A new and strange phenomenon emerges in one of largest countries in the world. It entered almost silently but soon millions of people are affected. From first impressions, it appears harmless and unconventional, even hopeful and positive, yet virtually all that touch it are harmed, resulting in family and social disruption, depression, even suicides. A few people, especially those who helped to bring it into the country, claim that it offers happiness, health and wealth. They say it is the wave of the future, a break from the old ways. These positive and hope-filled testimonials overshadow the tragic experiences of many others.
It spreads virally from one person to another. Those that contaminate others often do not realize what they have done. Others seem to know, but deny the consequences of their actions, claiming private, individual rights without personal responsibility. The harm, the denial and the lack of understanding cause widespread confusion, conflict and mistrust.
A small number of journalists, law enforcement officers and other experts examine the phenomenon and identify it as virulent, inherently destructive and illegal. They warn that it attacks the country’s foundation. If it is allowed to spread, they warn, it will distort values and corrupt government, courts, and other institutions. They name the country it came from and call it a form of invasion.
Astonishingly, they are met with a wall of dismissal or are ignored altogether. Trusted national and state politicians inexplicably reject carefully prepared evidence and data from experts and insist there is no proof of a direct connection to harm. They argue that those who say they were harmed likely brought misfortune on themselves. They point to prominent figures who endorse it. They also note the millions of people, including some that were harmed, that do not complain. Some go further to attack the experts, as anti-social, uninformed, and possibly instigated by wicked motives.
This is not the story of the corona virus epidemic or a toxic food or cancer-causing herbicide brought into a country where corrupt leaders ignore science and make money off of illness. It is the story of how multi-level marketing (MLM) schemes, e.g., Amway, Herbalife, etc., got into India and the sad and tragic consequences to that country. It is from the remarkable new book, Marauders of Hope, by Aruna Ravikumar, a courageous Indian journalist, based in the city of Hyderabad in south central India.
Marauders of Hope is described on the cover as “A dissection of multi-level marketing companies’ web of deceit, powerful international lobbies, political patronage and the gullible consumer.” It is the first full-length book from the field of journalism anywhere in the world that addresses the multi-level marketing phenomenon. The book’s Foreword is by Sanjay Kallapur, Deputy Dean, Indian School of Business, Hyderabad. Written in February 2019, Professor Kallapur prophetically likened stopping multi-level marketing to “preventing a disease. First, individuals should take precautions just as they should wash their hands regularly and avoid places that have many infected individuals.”
It should be noted that no major book publisher in India was willing to support this book. Based on my experience seeking major publishers for my own books, False Profits in 1998 and Ponzinomics to be published this summer, I suspect rejection is based on fear of harassing lawsuits from MLMs or unfounded assessments that the subject would not produce enough sales. For some publishers rejection is shockingly due to lack of awareness of the MLM phenomenon or interest in this Main Street scourge.
Marauders of Hope was published by The Write Place, a publishing initiative of Crossword Bookstores Ltd. a chain of bookstores in India based in Mumbai.The author characterizes the book as semi-self-published. It is available in hard copy or e-book. The author dedicates it to “victims of MLM fraud all over the world.”
According to MLM promoters, in 2018 there were about 5.5 million people in India who paid more than a billion dollars (a larger dollar figure is claimed for “retail” sales, which are unverified) or around $200 per person. The median per capita income in India is $616 a year. In India, as everywhere else, 99% of all MLM participants fail to gain a net profit each year.
Invasion and Duplication
Marauders of Hope is a comprehensive overview of how MLM came into India in the late 90’s with Amway as first invader, followed by the usual list of American copycats, Mary Kay, Herbalife, Nuskin and others. Now there are scores of India-based MLMs, all modeled exactly on the American prototypes. Many have organized into a syndicate, a chapter of the Direct Selling Association that pressures the Indian government at state and federal levels, defends MLM against law enforcement and promotes MLM as “direct selling” and a life-saving “income opportunity.” As the number of schemes is increasing, like a virus, MLM is poised to expand exponentially in India.
