AP High Court slams Amway India once again- PartII

Here is the second part of the High Court judgement on Amway India.

The 7^th respondent (Corporate Frauds Watch) gives a graphical representation, of the enrolment scheme of the petitioner, in the form of a chart.

It is contended on behalf of the respondents that the petitioners’ scheme requires enrolled members to sponsor new members called independent business associates; the members so enrolled are required to pay Rs.10,000/- as entrance fee for which the company claims that it would allot web space which is completely intangible in nature; subsequently the new members are required to sponsor more members for which attractive incentives are provided to them by the company; the sponsoring scheme is a binary system where each member sponsors two members; additional incentives are given for sponsoring of new members in addition to the normal merchandise; the sponsored member is treated as a down liner to the sponsorer and his upline members; this scheme of enrolment of new members, attracting them in the form of commission which is relative to the enrolment of new members into the scheme, falls within the definition of “Money Circulation Scheme” under the Act; these Money Circulation Schemes are pyramid schemes wherein the levels grow with induction of new members at every level; the scheme works to benefit those in the first level, and the vast majority of participants who join at lateral levels lose their original investments; while these companies could challenge their prosecution and contend in the criminal cases filed against them that the Act does not apply to their activities, they cannot pre-empt criminal action being initiated on the basis of a declaratory relief as sought for in the present writ petition.

The Prize Chits and Money Circulation Scheme (Banning) Act, 1978, (hereinafter called the Act), is an Act to ban the promotion or conduct of prize chits and money circulation schemes, and for matters connected therewith or incidental thereto. Section 2(c) of the said Act defines money circulation scheme to mean any scheme, by whatever name called, for making of quick or easy money; or for the receipt of any money or valuable thing as the consideration 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 2(e) of the Act defines prize chit as under:

“prize chit” includes transaction or arrangement by whatever name called under which a person collects whether as a promoter, foreman, agent or in any other capacity, moneys in one lumpsum or in instalments by way of contributions or subscriptions or by sale of units, certificates or other instruments or in any other manner or as membership fees or admission fees or service charges to or in respect of any savings, mutual benefit, thrift or any other scheme or arrangement by whatever name called, and utilises the moneys so collected or any part thereof or the income accruing from investment or other use of such monies for all or any of the following purposes, namely:-

i. giving or awarding periodically or otherwise to a specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or kind, whether or not the recipient of the prize or gift is under liability to make any further payment in respect of such scheme or arrangement;

ii. refunding to the subscribers or such of them as have not won any prize or gift, the whole or part of the subscriptions, contributions or other monies collected, with or without any bonus, premium, interest or other advantage by whatever name called, on the termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional chit.

Under Section 3, no person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme. Under Section 4, whoever contravenes the provisions of Section 3 shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees or with both. Section 7 (1) of the Act confers powers on a police officer to enter any premises which he has reason to suspect is being used for purposes connected with the promotion or conduct of any prize chit or money circulation scheme in contravention of the provisions of the Act; to search the said premises and the persons he may find therein; to take into custody and produce before any Judicial Magistrate all such persons against whom a complaint has been received or a reasonable suspicion exists of their being concerned with the use of the said premises for purposes connected with, or with the promotion or conduct of any such prize chit or money circulation scheme; to seize all things found in the said premises which are intended to be used, or reasonably suspected to have been used, in connection with any such prize chit or money circulation scheme.

AP High Court slams Amway India once again

Here is the Full text of the judgement delivered by the Division Bench of Andhra Pradesh High Court which slammed the business model of Amway India once again in its judgement.

IN THE HIGH COURT OF JUDICATURE

ANDHRA PRADESH AT HYDERABAD

THE HON'BLE SRI JUSTICE GODA RAGHURAM

AND

THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN

WRIT PETITION No. 22914, 22916, 23737 AND 25749 OF 2006

COMMON ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan)

W.P. No.22914 of 2006:

This Writ Petition is filed by M/s. Gemini Techno Marketing Private Limited seeking a declaration from this Court that the provisions of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978 (hereinafter referred to as the “Act”) has no application to the business carried on by the petitioner and its distributors. The petitioner seeks a consequential direction to the respondents not to apply or enforce the provisions of the Act to the petitioners’ business, and to restrain them from interfering with their lawful business.

W.P. No.22916 of 2006:

The relief sought for in this Writ Petition (Win Win Vartaka Pvt Ltd) is to declare that the provisions of the “Act” have no application to the business carried on by the petitioner, and the action of the respondents, in interfering with the business carried on by the petitioner and its distributors, is arbitrary and illegal. The petitioner seeks a consequential direction to the respondents not to apply or enforce the provisions of the Act to their business, and to restrain the respondents from interfering with their lawful business.

