Wednesday, 8 August 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 globeVirginia 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.'

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)


gbs5009 said...


I wanted to thank you for your efforts in exposing the dangers of MLM schemes. Recently, two of my close friends fell victim to Amway, and have wholeheartedly embraced the philosophy of avoiding 'negative' friends and family members such as myself.

Hearing two of the brightest people I know argue with absolute conviction that 'the only people against Amway are a group of "negative, self-referential bloggers' and that they are somehow saving money buying Nutrilite shakes was unreal; they completely lost the ability to think critically about Amway in just a few months of exposure to Amway's reality-inverting internal culture. I spent an hour pointing out the lies, manipulations, and bad math I had seen just in their recruitment meeting; every objection was met with a stock Amway non-answer about 'legitimate quality products' or 'that was a problem with the old Amway'.

My friends are in too deep to be persuaded by appeals to logic, or exhortations to actually look at their personal finances and evaluate their Amway 'business' objectively. They instead refuse to speak a word to me, and threatened violence if I should contact them again. As far as I know, they've similarly severed contact with every one of 10 or so mutual friends.

I hope your blog will serve as a warning to others, and help stop the spread of this bizarre and destructive business. I never would have believed the allegations of the cult-like influence Amway exerts on its members before I saw it consume people I'd known for years.

Good luck,


Shan said...

Last weekend I went to my native for Rmazan holidays (Aug 18 - Aug 20). One evening my Father's friend(Amway member) came to our house. He talked proudly about Amway to my father. I was watching TV that time. Then I reduced the TV volume and listened to their conversation. He(Amway) said that he is in 'SILVER' level and earning Rs 50000 per month. and said that 50K is minmum and he will earn more than that soon. I was shocked about this and said him that I cant really believe that. (since I am earning the same amount by 25 days of very hard work after my Bachelor degree. And that guy never reached college). To verify that I asked that guy to show his bank account statement. But he refused to show and said it is confidential. I even said that I would consider joining Amway if that is possible. But still he refused. I think he is not paying tax for that income (may be black money). I dont know what is the secret behind his earning!

Abhijith Ram said...

Shyam Sundar - formerly a journalist now an advocate, what do you know about corporate fraud? you are not "Prannoy Roy" or "Ram Jethmalini". Are you qualified to tell people about frauds. Have you done anything which is of national significance? i dont think so. You could not make it as a journalist & you must be the worst advocate as there are thousands of fraudulent companies in India and you have not named any on your blog. All you have done is take the names of Amway & TLC which is becoming more successful everyday & you are getting old without achieving anything.

I've checked your most of your posts from past 2 years where you have only posted negative comments about MLM schemes but you've not posted anything about 'on how to make money'. You can only make destructive comments but cannot give constructive suggestions as your are a failure in life. you are supported by other losers like george who talks about dangers of MLM schemes but does not know an alternative. He is jealous of his friend and reads this type blog to overcome his jealousy and probably . It is always easy to say bad things about others but cannot make others life successful. your blog should be named as 'corporate fraud watch for failures' subtitle 'waste time'

You think the MLM companies are going to contact you and pay you millions of rupees for not updating posts against them. Dream on as you are no 'Prannoy Roy' or "Ram Jethmalini". You only post those links which shows MLM in a negative way and those articles written by some unknown jounalist may be failed journalists like you but it does not show any of the great personalities telling about MLM schemes. Great personalities will never ever tell any negative things about others whatsoever. May be if you had done something of national significance that would be totally different but you are confused person who could not make it as journalist or advocate and other time wasters like George follow you.

Shyam Sundar said...

Come to reality. Not everyone is like you. I am a retired man. I don't have ambitions. I am comfortably settled in my life. My aim is to save our own people from falling victim to the MLM frauds.
It seems that you are also one of the crooks out to cheat your own friends and relatives. How many you have cheated.

Unknown said...

I'm still here! Isn't that annoying?

Abhijith Ramu said...
This comment has been removed by the author.
Abhijith Ram said...

Shyam Sundar

Oh! you are retired. Now i get it. You could not achieve anything in life and you are frustrated as you are old. You are not saving people instead you want people to be a failure in life like you, get retired & rot. You say you dont have ambitions, this is very true as you are a failure, only losers like people with no ambitions & your blog is full of them.

You are calling others cheaters is like 'Dawood Ibrahim calling others criminals'. From when did advocates become the good guys in India saving people. Advocates are the biggest crooks in our country. You team files case against company so that company will pay you to take back the case. as i had told you before dream on. As an advocate god knows how many people you have cheated and now you taking on the companies. Your are criminal genius.

Your comments on 29th Aug shows that you are trying to use reverse psychology widely used by the lawyers & advocate but it does not work on people like me. If you were a saviour you would probabably explain you theories once again and will never give negative comments on others but you are an advocate what can i expect from you.

Shyam Sundar said...