The primary “customers” that buy MLM products in India, as everywhere else, turn out to be the “salespeople” themselves. As an example of the bogus nature of MLM “products” Marauders of Hope describes how residents in one poor village in rural India were swept up by MLM’s prosperity promises. To gain the bonanza, illiterate recruits were induced to purchase and supposedly sell a “car wash” product. As reported in the book, “… their village could not boast of a single car. Pathetic as it is, companies amassing huge profits from recruitment couldn’t care less. They are happy as long as the distributors keep purchasing ‘promotional kits’ (training material and videos) and the monthly quota of products.”
For me personally, as an American, to read Aruna Ravikumar’s account is to experience both déjà vu and a deep sense of shame. MLM was invented in the USA. Influence-buying with corrupted American officials obtained not only immunity from law enforcement but also the active promotion and protection of the US State Dept. and Dept. of Commerce, which in turn pressure other countries’ governments to allow American-style MLMs.
Eerily, the story line of MLM’s entry and insinuation into the fabric of India, follows the playbook of how MLM emerged within the USA. It begins with liberalizing economic movements that promised greater freedom and more economic opportunity for all. Nationally-owned industries were sold to private investors. Market solutions were promised for social problems. Poverty would be reduced not by reforms or direct action but as a consequence of business growth. Amway sold itself as one of the vehicles of opportunity, claiming it would help to lift the masses out of poverty. It leveraged American government support for admission into India and then began its American-style propaganda and recruitment. Each recruit was called a “business owner” and pyramid recruiting was described as “entrepreneurship.” Critics were called anti-business or socialistic.
Predictably, reports of losses, disappointment, deceit, and betrayal exploded. This prompted efforts by some courageous attorneys, regulators and police officials to prosecute MLMs under India’s anti-pyramid law, called the Prize Chits and Money Circulation Schemes (Banning) Act, which was passed in 1978, about a decade after similar laws were enacted in the USA in many states. The US still does not have any national statute defining and outlawing pyramid schemes but they could be covered under longstanding criminal fraud laws. India’s national law enables police raids and seizures of property from such schemes and prison for the leaders.
The story continues along the American experience in which political lobbyists from MLM succeed in somehow exempting MLMs from the very laws intended to restrict them or they manage to shield them with ambiguous or limited court rulings. The media largely comply, spreading the notion that MLM is not a money-circulation scheme because products are “sold.”
Unlike her journalist counterparts in the USA, author Aruna Ravikumar is unequivocal as to how it is that MLM continues in India, despite the documented deception and enormous losses.
“Why do we see the same scams re-enacted time and again? How are old players back to their tricks under new names? To the many questions raised there is only one answer: political patronage. Regulatory institutions can do little when those in power decide to help fraudulent companies in an understanding that is mutually beneficial.”
She also breaks ranks with journalists around the world by treating “MLM” as an overall phenomenon, making no significant distinction among them. They are all essentially the same in her analysis, no “good” MLMs.
Promoted as a legal and conventional business but, uniquely and miraculously, also able to deliver “unlimited income,” which no other business or industry could, MLM spread like a mania across India. It enrolls illiterate villagers and educated urban dwellers as well. Products purchases provide camouflage for the blatant money transfer scheme and the impossible “endless chain” (pyramid scheme) that dooms the vast majority. Half or more of the price paid by the enrollees for MLM’s inflated products is transferred up the chain, concentrating in the hands of top schemers ensconced in America and other countries. The profits to the foreign holding companies (Herbalife, for example, is chartered in the tax haven of the Cayman Islands) and the payments to top pyramid recruiters largely escape Indian taxation.
Also, as in America, India has its champions who have sought to expose the hidden and toxic truth about MLM and to halt its ruinous spread. The book pays tribute to them, including Superintendent of Police in Andhra Pradesh, Raghuram Reddy who arrested William S. Pinckney, the CEO of Amway India, for criminally operating a pyramid scheme. The action provoked an immediate political response against law enforcement. Reddy reported,
“There was enormous pressure with telephone calls being made on behalf of the US Embassy. The media carried front page stories and the entire police department of the state came into focus. I acted on the case with fool proof evidence and was doing what I was supposed to do under the circumstances.”