W.P. No.23737 of 2006:

M/s. Dewsoft Overseas Private Limited, and their franchisees, have filed this Writ Petition seeking a declaration from this Court that the action of the respondent, in applying the provisions of the Act to the petitioners’ business and interfering with their business activities, is illegal and arbitrary. They seek a consequential direction to restrain the respondents from interfering with their lawful business and that of their associates/franchisees.

W.P. No.25749 of 2006:

This petition is filed by (Mr R Uma Maheswara Rao) a retired scientist of the National Geo-physics Research Institute in public interest to declare the action of respondents 1 to 12, in permitting M/s Amway India Enterprises to run its business in India, as arbitrary and illegal and in violation of the provisions of the Act.

It would suffice for the disposal of this batch of writ petitions if the facts, in W.P. No.22914 of 2006, are noted. The petitioner is a private limited company registered under the Companies Act, 1956. It claims to be engaged in the marketing of its products through a network of distributors; to be providing accident insurance of Rs.1.00 lakh to its distributors in collaboration with Bajaj Allianz Life Insurance Company limited; and to have provided employment to thousands of unemployed individuals, more particularly in rural areas.

The petitioner would submit that it is an income tax assessee; it is registered under the Sales Tax Acts; it provides accident insurance of Rs.1.00 lakh to each distributor in collaboration with Bajaj Allianz; no easy and quick money circulation is involved in its marketing; there is no element of deception in its marketing business; it is a member of the Indian Direct Selling Association; the members of the association are strictly product sales companies which do not indulge in quick or easy money making/money circulation schemes; the distributors have a separate and independent legal identity from that of the petitioner; the relationship between the petitioner and its distributors is strictly at arm’s length; the distributors are solely responsible for the overall management of their business including sales, income, profit or loss, accounting, taxation etc; the petitioner’s business is not a money circulation scheme under the Act; the petitioner’s sales and marketing plans do not envisage promoting or conducting a scheme for the making of quick or easy money; it is identical for every distributor; each distributor’s success is dependent on the time, effort and commitment put in by him, and the sales and marketing of the products of the petitioner which results in his earning commission on the personal purchase of products for sale to the end consumers amongst the public; the commission earned is on the group turnover of product purchases, for sale to the consumers amongst the public, made by the distributor and his/her group distributors; there is no compulsion for a person to continue as a distributor; within the 90 days trial period he can return the business kit and obtain full refund of the money paid by him; free product training sessions are held for training of distributors; the distributors go to the consumers amongst the general public, receive orders and place purchase orders with the petitioner at the distributor price, and sell products to the end consumer at a price not exceeding the MRP printed on the product; the petitioner’s sale and marketing plan does not envisage making quick or easy money; distributors do not earn money by enrolling new distributors; the focus is only on the sale of products; none of the conditions precedent for attracting Sections 2(c), 3 and 4 of the Act are attracted; and the incentives given by the petitioner towards distribution is for the efforts put in by them.

The petitioner would assert that, without recognizing the factual and legal position, the respondents were interfering with their lawful business by taking action against them under the Act; respondents 5 and 6 had conducted simultaneous raids on their branches; had caused wide publicity regarding the arrest of some of their distributors; had registered cases against the petitioner and its distributors; had sealed various office premises of the petitioner; and had thereby created panic in the minds of the petitioner’s distributors and consumers with malicious intent.

The 2^nd respondent would submit that implementation of the Act falls within the purview of the State Government; in case there are fraudulent schemes being carried on in the name of Direct/Network/Multilevel Marketing companies, with the object of making quick and easy money, such schemes should be investigated by the State Government; the Reserve Bank of India issued a clarification in its letter dated 5.2.2003; and it is for the State Government to decide whether or not any given scheme attracts the provisions of the Act.

