Make $ in a Pyramid: Bet Against It

On April 25, the stock of Herbalife Ltd., which sells weight-loss and energy products through multi-level marketing, plunged by 9 percent to $40.08. On that day, San Diego fraud sleuth Barry Minkow had revealed that Herbalife’s president, Gregory Probert, did not have the MBA degree he claimed to have. Minkow, who had been betting Herbalife stock would go down, made $50,000 on the stock’s plunge.

It was legitimate: Minkow had publicly revealed he was betting on the stock’s dive, “and the FBI and SEC had access directly to the trading account in advance,” he says, referring to the Federal Bureau of Investigation and the Securities and Exchange Commission, federal agencies to which he regularly gives scam information dug up by his Fraud Discovery Institute.

On May 1, Probert resigned from Herbalife under pressure. That day, the stock dropped only 1.85 percent.

Herbalife’s address is Los Angeles. But the company is officially based in the tax-and-secrecy haven of the Cayman Islands. Astutely, Minkow is suspicious of multi-level marketing companies, because they are basically pyramid schemes, he says. He is also suspicious of offshore pirate coves. In February of last year, he exposed Salt Lake City–based Usana Health Sciences, another multi-level marketer of weight-loss and energy products. The founder of that company holds 52.4 percent of the shares, and almost all of them are tucked away in the hush-hush tax haven of the Isle of Man.

When Minkow went on the attack, Usana’s stock was selling for $61.19. Now it is a bit above $20. Minkow made $60,000 on that one, but the proceeds didn’t cover the cost of the Usana investigation, which unearthed two San Diegans at the top of the company with phony bios. They resigned. Usana has sued Minkow and his institute; the case is still in court, but Minkow seems to have the upper hand, even though the case is being tried in Utah.

As a result of Minkow’s charges, the Securities and Exchange Commission probed Usana, eventually dropping the matter. The agency began investigating Herbalife last year, and that probe is still pending.

Herbalife’s business is seemingly booming. But the company makes its money recruiting salespeople; actual product sales are not as important, says Minkow. He says the same of Usana. That’s what makes both of them endless chain schemes, he says.

“The biggest risk facing Herbalife is the high level of regulatory scrutiny to which it is subjected, particularly in foreign markets where its multi-level marketing approach is not widely accepted,” says Morningstar, the stock-rating firm. “We give the firm an F for stewardship,” partly because of the Cayman Islands incorporation.

Minkow, who is quoted in newspapers such as the Wall Street Journal and appears on TV shows such as 60 Minutes, is both world-famous and world-infamous. In 1987 he was sentenced to 25 years in the slammer for perpetrating a fraud in which he inflated sales by 90 percent. He has written books on the experience. While in prison, he got religion and was sprung in 7 years. He is now senior pastor for Community Bible Church in Mira Mesa. He splits his time between saving souls and chasing crooks. But “sadly, no trade [bet on a stock receding] has ever come close to covering the cost of any investigation,” so the church has not reaped any of the profits.

Comments

Response to post #42: My, my, my. The invective is getting as foul-tasting as wheatgrass. Will someone please tell me what gange is? Best, Don Bauder

Barry Minkow is a crook who was sentenced to 25 years and served a paltry 7. His newfound company, Fraud Discovery Institute was financed in part by Sam Antar who is likewise a crook who scammed people through the company Crazy Eddie. Like Minkow, Antar served reduced time for defrauding people out of millions of dollars (house arrest) and now these two pair up to destroy the reputation of public companies and investors in these public companies.

Minkow profited $60,000 on his reportings he claims. The stock lost more than 50% of it's market capitalization costing investors tens of millions of dollars. Ultimately a regulatory investigation found that much of Minkows claims were false.

How many more public companies and investors will Minkow and Antar gang up to destroy while harassing them in false allegations?