Among other heroes in India cited in the book is journalist Shyam Sundar, who organized Corporate Frauds Watch, which undertook a study of MLM and offered legal help to victims while also conducting awareness programs.
“We noticed that these firms not only duped innocent people but also had the audacity to approach courts as if they were victims. In most cases they convinced legal authorities that they were on the right side of law and got a stay on police investigation,” Sundar stated.
Sundar, took special note of the court arguments made by the notorious MLM scheme called Gold Quest when it was prosecuted. (Note: I am personally very familiar with this Gold Quest MLM, aka Q-Net, which has ravaged many other countries. I was invited to deliver a seminar in the nearby country of Sri Lanka in 2005, prompted by activity of that scheme that posed a direct risk to Sri Lanka’s currency which was being siphoned out of the country with the scheme’s inflated gold coins. Attendees also included central bank representative from India.) In the India prosecution, Gold Quest’s high profile attorney was the wife of a former central minister of the Indian government. She used the rationalization so commonly heard in MLM defenses in America of “Goldquest is just like Amway (which is true), so, unless you outlaw Amway, why are you singling out my client?”
Aruna Ravikumar called this a “brazen defense” that openly admits that all MLMs are essentially identical. It is a public taunt to the government, daring it to act against the entire MLM “industry”, knowing that it will not since it has been bought. Instead, as she explains, Indian authorities (exactly as they do in the United States) maintain “ambiguity” and “space for interpretation” which, in reality, she writes, serve as a “cloak for fraud, and a leeway for regulators and enforcement authorities to defer action.” She concludes that it is “undeniably apparent that as long as the ‘passing the buck’ game was on (in India as it is also in the United States) it was ‘party time’ for the marauders.”
The Greed Claim
Beyond consumer loss, exploitation and deception, economic piracy by the USA, cult persuasion and the further corruption of India’s political and judicial system, there is one more theme woven throughout Marauders of Hope. It is the element of human greed. The manias caused by MLM promises of wealth appear as massive outbreaks of unbridled greed.
Greed haunts all inquiries into the MLM phenomenon. It is used by corrupted legislators and regulators to justify allowing the frauds to spread. It is a key part of the blame-the-victim narrative that shames victims into silence. To identify MLM victims or to associate them, even indirectly, as paradigms of greed is a powerful form of blame. In the Christian tradition, for example, greed is one of the seven deadly sins, along with pride, lust, envy, gluttony, wrath and sloth. To brand MLM victims with this sin is to banish, castigate and separate them from the public at large. In fact, there is no “typical” MLM victim, no identifiable profile. They are us.
Aruna Ravikumar vividly captures and rejects the blanket greed labeling:
“Victims are paying for their own greed. What is so heart rending about their stories?” I overheard a well-to-do socialite say, shrugging her shoulders in disdain when this topic came up in our conversation. Her careless dismissal may seem not quite off-the-mark but with clear evidence pointing to the web of deception, ruined relationships and outright fraud on the poorest of the poor, shifting the onus onto the victims seems grossly unfair.”
From my own two-decade long experience with the MLM phenomenon, I think the greed factor deserves stronger rejection, more clarification and less emphasis. This book makes clear that greed of victims is not primary, yet, reflecting the widespread greed narrative, it opens with a quote about greed from famed social psychologist, Eric Fromm, “Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction.” The first sentence of the Preface reads, “This book is about the unconcealed greed of companies and individuals who reap a rich harvest through fraudulent financial schemes that are a recipe for disaster.”
For my part, I have never found that the ordinary people lured into MLM – and I have talked or corresponded with thousands from many countries – are distinguishable by greed. It does not manifest in any other part of their lives. Far more common is the motive of merely seeking relief or escape from burdensome, sometimes desperate financial conditions. Often they are driven by higher aspirations for their families or even by a desire to make a more positive impact in the world. MLMs entered India by claiming they were bringing modern values and business models that produce profit and prosperity. To be lured by such claims, backed by trusted local authorities, in my view, does not constitute greed.