The 7^th respondent (Corporate Frauds Watch) would submit that the petitioner’s scheme is a binary scheme which means one person has to sponsor or enroll two persons each, and again these two persons are required to enroll or sponsor two persons each to join into the scheme; the new member must be sponsored or enrolled by the already enrolled members in the scheme; the new member ie., those sponsored are called the downline workers and the sponsor is called the upline member; the entrance fee is Rs.2699/-; when a new member joins the scheme, all upline members in the same network or chain get commission irrespective of their efforts; as soon as new members are sponsored either directly, or by the efforts of his downliners, all the upliners in the group get points and, on the basis of points, commission is paid and distributed; as money circulation is based on the contingency relative or applicable to enrolment of members, and on the efforts of the down line members, it is nothing but easy money; the petitioner is promoting an illegal money circulation scheme under the guise of sale of products; the amount of commission paid by the company is directly dependant on the sponsoring of new members into the scheme, not only on his personal efforts but also on the event of contingency relative or applicable to the enrolment of new members by their downline members without effecting any sales; and the scheme squarely falls within the definition of Section 2(c) of the Act. Reference is made to the judgment of the Supreme Court in Kuriachan Chacko v. State of Kerala[1][1] in this regard.

---

[1][1] (2008) 8 SCC 708

More in the next post

Penn and Teller are in perfect agreement with us on 'MLM'.

Shyam

As Penn and Teller's expert opinion of so called 'MLM' as a pseudo-scientific swindle, is in perfect agreement with our's, then, since the 'Amway' Lord Haw Haw, Mr. 'IBOFB' Steadson has labelled our opinion bullshit, by simple extrapolation, he has already decided (without even watching the 'Easy Money' episode of 'Penn and Teller's Bullshit') that they are talking bullshit. However, according to Mr. Steadson, to make this statement of fact, is a lie.

Laughably, Mr. Steadson's latest proud boast that bankruptcy court documents proved that some people have 'made millions of dollars' out of 'Amway's' so-called 'Business Opportunity,' is more reality-inverting 'MLM' bullshit.

Don't forget, Shyam, in order to attract fresh victims, Bernie Madoff and his wealthy criminal associates claimed that some people were making millions out of his fake 'Hedge Fund.'

As ever, our esteemed friend Robert FitzPatrick is perfectly correct in his published analysis. What Penn and Teller's hard-hitting, but humorous, show, 'Easy Money,' revealed, is what the mainstream media (with a few notable exceptions) has been too lazy, and/or scared, and/or corrupt, and/or ignorant, to put clearly before the general public.

Despite all the reality-inverting bullshit, for 50+ years, the overall failure/drop-out rate of so-called 'Multilevel Marketing Business Opportunites' has been effectively 100%, because these cruel scams have had no significant or sustainable source of revenue other than their own participants. The insignificant percentage of persons who have taken large quantities of cash out of these centrally-controlled, unviable closed-markets were liars and racketeers -economic 'alchemists' whose profits, exactly like those of Bernie Madoff and his wealthy criminal associates, actually derived from a heavily-disguised form of theft.

Half a century of evidence proves that so-called 'MLM' has not been a viable income opportunity for countless millions of failed participants around the globe. In the adult world of quantifiable reality, pernicious, blame-the-victim 'MLM' swindles have been the economic, and psychological, equivalent of swallowing poison.

Mr. Steadson is the vile de facto agent of vile US-based racketeers whose Internet propaganda activities are designed to promote fraud and prevent victims from making complaint. Thus, Mr. Steadson and his de facto bosses still risk indictment, heavy fines and imprisonment under the US Federal Racketeer Influenced Corrupt Organizations Act, 1970 and Penn and Teller's recent show must have helped bring this inevitable prosecution much closer.

'You can fool some of the people all of the time and all of the people some of the time, but you can't fool all of the people all of the time.'

David Brear (copyright 2010)

It's bullshit Lord Haw Haw decides that 'Easy Money' as bullshit

Shyam

What a surprise, the inflexible 'Amway' Lord Haw Haw has arbitrarily decided, without even watching the episode of the show entitled, 'Easy Money' (featuring Robert FitzPatrick), that Penn and Teller's well-informed opinion of 'Multilevel Marketing' as bullshit, must itself be 'bullshit.'

http://www.falseprofits.com/files/c4ed210aaece59cd2bb0a07df62c86a0-24.html#unique-entry-id-24

Apparently, Mr. Steadson (who defends and promotes narcissistic racketeers and liars, but who steadfastly pretends to be a poor little independent campaigner for the truth), has been too busy peddling overpriced 'Amway' wampum to his dear old mother (for a profit), that he hasn't had a moment to take look at the sociopathic, Canadian 'MLM' racketeer and liar, Alan Kippax. However, Mr. Steadson seems to have endless time availbable to pursue his transparent 'Scientology'-style 'bull-baiting' tactics on your Website. Yet, according to Mr. Steadson, 'Scientology' isn't (as proved by 50+ years of damning evidence), an abusive totalitarian movement and series of related-frauds dressed up as a 'religion', it is a religion; but then, according to Mr. Steadson, 'Amway' isn't (as proved by 50+ years of damning evidence) an abusive totalitarian movement and series of related-frauds dressed up as a 'business opportunity', it is a business opportunity.