Our whole Famn-Damily (switch the F & D) have been immersed in the San Marcos,CA sec. #127 AYSO for nearly a decade. Kid's are players, Mom's a cert. Ref. & Bd. member & Dad's a pt./time line Ref. and Field-maint. Staffer. "Herbalife" is also the Main U.S. (Nat'l.) league sponsor for AYSO and are the Mn. sponsor of the "L.A. Galaxy" pro Soccer team of David Beckham fame. Reading this article leaves one cringing at the thought that such an honest and decent Jr. athletic program (Motto: EVERYONE PLAYS!) could be naively brought-down (or even worse infiltrated via membership masquerade). It should be (one would think/hope) that "Herb-of-Death" could somehow be investigated or at least ordered to show their hand. Is this possible and if so how? My wife & I have always held these once-self-touting-"Cancer-Curers" in sceptical disregard, and now find ourselves "Dancing w/the Beast"!

Response to post #1: Minkow's study of Herbalife is eye-opening. Be extremely wary of ANY multi-level marketing (sometimes called "network marketing") operation. It is almost certainly a pyramid like Herbalife and Usana. Also, be very wary of any company that is based in an offshore tax and secrecy haven, or whose stocks are housed there. Best, Don Bauder

Don, I am not personally involved in MLM but I am ceratinly aware that they have been around for decades. Your comments in Post #2 almost assuredly imply that MLM firms are all fraudulant scams. My question to you woud then be, if they are all fraudulant scams, why has the Federal government allowed them to exist over these decades?

Certainly the federal governmengt has shut down many a pyramid schemes and yet Herbal-Life has been around for some time now. If they were a pyramid scheme as you claim, why do they exist today?

If you don't like the fact that upper management gets the most profit/money in all this you must have a basic problem with corporate America in the USA. Research the ratio of CEO salary to average worker and take a close look at the disparity.

Response to post #3: Minkow is the first to admit that he pulled a huge scam that landed him in prison. I have seen several studies by the Fraud Discovery Institute, and thought they were very good. The FBI, SEC and other agencies rely on his work. I am not aware that Sam Antar was involved with him. I thought his name was Eddie Antar. If it's Sam, and his firm was Crazy Eddie, I won't argue with you. Yes, the one I recognize as Eddie Antar was a crook. Best, Don Bauder

Response to post #6: Yes, governments at all levels have shut down MLM companies, but the big ones such as Herbalife, Shaklee, Amway, and Usana survive. From time to time, the government looks into the biggies such as it has looked into Herbalife and Usana after Minkow did his studies, but the big ones slip off the hook, just like most large companies get away. Yes, CEO salaries are obscene. In that sense, I do have a problem with corporate America. I have an even bigger problem with Wall St., where pay is even more obscene. That doesn't make me anti-capitalist. The system just needs reform -- big reform. Best, Don Bauder

Don, Crazy Eddie was Eddie Antar and his cousin Sam was the CFO of the company. Sam was the guy cooking the books for Eddie. Sam is also the guy who put nearly $300K into Barry Minkow.

RE: Executive salaries, I am in 100% agreement with you. My only argument to this is that it ultimately is all a ponzi scheme as the guy at the top of EVERY Corporate company is taking in most of the profits. Singling out those at the top of any MLM firm as being any different is wrong. They started the companies, they are most in line for the biggest profits. Check out the pay for the Google guys who started that company. Lloyd Blankfein took in over $70 Million last year and hedge fund managers are pulling in over 41 Billion annually. Ultimately Wall Street itself is one big ponzi scheme that is protected by the federal government.

Response to post #7: I appreciate the clarification on the Antars. I don't think obscene executive compensation is a Ponzi scheme. Top executives' pay, although admittedly disgraceful, is not a large percentage of total corporate expenses. But this obscenity has negative effects on the U.S. economy. The CEOs send jobs overseas, thus lining their own pockets. They manipulate earnings with all kinds of accounting tricks. This means the market does not have good information. Hedge fund managers raking in several billion a year -- and there are many of them doing that -- is the most obscene of all. What I do not understand is why investors put so much money in hedge funds, whose performance is mediocre at best. Why put money in a hedge fund and have to give 20 percent of your profits to the fund when the fund can't beat the S&P 500? The fact that more than half these hedge funds are based offshore may have something to do with it. It may be a tax angle. If it is, the IRS should throw both the hedge fund managers and tax-shaving investors in prison. Best, Don Bauder

Back in 1993-94, when I was still a Republican, Jim Madaffer tried to recruit me into his "downstream" for an MLM company called Quorum.