Cultic Movement
Additionally, sophisticated cult persuasion methods used by MLMs subvert critical thinking and core values. The goal is to separate victims from their own identities and to replace them with a delusional ideology, based on the “endless chain” and magical claims about creating wealth from unquestioned belief and positive thinking. It dresses up deception as “selling” and the commercialization of intimate relationships as “marketing.” When such distorted or contemptible messages are cloaked in these sophisticated disguises and then endorsed by trusted authorities, including religious leaders and admired celebrities, psychological defenses can be overwhelmed.
Individuals are not actually lured into MLM one by one. Their losses are not the personal price for a private indiscretion. MLM recruiting is a global phenomenon, a cultic movement. MLM is a cult of capitalism that has been expanding for more than 40 years. As a cult, it teaches a radical belief system that distorts and exaggerates more conventional beliefs and values that are generally accepted by most people, though likely unexamined. These are the core beliefs that underly our capitalistic system, including personal acquisitiveness, “unending growth”, private gain, supremacy of the “market”, upward mobility, protection of private ownership, etc. Most people measure their self-worth and their place in the world by these values.
MLM manipulates these beliefs and values to cover over its fraudulent pyramid structure and illicit money transfer and then also to cover up the pre-determined losses as a “business” outcome. It distorts and exaggerates the beliefs into a totalistic system with absolute dogmas, promising utopia to those who follow it without question, while claiming to be the purest, truest expression of market capitalism. Its leaders assume the authority of economic gurus. The behavior advocated by this extremist ideology can resemble that of sociopathic CEOs that pursue “return on investment” at any cost or religious extremists who seek to convert the world and permit no dissent.
Big Lie
Far more relevant for identifying and condemning what particularly distinguishes MLM is Deception. The deceptive methods used in MLM would make Madison Avenue and Ministries of Truth blush with envy. From victims’ very first encounters with MLM when they are solicited, MLM is grossly misrepresented. It is therefore a fact that no one joins an MLM knowing what it really is. Not only are its rigged pyramid model and money-transfer plan hidden, but participation costs, inability to retail the products, and historical loss and quitting rates, are all undisclosed or misrepresented. Many of the “testimonials” about income are fabrications. Even the company names are often withheld. Of course, the products themselves are grossly over-priced and misrepresented, often with false and dangerous medical claims. More recently, MLMs have become active in promoting ponzi-based crypto-currencies.
Beyond the deceptions that are spread virally, there are the official false claims issued by MLM’s so called trade association, and often repeated in the news media. These include false “average incomes”, unverified claims of “retail” sales, fake “surveys”, and absurd claims that it is creating “jobs.” During the Corona Virus while people are sequestered in homes, MLM promoters are claiming it is the ideal “business” for “working from home.” During the last Great Recession, MLMs were touted as “safe havens” and a “fallback” for those who lost jobs.
Powerfully aiding the avalanche of deception are the cult methods of persuasion and domination, involving “motivation” rallies, utopian visions, rousing music, chanting, specialized terminology, and constantly repeated lies, based on the truism that a lie repeated often enough becomes accepted as true. Separating victims from objective reality is aided by alienating recruits from families or friends who question the schemes, resulting in what is aptly described as brain washing or thought control.
The false depiction of MLM as “direct selling” and “extraordinary income opportunity” has been accurately characterized as the classic “Big Lie,” a propaganda technique described by Adolph Hitler as a lie so “colossal” that no one would believe that someone “could have the impudence to distort the truth so infamously.”
For this reason, perhaps beyond her clear-sighted illumination of MLM and her unflinching chronicle of India’s tragic experience, Aruna Ravikumar’s book deserves special acknowledgment. She confronted the Big Lie.
Robert L. FitzPatrick
March 2020
