From around the world, the charge that multi-level marketing is illegal is being sounded. Consumer activists have long charged that “MLM” is not a true business based on sales to the public but a pyramid scam based on “endless chain” recruiting fueled by “distributors” making purchases to qualify for recruiting rewards. Some MLMs have more retail sales than others but income in all depends on “endless” recruiting, thus, an “endless chain.” Endless chains doom the great majority at the “end” of the chain, making the promise of income potential for all a lie. Most will always lose out, no matter how hard they try. No chain is endless.
Worse, employing the endless chain to promise a utopian future for recruits, MLMs have emerged as the world’s first “economic cults.” Cult leaders separate recruits from friends and family, disparage all other forms of work, and gain control over recruits’ thoughts, speech and actions, requiring them to spend ever-increasing amounts to gain the promised “unlimited income.”
Here are some highlights of charges, arrests and accusations related to MLM illegality.
The MLM, Vemma, another MLM with a “health product” and aggressively recruiting students, has been declared a pyramid scheme – in Italy. In recent months, Vemma is getting increasing scrutiny for targeting students.
Now there is news of Amway’s CEO in India, William Scott Pinckney, being arrested in that country by officials in one state that is prosecuting Amway as a pyramid fraud. This is the second time Pinckney has been arrested. State officials in India laid out a detailed case to the court that Amway is breaking India’s anti-pyramid law by running a recruiting scheme promising “huge and fabulous easy money” based on the number of people recruited. The police officials’ description of Amway recruiting in India precisely mirrors that the description of Amway USA operations in a recent class action lawsuit against Amway. Amway is now “lobbying” Indian officials to get the national law changed so its current operations could become “legal.” Amway’s CEO stayed in jail for almost two months before arranging bond and release.
The large America MLM, Herbalife, is under official investigation by the Federal Trade Commission
Utah’s Top Cops and Biggest MLM Promoters Arrested
Back in the USA, the MLM industry has touted as one of its great promoters the former Attorney General of Utah, Mark Shurtleff. While still serving as a public official, Shurtleff appeared to have publicly endorsed the MLM, Usana and he was instrumental in opening Utah up to more MLM pyramids.
Now it is reported that Shurtleff has been arrested in Utah on bribery charges, along with another former Attorney General of Utah, John Swallow, who was also a major MLM backer.
According to the Salt Lake County District Attorney Sim Gill, the prosecution included the cooperation of the FBI. Gill announced that Shurtleff and Swallow are accused of taking tens of thousands of dollars in bribes from businesspeople. The charges come with a maximum penalty of 15 years in prison.
Both Swallow and Shurtleff were nationally known as governmental defenders and promoters of MLM in Utah and nationally, the state with more MLM headquarters per capita than any other. According to a 2012 investigative article in Harpers Magazine by Jeff Ernsthausen, Shurtleff received campaign contributions totaling more than $475,000 from members of the Direct Selling Association (DSA) since 1999, accounting for 14 percent of his donations from sources other than the state Republican Party. The DSA writes the “code of ethics” that MLM member companies are supposed to follow. The Harper‘s article noted, after itemizing DSA member contributions to Shurtleff, noted that “unsurprisingly”, Shurtleff was a major MLM backer.
Shurtleff famously appeared as the state’s top law enforcement officer at DSA member and MLM, Usana’s national meeting in 2004 to apparently endorse the company publicly. As reported in the Salt Lake Tribune in a 2011 piece on MLM influence in Utah by Steven Oberbeck, Shurtleff “walked onto the stage in Salt Lake City. ‘Good morning, Usana,’ he shouted. ‘And I have some news for you. Last night I talked to Governor Huntsman, and he agreed with me that it is now time to change the name of our state. ‘From now on we will be known as Utana.'”
Another publicized connection between Shurtleff and MLM, was with the MLM scheme, Pre-Paid Legal, which also had been a DSA member. Pre-Paid Legal was a publicly traded stock with the symbol, PPD. It was frequently sued for deception and pyramiding, and later was taken private with a leveraged buy-out, followed by the change of its name to LegalShield, a current DSA member. The Shurtleff/Pre-Paid Legal connection allegedly involved campaign money to Shurtleff from PPD, a lucrative book purchasing deal by PPD to the profit of Shurtleff, and possible help from Shurtleff in squelching a federal investigation of PPD. According to an article in the Salt Lake City Weekly by Eric S. Peterson, the multi-level marketing scheme, Pre-Paid Legal Services had donated $130,000 in campaign funds to Shurtleff between 2003 and 2008. Shurtleff also received $7,400 in donations to his 2009 Senate race from employees of Pre-Paid Legal, and Shurtleff’s political action committee, the PAC for Utah’s Future, received $15,000 in donations from the company in 2010.
Quoting from the article, “Author and Tea Party activist Candace Salima says that when then-Attorney General Mark Shurtleff approached her in spring 2009 about publishing his historical fiction novel with her Valor Publishing Group, he told her that he hadn’t finished writing the book – but that he could guarantee a pre-sale order of 100,000 copies. Salima says that the company that Shurtleff told her was willing to buy 100,000 copies… which, Salima says, would result in over $100,000 in royalties being paid to Shurtleff – was Pre-Paid Legal Services…. At the time, the company was being investigated by the Federal Trade Commission for making misleading statements to its customers.”
Shurtleff’s greatest contribution to MLM in Utah, with national ramifications, was his leadership role in changing the state’s anti-pyramid scheme law to one that exempts MLM and also inhibits the ability of victims to sue an MLM in Utah. For a full review on the changed law in Utah that now protects “product-based” pyramids see, 2006 special report, Utah Legislature Passes Pyramid Scheme Safe Harbor Amendments,by Robert FitzPatrick.
On Shurtleff’s successor John Swallow’s ties to MLM, the Harper‘s investigation reported that “Of the $680,000 he has raised for his election campaign to date (June 2012), $114,000 can be traced to Utah-based DSA member companies, their executives, or their spouses.”
Politics as Protection
Utah is only one example of MLM influence-buying at the state level. North Carolina was also specifically cited in the Harper‘s investigation. Formerly a state that was noted for active prosecutions of MLM pyramids under its strict anti-pyramid scheme statute, North Carolina is now a recent headquarters to the MLM, ACN, famously touted by Donald Trump, and the site of a major new distribution center for Herbalife. Pyramid Scheme Alert asked Mr. Cooper to investigate Herbalife, based on consumer losses revealed in the income data as well as other other known facts about the company related to a pyramid scheme. He did not respond.
Executives from ACN, according to the Harper’s investigation, have given $84,550 to North Carolina Attorney General Roy Cooper “since the run-up to the company’s relocation there in 2008 – nearly 85 percent of their total campaign contributions during that period… Two ACN executives, Charles Barker and Robert Stevanovski, tied with a few others as the largest individual donors to Cooper’s 2008 reelection campaign.This figure includes donations by executives’ spouses and members of ACN’s “Circle of Champions.” Much of this money came from employees residing outside North Carolina.”