See more about them and their products here:

http://www.mlmwatchdog.com/Report_Quorum.html

Several other San Diegan Republicans were in on this. I don't know that any of them ever made money, though one candidate for State Assembly was proud of his "Diamond" status.

Of course, Jim Madaffer also bragged to me over lunch about how putting the Mission Times Courier into his wife's name allowed him to get a grant from the City of San Diego. This was all while he was employed as Judy McCarty's chief of staff.

It was just this kind of sliminess that turned me off from the Repugnican Party in San Diego. A few years later I was offered a position in McCarty's office and turned it down precisely because it would have involved working under Jim Madaffer.

I'm glad I never got involved in any of these MLM operations. I guess I'm bright enough to figure out that they made all their money by selling motivational books and tapes to their gullible "downstream".

Any wonder our city has been run into the ground?

Best,

Fred Williams

Response to post #13: I have been writing about the dangers of multi-level marketing for more than 20 years. You ask whom I helped in my life. If I rescued just one person from getting involved with MLM, it was worth it. Best, Don Bauder

Response to post #9: Given his activities at city council, it hardly surprises me that Jim Madaffer got involved in a multi-level marketing operation. I wonder how many cartons of soap he has in his garage? Best, Don Bauder

It is interesting to hear and get to know all that info, but as a customer of the products I'll be more interested to know any findings related to the quality of the products and effectiveness. I'm more concern about any health problems reported associated directly with the use of the product than executives making $$$ with MLM companies or any other type of company.

Response to post #11: The quality and safety of the products are important. Incidentally, have you ever seen a bar of Amway soap in a house? I haven't. Best, Don Bauder

Hi Don! I think that someone payed you for this article. Because MLM companies and all produducts HLF,USANA e t.c. goverment check regulary.And ITS WORKING!PRODUCTS WORKING!Do you understand? It means all that you writing - bull---t. And Barry Minkow makes money on the scandals.I think it's not good.This companies REALY help poople,I see results! America has 65% people with obesity-it's facts!Who will help them? And what about you? Who did you help in your life?

Current Litigation;

In a routine financial report filed with the U.S. Securities and Exchange Commission in mid-2006, Herbalife management identified two pending lawsuits significant enough to warrant notifiying their investors:

In a California class action suit, Minton v. Herbalife International, et al, the plaintiff is "challenging the marketing practices of certain Herbalife International independent distributors and Herbalife International under various state laws prohibiting "endless chain schemes", insufficient disclosure in assisted marketing plans, unfair and deceptive business practices, and fraud and deceit".

In a West Virginia class action suit, Mey v. Herbalife International, Inc., et al, the plaintiffs allege that some "telemarketing practices of certain Herbalife International distributors violate the Telephone Consumer Protection Act, or TCPA, and seeks to hold Herbalife International vicariously liable for the practices of these distributors. More specifically, the plaintiffs' complaint alleges that several of Herbalife International's distributors used pre-recorded telephone messages and autodialers to contact prospective customers in violation of the TCPA's prohibition of such practices".

Man, I love it when I can blow people like Reader clean out of the water with their nonsense claims.....Reader-put your chin strap on buddy, because in boxing this is known a a knockout. ! ! !

1- USANA is award winning, won Best of State in Utah for 4 years in a row where over 100 supplement companies are housed.

BIG DEAL, this is not a STATE agency, it is a private group that has only in been business 4 years-and they give out HUNDREDS of these awards. And BTW-Utah does NOT HAVE hundreds of supplement companies. Nice try.

http://www.bestofstate.org/index.php?BestofStateSess=7d942eeb7e87559e29b3cb3de79dc810

Strike one.


2-USANA won the highest rating in "The Comparative Guide to Nutritional Supplements".

Lyle MacWilliam who authored the Comparative Guide to Nutritional Supplements was on USANA's medical advisory board from 2003 to 2006. This was during the time he wrote the fourth edition. Lyle MacWilliam never disclosed that fact to anyone.

One of his claimed "INDEPENDENT authorities" used to make the blended standard used to determine the best formula was Dr. Ray Strand. What is never disclosed to any reader of the book is the following.

Dr. Ray Strand is on USANA's medical advisory board. Dy Ray Strand and his wife Elizabeth are USANA distributors at the EMERALD director ranking which makes on average $104,000 a year on commissions.