David Brear (copyright 2010)

Because IBOFB is the inflexible apologist of Amway

Shyam

When is the 'Amway' Lord Haw Haw, Mr. 'IBOFB,' Steadson, going to twig that we are not at all interested in his puerile,'Scientology'-style 'bull-baiting' tactics? Similarly, when is he going to realize that we are not going to swallow his 'MLM'bullshit? The answer to these rhetorical questions is, of course, 'never,' because Mr. Steadson is the inflexible apologist for totalitarian racketeers.

Interesting (isn't it?) that Mr. Steadson has had absolutely nothing to say about the recent, humorous exposé of 'MLM' on the popular US television show, 'Penn and Teller's Bullshit.' Similarly, the poor little lad has nothing to say about Penn and Teller's description of the 'Scientology' mob as peddling bullshit, but as being an organization which is too dangerous and litigious for even them to ridicule. Notice also, how Mr. Steadson (an absurd fellow who can't even write simple English, but who claims to have a psychology degree) can't bring himself to recognise the sociopathic Alan Kippax and his pernicious'Business In Motion' fraud, because Kippax obviously copied the'Amway,' mob complete with an added-load of 'Prosperity Gospel' bullshit.

Anyone with fully-functioning critical, and evaluative, faculties, knows that the impressive, made-up, technical-sounding names,'Dianetics' and 'Multilevel Marketing', are cultic bullshit. Indeed,'Dianetics' bullshit is to 'Scientology,' what 'Multilevel Marketing'bullshit is to 'Amway' and its many copy-cats.

The instigators of pernicious cults seek to overwhelm their adherents emotionally and intellectually by pretending thatprogressive initiation into their own superior or superhuman knowledge (coupled with total belief in its authenticity and unconditional deference to the authority of its higher initiates) will defeat a negative or adversarial force of impurity and absolute evil, and lead to future, exclusive redemption in some form of secure Utopian existence. By making total belief a prerequisite ofredemption, adherents are drawn into a closed-logic trap (i.e.failure to achieve redemption is solely the fault of the individual who didn’t believe totally). Cultic pseudo-science is always essentially the same hypnotic hocus-pocus, but it can be peddled in an infinite variety of forms and combinations (‘spiritual’, ‘medical’, ‘philosophical’, ‘cosmological,’ ‘extraterrestrial’, ‘political’, ‘racial’, ‘mathematical’, ‘economic’,‘New-Age’, etc.), often with impressive, made-up, technical-sounding names. It is tailored to fit the spirit of the times and to attract a broad range of persons, but especially those open to anexclusive offer ofsalvation (i.e. the: sick, dissatisfied, bereaved, vanquished, disillusioned, oppressed, lonely, insecure, aimless, etc.). However, at a moment of vulnerability, anyone (no matter what their: age, sex, nationality, state of mental/ physical health, level of education, etc.) can need to believe in cultic pseudo-science. Typically, obedient adherents are granted ego-inflating names, and/ or ranks, and/ or titles, whilst non-initiates are referred to using derogatory, dehumanizing terms. Although initiation can at first appear to be reasonable and benefits achievable, cultic pseudo-science gradually becomes evermore

costly and mystifying. Ultimately, it is completely incomprehensible and its claimed benefits are never quantifiable. The self-righteous euphoria and relentless enthusiasm of cult proselytizers can be highly infectious and deeply misleading. They are invariably convinced that their own salvation also depends on saving others.

David Brear (copyright 2010)

Ugly truths behind groups like Amway remains same

Shyam

How is it possible that the billionaire bosses of the 'Amway' mob have cast such an arrogant puppy in the role of their latter-day Lord Haw Haw? Despite his unsubstantiated academic claims, Mr. Steadson still can't even write short, simple, English sentences without making schoolboy errors - 'there,' instead of their.

Behind all the reality-inverting 'Multilevel Marketing' bullshit, the ugly truth about groups like 'Amway' has remained the same for more than 50 years.

