie' is a valuable attempt to halt the spread of the 'MLM' fairy story, but its creators accept that they have little chance of influencing the most gung-ho 'MLM' fanatics.


David Brear (copyright 2016).