Another "INDEPENDENT" authority was Dr. Michael Colgan. He was also on USANA's medical advisory board in the 1990s and once was a USANA distributor with the USANA account name "Institute Colgan".

So how could Lyle MacWilliam claim Dr. Ray Strand is an "INDEPENDENT" authority??? And since Lyle MacWilliam himself was on USANA's medical advisory board from 2003 to 2006 without ever disclosing that fact, this makes the entire book USELESS and NONCREDIBLE.

The book is nothing more than a sales tool sold to USANA distributors to be used to recruit people into USANA's pyramid scheme.

Strike two.


3-USANA's founder won "The Albert Einstein Award" for Life Science through Nutrition.

This "award" comes from Global Capital Associates, founded in April of 2006-or less than a year old when they gave this "award" to one of their first "clients". My question to Reader-ARE YOU SERIOUS!!!!!

Strike three-you're out Reader.

Patchie is obviously a MLM person, because they are the only ones who promote MLM's as legitimate businesses. Same goes for Alexander. When you get people coming on making conclusory statements, in spite of the vast documented scams of these companies, then you know they are in over their heads and just trying to get their oney out of the scam.

As for shutting down MLM's, like Don stated, happens all the time. As for Herbalife, Amway and the others-they have been hit with hundreds, if not thousands of FTC lawsuits, claims and cease and desist orders-so it is very well documented that they break the law on a regular basis, and eventually they will fold.

As for hedge fund managers making $ billion a year-100% false. The TOP hedge fund/private equity manager last year made 3.6 billion, and he was far and away the highest paid. There is also a fundamental difference between MLM and regular business where people actually work for a paycheck. In MLM's it is just a big fat scam where people do NOT WANT to work, and just sit back and get the profits. No intent to put in the sweat and tears, but still want to take out the profits.

As for Amway and their claim that they are the top supplier of soap in America-I will restate what Don said-have you EVER seen an Amway bar of soar ANYWHERE in public or private. No. I m not saying the Amway, or the others, have garbage products, but I am saying they are not honest companies.

I think the BIGGEST scam held out by Amway is that the have created more millionaires than any company in the world. Never mind they can’t back the statement up, and the fact is McDonalds is well documented as having created more millionaires, BY FAR, than any other company. Now, ask someone how many times he or she have eaten a Big Mac and then ask him or her how many times they have bought Amway soap. BOOM!

Patchie-MLM's are 100% bogus, always have been, always will be. Sorry to burst your bubble.

For Patchie and the others;

http://www.google.com/search?hl=en&q=amway+scams

In a 1979 court ruling,[7] the Federal Trade Commission found that Amway does not qualify as an illegal pyramid scheme since the main aim of the enterprise is the sale of product and money is paid only for business volume, personal and group. It did, however, order Amway to change several business practices and prohibited the company from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve with the business. Amway was ordered to accompany any such statements with the actual averages per distributor, pointing out that more than half of the distributors do not make any money, with the average distributor making less than $100 per month.

****The order was violated with a 1986 ad campaign, resulting in a $100,000 fine.[8]

.... October 2005 a Utah appeals court reversed part of the decision dismissing the case against four Amway distributors, and remanded it to the earlier court for further proceedings.[32]

****On 20 March 2007, Procter & Gamble was awarded 19.25 million dollars by a U.S. District Court jury in Salt Lake City, in the lawsuit filed against four Amway distributors in 1995.[33][34]

Several groups including those associated with the anti-cult movement have expressed concern that tactics of some of the organizations that support Amway IBOs may constitute cult-like activity. Steven Hassan's Freedom of Mind Center lists the practices of some of these groups as potentially abusive according to his "BITE" Model of mind control.[35] Other similar organizations that have expressed concern with the activities of AMOs in practice include FACTnet,[36] Cult Awareness and Information Centre (Australia),[37] and others. The Rick Ross Institute keeps a collection of related material on its website.[38].

GREAT COMPANY!!!!

I am a USANA product user my health has never been better and have a better quality of life. So much so, I decided to join the company a few years ago. This opportunity has allowed me to quit my job and retire my wife as well, which you cannot put a price on. Corporate America could never do that for me.