Whilst they remain under the malign influence of their groups' bosses, 100% positive core-adherents of 'MLM' cults will cut themelves off from anyone criticizing their economically-suicidal activity and steadfastly pretend to be in business and making money. They will also insist that their 'MLM' involvement was the result of a perfectly free-choice, that they were not deceived or coerced in any way and that they are not deceiving or coercing their own recruits. However, when asked what their expenses are?, or: If they can produce any quantifiable evidence (in the form of audited accounts) to back up their money-makingclaims? or: If, before they signed-up, they were given access to any quantifiable evidence (in the form of audited accounts) proving that anyone in their group has actually made an overall net-profit out of retailing 'MLM' products, the reactions of deeply-deluded 'MLM' adherents range from embarrassed silence: to downright aggression. This has led some observers to describe these poor persons as being like gambling addicts. For more than half a century, 'MLM' adherents have been programmed to stop thinking critically and to focus exclusively on their meagre winnings, and to ignore their mounting losses.

More than ten years ago, French journalists, and consumer and cult advisers, exposed 'Vente Multi-Niveau' ('Multilevel Marketing') as a mind-bending fraud and 'Prosperity Gospel'cultism dressed as a 'Business Opportunity.' At that time, the largest 'MLM' in France (with a claimed '50 000 Independent Business Owners' conducting multi-million dollar annual sales) was known as 'le Groupement' or 'GEPM' (short for, the'European Group of Marketing Professionals'). This mystifying labyrinth of privately-controlled, limited-liability, commercial companies was ostensibly created by a Franco-American, 'Amway' under-boss, Jean Godzich, who had previously been identified by journalists as one of the racketeers running the 'Amway'-related advance fee fraud (a.k.a. tool scam) in France. In order to prevent further investigation, Godzich was officially excommunicated from'Amway' in 1989, and approximately 8000 adherents in the'Amway Network' which he headed, were all arbitrarily informed that they were now going to become 'Groupement Distributors.' In fact, largely due to the interest of the media, 'Amway France'virtually vanished during the early 1990s; claimed numbers of French and Belgian 'Amway' adherents falling from approximately 90 000, to less than 5000. However, during this period, Godzich churned at least 300 000 more French victims through the identical closed-market swindle and he continued to run the same advance fee fraud on behalf of 'Amway' under-boss, Dexter Yager, and in association with Doug Wead, in the USA. The only thing that was changed in France, was the name over the entrance to the secondary scam.

The following, is part of the testimony of a French 'MLM' victim.

'In total we lost about 700 000 francs ($140 000) ... the more success we thought we had the more we lost... we paid everything ourselves... petrol bills, telephone bills, hotel bills... most of the money went on books, tapes and tickets... we also bought products every month ... we transferred all our insurance ... we were taught to believe that we were investing in our own business and in our future and in our children's future... of course we began to have doubts, but we were made to feel guilty and inadequate... our negative attitude was seen as proof that we didn't love our own children and that we were stealing the dreams of the only people who loved us ... upline told us if we really cared about our children and our friends we should borrow against our house... I can't believe I was so blind, but this fraud can destroy your will ... before you realize what's happening, it can take over your entire life.'

Meanwhile, the billionaire bosses of the 'Amway' mob, via their inflexible Lord Haw Haw, Mr. IBOFB Steadson, still would have your readers believe that 'MLM' is just about selling marvelous products, like toothpaste, for a profit.

David Brear (copyright 2010)

IBOFB yet to come out with quantifiable evidence to back up MLM crap

Shyam

One would have thought that the billionaire bosses of the 'Amway' mob would have realized a long time ago that each time Lord Haw Haw Steadson squawks on their behalf, he is merely pushing them nearer to a prison cell, but no.

Just I have previously stated, David Steadson, like his cackling 'Nazi predecessor, William Joyce, has to remain as inflexible as ever in his defence of totalitarian racketeers, but predictably he will never offer any quantifiable evidence to back up his 'MLM' bullshit. Apparently, out of tens of millions of aspiring, but insolvent, 'MLM' millionaires who have been churned through 'Amway' down the years, there have been a tiny percentage who still claim to have shown an annual profit. However, I have yet to see any real proof (in the form of audited accounts) that this is true, or that an annual 'Amway' profit represented an overall profit. What I have seen, are countless individuals who have been gradually programmed to stop thinking critically and to focus only on their 'Positive Dreams' of 'MLM' success to the detriment of themselves and of their friends and families. In this way, a significant minority of 'Amway' adherents have been deceived into wasting decades of their lives, and tens of thousands of dollars, pursuing a latter-day myth of Utopia, no what suffering this entailed.

Lord Haw Haw Steadson might feign laughter, like his cackling 'Nazi' predecessor, but he knows full-well that all persons who have been presented in 'Amway's' kitsch propaganda as shining examples of 'MLM' success to be copied, were either insolvent dupes or greedy schills whose wealth secretly derived from an advance fee fraud (a.k.a. 'tool' scam).

David Brear (copyright 2010)