Abhijit, Are you the Ongole man who has been into this type of rackets for the last several years to cheat people.
This type of crooks are the dangerous lot to the country and economy.
This fellow keeps on looking for new rackets and induce people stating the early entrants would get lot of money in the chain system.
They convincingly say that it is legal and a 'good business opportunity'.
Ultimately, criminal case would be filed against that company and he would search for another company and new lambs to sacrifice.
My dear fellow countrymen! Don't listen to these crooks and lose you hard-earned money.

Abhijith Ram said...

Shyam Sundar

Now you have spoken like a politician. Cover up your criminal ideas by giving some theories which does not make sense. Check out the below link which will expose you. You are a typical advocate who'll only try to take money from others and call it saving people


Posted by Rakesh on August 31, 2011 at 8:53am in Pai* Suveys & Market ResearchView Discussions

Shyam Sundar said...

It is like a thief shouting that everyone a 'thief'. Why don't you prove that the business plan of the your racket is legal. You could prove here or prove it in the court of law. Why these people are trying to convince me or anyone who appears on this blog.
It simply is hilarious.
My life is like an open book.

Peter said...

Triple Filter Test - Very true for today's world....

One day an acquaintance came to meet Chanakya and said to him excitedly do you know what I just heard about your friend?

Just wait a while, Chanakya replied. Before you tell me anything I would like you to go through a little test which I call the triple filter test.

What's that? asked the acquaintance.

I will tell you, Chanakya said. Before you talk to me about my friend, it might be a good idea to take a moment and filter what you are going to say. That is why I call it the Triple filter test. The first filter is ˜Truth'. Are you sure that what you are about to tell me is true?

No, the man said. Actually, I just heard about it.

All right, said Chanakya. So you don't really know if it is true or not. Now lets us try the second Filter, the filter of ˜Goodness'. Is what you are about to tell me about my friend something good?

No, on the contrary..

So, Chanakya continued, You wanted to tell me something bad about him but you are not certain it is true. You may still pass the test because there is one filter left; the filter of ˜Usefulness'. Is what you want to tell me about my friend going to be useful to me?

No, not really...

Well, Continued Chanakya, If you want to tell me what may not be true and is neither good nor useful, why tell it to me at all?

MORAL OF THE STORY: He who repeats the ill he hears of another is the true slanderer.

Let us not be the rumor mongers to tarnish the image of others; wherever possible, let us avoid projecting the wrong image of others! All the human beings have plus and minuses, let us concentrate on our minus points and try to improve ourselves.

Peter said...

Shyam you said, I am young and should be ashamed, Ashamed of what?? Support to those who are earning, who have no job and now they have a steady job, those who are getting some few bucks of free groceries every month and a credit of Rs.1,500 every month so that they can run their houses,

Does your government ever gave credit to anyone?? Those controlled Kirana store near you is selling kerosene for the premiums to the poor, those selling Wheat, Rice, Sugar on a premiums to control their margins, does your government ever looked for those farmers who have lost huge amounts in the Satta Bazaar of Sharad Pawar? Does your Government ever thought of us when Rs.4 is getting increased in Diesel and Petrol very soon?

Did You.!!! ever thought of this?? I bat you never had a thought of it cuz you said you are an old man and with no further goals, or ambitions. People like you should have a fight with the government but you really know that if you fight with them and lock your horns in it, you will be in a Jail with Anna and Ramdev and that will hurt your prestige what you may have in Vijayawada, or people may say Sala bahot bol ta tha, dekho Govt. ne use bhi under kar diya.

Look Old man the World has changed a lot, the way you type the way you learnt, the way you speak, the way you transfer, every thing is adopted in India, what you wear? Sure not Khadi, cuz even the Khadi is not pure Indian. Look at the surroundings near you. Understand the basic of Circle and Circulations, you at one side closing companies, are creating Un employments, many such companies are recruiting people who have no jobs,those who are looking to earn few penny. I ask a simple question, those companies whom you have brought down to knee, just give me the figure how many Un Employments have you created?

Check the figures fact fully, just than pick any two Employees from those un employee who are very low in their Salaries, now just take an Oath that you will full fill their necessity every month by providing their same amount of salary for the time you live.

Can you Do that? You cannot, or even if you do, you will choose your own relative so that the money remains in house.

Bachchu bol na bahot asaan hai, karna nahi.. I am Young Dynamic and i live with my ambitions, i have lost crores of rupees till now, even i don't have a single penny in my pocket, i have never thought like you, I am not ashamed of i lost crores, i am happy that everyday i learn a lot.

One very Important thing: You say yourself as an ONGOLE, i specify myself as an Indian,

You live for your Society, I live for this Country,

You live with your own EGO as you are OLD, it is scientifically proven that after crossing 55, most humans get EGO in them, and you are one of them,
I am only 36, and i crush the EGO which tries to over take me.

This is a Difference between the Age. and i don't have to go to Court to prove these things.

Unknown said...

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