However, I DO agree that NO INDIVIDUAL nor ANY COMPANY (drug or supplement companies) should make any product claims about "curing cancer" or other diseases.

I am also a Christian. Although I do not agree with Barry Minkow's behavior but that is his own life and choice. I am not to judge, only let my light shine and tell the truth. Otherwise if we sit and judge others, we are wasting time when we could do something a lot more positive!

Like...looking at these wonderful accolades! Here is just a few of them...... USANA is award winning, won Best of State in Utah for 4 years in a row where over 100 supplement companies are housed. USANA won the highest rating in "The Comparative Guide to Nutritional Supplements". USANA's founder won "The Albert Einstein Award" for Life Science through Nutrition.

To all the people out there reading these comments that are confused....the best way to make a decision is to try it for yourself then decide. The most expensive thing you can own is a closed mind.

Some things I cannot believe:

  1. Tooth Fairies

  2. Unicorns

  3. Multi-Level-Marketing

  4. Social Security for my Generation

Response to post #15: Excellent points. MLMs make their money recruiting salespeople, not selling products. Eventually, this strategy collapses. Best, Don Bauder

Response to post #16: "Cult-like" is quite descriptive. The meetings are like religious revivals. Of course. People have to be whipped into an emotional state to fall for this line. If they were rational, they would see through it. Best, Don Bauder

Response to post #17: Great combination: pyramid and telemarketing scam wrapped into one. Best, Don Bauder

Response to post #18: MLM enthusiasts are very enthusiastic. Best, Don Bauder

Response to post #19: Johnny, you are showing that MLM is an insider's racket. Good sleuthing. Best, Don Bauder

May you live in the BEST of health in your coming years, be free of any pain and suffering and live a long, POSITIVE wonderful life. :)

May you find many things to reflect upon that are WONDERFUL in your life and see the JOY and hapiness in others with what they chose to do and what works for them.

I am too happy counting my blessings to argue with wolves so I can only laugh at their responses and move on. Have a great Sunday!

Proud USANA User/Distributor FOR LIFE.

"The Most Expensive Thing You Can Own Is A Closed Mind."

Response to opost #25: I have already lived a long life and have never used a Usana, Amways, Shaklee, Herbalife product -- knowingly, anyway. Best, Don Bauder

"The Most Expensive Thing You Can Own Is A Closed Mind."

By Reader 12:56 a.m., May 18, 2008

Reader, your mind is not only closed, it is cemented shut!

Don't sweat it though Reader, if someone owned me on bogus claims the way I owned you I would not argue anymore either.

Hope this helped.

Kiyosaki, Trump, Warren Buffet were totally wrong about endorsing Network Marketing...but let the readers decide who to listen to...MULTI MILLIONAIRES or a critic that enjoys crying claiming to "own" others that believe network marketing?

You had better enjoy your job while you have it sir...BUT don't listen to me...listen to the United States Comptroller David M. Walker! My network marketing business is BOOMING in this economy.

http://www.youtube.com:80/watch?v=OS2fI2p9iVs

As far as Barry Minkow...all I can say is... "Jesus save me from your followers!"

"People have always been afraid and even ignorant about ideas and methods that may result in change. Fear of change caused ridicule of Christopher Columbus, Louis Pasteur, Thomas Edison and Albert Einstein. There are other examples of how fear of change had effects on progress."

By the way I am allowing you to have the last word. You are truly hilarious and entertaining. Have a great life! SMILE...

Response to post #28: Donald Trump is a phony. Check the bankruptcy filings of his casino holdings. Buffett is one of the world's great investors. But he has made serious mistakes, and he admits it. Do you remember PS Group in San Diego? When the PSA airline was sold to USAir, the airplane leasing part of PSA, along with some other businesses, remained a public company under the name PS Group. The company struggled and was finally taken over. Buffett had blown it. Best, Don Bauder

The people have already decided about the scams Reader- pyramid schemes don't work, never have-never will. And when you get caught in a lie, like the three I called you on, it just destroyed what little credibility you had.

There are a few millionaires at the TOP, that is why they call them pyramid schemes. As for your "pie in the sky" claims that your pyramid scheme is "booming", I say your nose just grew 10 feet long with that statement. But feel free to post up a copy of a tax return.

Response to post #30: Yes, there are some rich people at the top. In the case of Usana, the stock held by the richest person reposes in an offshore tax and secrecy haven. Best, Don Bauder

Response to post #31: Many pyramid schemes are legal -- Social Security, for one. Best, Don Bauder

Social Security is not avery smart way to run a retirement system, but it is not a pyramid scheme.

It has basically been abused the the Congress, who have stolen the money out of it. Then Senator Dan Moynihan "fixed" it by raising the FICA contributions-which were once again quickly stolen by the Congress, and now we need to "fix" it again-IE raise the taxes on it again.

Sort of like the CA budget and CA legislature. Idiots leading other idiots.

Response to post #34: Today's young people are not going to get out of Social Security or Medicare what they put into it. Ultimately, that would have been true even if Congress had not tapped the till. Congress hastened the woes, which are still a number of years away. Best, Don Bauder

Response to post #36: Those are words for all to ponder. You have to believe in the tooth fairy to believe in MLM. Best, Don Bauder

Nice link, but I am going to have to ask why the lead was analyzed in labs outside CA, and even the USA?????

CA. has hundreds of state certified labs for testing-why not use one, even if it is in ADDITION to the Switzerland and Israel labs...

Makes the testing look like a smelly fish, when it doesn't have to.

Response to post #38: Do you think the Cayman Islands will tell Herbalife to get the lead out? Best, Don Bauder

Response to post #39: A testing lab in one tax haven, Switzerland, warns a company based in another haven, the Cayman Islands, about high levels of lead. I sense more official inaction. Best, Don Bauder

Ironically, there is some great advice here: Investing in a pyramid scheme is likely not to return a profit. However, Don does not understand the difference between a pyramid scheme and a legitimate MLM company.

  • Pyramid scheme: promise of profit gained for recruiting other individuals into the scheme (at a cost) without moving any products or services as a legitimate business

  • MLM: identical to any traditional company except in how it chooses to market its products or services

An MLM advertises through a network of entrepreneurs who market the company's products/services via word-of-mouth. These people earn commissions based on their effectiveness in moving the company's products and services through their own teams of affiliates, as opposed to more traditional advertising methods (e.g. celebrity endorsements, national TV or print ad campaigns). Those whose marketing efforts generate the most product sales make the most money, not those who "started at the top." It’s a simple concept, but it is unpopular with the excuse-prone who would rather blame the model rather than be accountable for their own failings as entrepreneurs.

Anti-MLMers tend to fall into one of 3 categories:

  1. MLM failures: They started a business and were either too lazy, too fearful, or too ignorant to learn about the industry, work with their upline mentors, and put in the necessary footwork to build a successful long-term business. These folks should remain as employees since they lack the mindset and determination to build a successful business.

  2. The ignorant or uneducated: They reiterate hearsay from others without any personal experience or real study of the subject. These people tend to be bigots, irrationally jump to conclusions, and often play a role in promulgating ignorance throughout society.

  3. Those who have a financial stake in the demise of either MLM as an industry (by selling their own books/tapes/programs) or of an individual company: Minkow falls into this category, having purchased put options on the USANA’s stock and having received outside funding to fuel his anti-USANA "research."

I run two small businesses, one of which is as an MLM distributor and have been in the industry for 2.5 years. I have learned the ropes and put in the effort necessary to have generated steady, weekly, residual commissions from this venture for more than a year now. I believe it makes the most sense to learn any trade or new skill from those who have expertise in a given subject rather than receive "gospel truth" from charlatans, failures, or otherwise ignorant individuals. Learning about MLM from an individual belonging to groups #1-3 above is analogous to getting advice from a chronically obese person on how to lose weight, receiving personal training from a couch potato, or consulting a convicted felon for fraud on evaluating ethical business models.

To which of the three groups above do Don and JohnnyVegas belong?

Response to post #44: You got me. From the usage, it would appear to be something like that. Best, Don Bauder

Once again, it's short for ganja (Rastafarian for "weed").

Response to post #46: By "weed," I am assuming you mean marijuana. Right? See how naive I am? Best, Don Bauder

To which of the three groups above do Don and JohnnyVegas belong?

By Successful_in_MLM

See Don, what did I tell you, the truth kills this scammers!

Response to post #48: In most MLMs the product is incidental to the operation. The company makes its money recruiting more salespeople. You can see that in the official filings of the publicly held MLMs. In the little MLMs, it is even more pronounced. Best, Don Bauder

Response to post #49: I don't fall into any of the three categories. I have never personally been involved in an MLM. I have written a lot about MLMs as scams, but have never made any off this activity. What about you, Johnny? Best, Don Bauder

No, I have never been involved with MLM's.

I have been to a few Amway recruitment meetings though. In fact Amway has trained their people to not even mention the name "Amway" in these recruitment meetings today because of the negative association.

I get "invited" to an Amway meeting every 15 years or so, and when I hear the pitch the first thing I ask at the end is if they are asociated with Amway, and then they have to cough up the truth, and I tell them flat out-thanks but no thanks.

Response to post #52: The son of the founder of Amway is the brother-in-law of the founder of Blackwater. Best, Don Bauder

Response to posts #49-52: Clearly you are both in category #2 (ignorant or uneducated on the subject of MLM). Neither of you have any personal experience with MLM and have only a superficial, misguided concept of how this business model actually works.

The product/service offered by an MLM is NOT incidental to the operation, just as with any other business. In fact, this is strongly enforced by the FTC and is exactly what differentiates a pyramid scheme from an MLM (refer back to post #48).

What you describe in post #50 is completely inaccurate. In my business, I earn absolutely NO commission for simply enrolling another associate or distributor in my downline. I only earn commissions by generating sales of a product or service, just as in any other business (e.g. car salesperson, real estate agent, insurance agent, mortgage broker, etc.). What differentiates me from the aforementioned classical sales professionals is that I also benefit from the leverage of my team. My commissionable sales volume is calculated a function of products purchased by my own direct customers as well as the customers of individuals who are working with me as Associates/Distributors in my organization (downline), as well as the personal consumption of products by these Associates. This is spelled out in detail within the compensation plan made publicly available by my corporate partner:

http://www.usana.com/media/File/Training%20page/BDS%20files/policies%20and%20pro/US-CEN-Binary%20Comp%20Plan.pdf

You will note that it is entirely possible to have a profitable business without recruiting ANY additional distributors and simply market products to customers who are not associates/distributors (just as in any other traditional business which markets to customers one-on-one). After all, we are only compensated by product volume sold within our organization. Of course, in doing so, one does not gain the leverage which is built in to an MLM structure, where those who are great teachers are compensated handsomely to the degree in which they are able to effectively train others (in their downline) to market a company's products/services and generate a much larger amount of product volume through a team than one is capable of accomplishing as a single individual.

Hey "Successful in MLM", why don't you name your organization and tell us about your products? You're proud of your products, aren't you?

I get attempts to recruit me into MLMs all the time, and it really irritates me. Most of the time, they lie to me to get me to attend. Often, there's a religious revival feel to the operation, with no dissent allowed, a showoff "leader" telling tales, music, clapping, happy talk, and no proof for their wild claims.

I know several people who have worked their tails off in MLM, and earned nothing. You've inadvertently let out the secret...the real money is in selling motivational books, tapes, and videos to suckers.

Best,

Fred

Response to post #56: Yes, MLM meetings often have a revival tent ring. How else can you lure somebody into an implausible deal? Get 'em juiced with a religious pitch. Best, Don Bauder

Response to post #54: If you are in an MLM that only lives off product sales, it is like none I have ever heard of. Yes, I have never been in an MLM and never will be. But I do have experience writing about them. If yours is actually straight, I take my hat off to it. Best, Don Bauder

Ahhhhh...Successful_in_MLM is a usana sucker, the cat is out of he bag.

While it is true if YOU make YOUR money from YOUR sales then you are indeed not an MLM, but face facts, you don't make YOUR living from YOUR sales-you try to do it off the sales of OTHERS. That is the classic MLM/pyramid scam.

Sorry Successful_in_MLM, but you cannot win here-truth is power-and when the turth hits you in the face your only option is to get KO'd.

Response to post #58: If you make money selling soap in a pyramid the person above you is going to rake some of it off. Best, Don Bauder

Response to post #55: Don, in the interest of maintaining journalistic integrity, I expect that you would research all aspects of the topic upon which you are writing. In your own words describing the "exposed Salt Lake City–based Usana Health Sciences," you apparently have not even bothered to read the company's compensation plan which is publicly available (see link in post #54). If you took 5 minutes to read the plan, you would see that an associate's commissions are derived 100% from product volume moved within his/her organization. While you may have experience writing about a subject, that does not necessarily mean you actually have any educated background or experience on the subject matter, but then there is no law against that. Only the content which you produce which attracts readers will pay your salary, and we all know that "scandal" (regardless of truth) sells.

Response to posts #56-57: Fred_Williams, my response to this thread is on behalf of the industry, in general, not to promote my own corporate partner. That said, I hold the integrity of my company (USANA Health Sciences), its products, and its compensation plan against any in the industry. Of course, every industry has its bad apples, and those individuals who lie to you in order to sweep you into some meeting are acting without integrity and do not represent the professionalism with which I and many others conduct ourselves as independent associates/distributors. It's unfortunate that this handful of individuals has colored your prospective of the entire industry, any more than Enron, Tyco, and Global Crossing would have done so for their respective industries.

As for the people you know who have "worked their tails off" in MLM and earned nothing for their efforts, I, too, know a few of these of folks. I even have a few in my own downline who claim to have worked their tails off in other companies before. However, these individuals have yet to complete even the first 10-step checklist in our initial training program on how to set up a proper foundation for their business (which only takes a couple of hours). So what kind of work are they actually doing? There is a big difference between being "busy" and being "productive." People can spin themselves around in circles being busy and never produce anything of value, regardless of their industry or profession. Very likely those of whom you speak were either not exposed to proper training or failed to follow that which was laid out for them. I've seen both types of folks, and neither group makes a dime in this business long-term, nor would they succeed in any business if their effort is similarly misdirected.

Your claim that "the real money is in selling motivational books, tapes, and videos to suckers" has no bearing to those of us who build legitimate businesses in MLM. I have not produced a single book/tape/video myself, nor am I compensated by my company for purchasing or distributing these materials. Simply stated (again): I am paid for moving product and teaching others how to do the same. BTW, I personally have never sponsored an Associate as a result of a "revival tent" meeting. I typically meet with someone over a cup of coffee or lunch and take 30-45 minutes to explain how the business works and answer their questions. There is no fluff, smoke and mirrors, or other pyrotechnics... just logical Q&A. All information I offer is publicly available and allows one to decide for himself/herself whether to participate in the opportunity. I leave the irrational religious pitches to Rev. Minkow et al.

Response to posts #58-59: JohnnyVegas, it's clear that you lack the reading comprehension to understand what I've written in previous posts regarding commissions based on a function of my own sales as well as those of my team, so I have no hope that reading the compensation plan mentioned in post #54 will further elucidate this for you. God bless.

Don, I believe there still may be hope for you to gain a better understanding of this, even if you have no desire to participate personally. If you really want to know how a legitimate plan works to compensate those who market and train others how to market a company's products/services, read the compensation plan in post #54 and let me know if you have any questions. Of course, this is just an example of one company's plan (which I personally know well and from which I derive benefit). You may also find of interest this article by another industry trainer/advocate who is not tied to one particular company as he differentiates a pyramid scheme vs. a legitimate MLM:

http://www.firstclassmlm.com/2007/12/07/pyramid-schemes-and-scams/

Response to post #60: In turn, you should read Minkow's report on Usana. Much of it was taken from the company's documents. Best, Don Bauder

Response to post #61: Those making money in tapes, seminars, etc. are usually pitching some phony financial scheme, such as buying distressed homes. Best, Don Bauder

Response to post #62: There are authors in the MLM business who write about the various schemes around. Most are committed to MLM. Best, Don Bauder

The "Albert Einstein Award for Outstanding Achievement" that Usana brags about is one of several given by a company called Global Capital Associates. They say it "salutes path-breaking leaders whose vision and commitment have contributed to the critical advancement of vital life-saving and life-enhancing technology to the benefit of mankind." In other words, the award was for selling vitamins. You can read about what this company here: http://www.globalcapitalassociates.com/about/index.php .

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