Carlsbad's Actis: How a Pyramid Topples

Pssst! Wanna double your money in one day? Yes, the stock of Actis Global Ventures, based in Carlsbad, soared from $0.0001 to $0.0002 on September 2. Officially, the stock’s price is still $0.00, according to Yahoo.com, which rounds off share prices for investors’ convenience.

A couple of years ago, Actis got a lot of publicity as one of San Diego County’s booming multilevel marketing companies. Such firms wring money out of salespeople as well as customers. Distributors make money on products they sell, as well as on products that people they recruited into the scheme sell. That’s why multilevel marketing, also known as network marketing, is often called what it is: a pyramid scheme. Over and over, it has been shown that only a small percentage of people in the pyramid make significant money, but the schemes still proliferate.

San Diego, for example, has other publicly traded multilevel marketing companies. The same week Actis rose to $0.0002, the stock of Ethos Environmental, which sells environmentally friendly oil additives, was quoted at all of 2 cents a share, and F.I.T.T. Highway Products, formerly Who’s Your Daddy, distributor of energy shots (recently moved to Orange County), was quoted at 9 cents. The aristocrat of the bunch, LifeVantage, which makes antiaging products, was trading hands for a less meager 58 cents a share.

Most of these pyramids don’t make it. Consider Actis. As far as I can determine, $0.00 is a very realistic price for its stock because the company no longer has any operations. The company chief executive, Ray Grimm of Rancho Santa Fe, is a darling of pyramid marketers, as well as San Diego Beautiful People. He owned a palatial home that was used for movie sets. He still lives in the tony Ranch, and folks swoon over his collection of Lamborghinis.

He’s not so beloved in government circles. He had been a cofounder of Carlsbad’s USA Inc., which sold supposed health products. Then the Food and Drug Administration said the products were unapproved and misbranded. USA closed and Grimm moved on to Uni-Vite, which hawked diet food from Carlsbad. The company went public by merging into a Nevada shell company, running afoul of the Securities and Exchange Commission in the process. Grimm then moved to still another Carlsbad multilevel marketer, Body Wise. But the Federal Trade Commission charged that the company made deceitful weight-loss and cholesterol-reducing claims.

In the year 2000, Grimm and his wife set up FemOne to peddle so-called nutritional and skin-care products (also from Carlsbad). FemOne stock initially soared, getting to $1.70. Four years ago, the name was changed to Actis Global Ventures. The multilevel marketing firm kept selling the products for women and added another wrinkle: gizmos to combat electromagnetic radiation.

“Electropollution has been linked to everything from headaches and sleeping problems to tumors and cancer,” blared Actis’s website. Cell phones, cordless phones, and computers are the villains, declared Actis. It had its multilevel distributors selling the Biopro cell chip, Biopro universal chip, and neck pendants, among other products, that would purportedly mitigate the effects of electromagnetic radiation.

One George Carlo, a controversial character who touted his medical expertise, claimed that cell phone radiation disrupted heart pacemakers, harmed children, caused brain damage, and set off genetic changes leading to cancer. At one point, Carlo backed Actis’s products. Later he disavowed his support. My sources say Biopro products were no longer being sold last year.

But while they were on the market, the products generated lots of controversy. According to a story on neurodiversity weblog, a lady in Brentwood, Tennessee, claimed she ran a detoxification clinic. A Louisiana woman sought treatment for suspected mercury toxicity. She faxed information to the lady running the clinic, who stated that the Louisianan suffered from mercury toxicity, liver and kidney dysfunction, precancerous blood morphology, and parasite infestation. Frightened, the Louisiana woman allegedly paid $8900 up front and traveled to Tennessee, where she was told to have her amalgam dental fillings removed so she could go through treatments. The purported clinician told the Louisianan that her problems were caused by electromagnetic radiation, or electropollution. The Louisianan was told she must purchase — you guessed it — a Biopro device. The alleged clinician was — you guessed it again — one of the salespersons in the Actis multilevel marketing chain. Hmmm.

Now, still another Carlsbad multilevel marketing company, privately held Gia Wellness, headed by former Actis top executive Alfred Hanser, is selling products that are similar to the Biopro products. And Gia is using prose similar to that used by Actis: “Electromagnetic radiation is constantly all around us,” proclaims Gia in its promotions. “It has been linked to everything from headaches to cancer. Electropollution is emanated by every wired and wireless device you use today.”

As Actis was coming apart, Grimm cofounded another multilevel company, Cal Nutrisciences, selling purported weight-loss products. It was based in the same building as Actis, according to my sources. It has just been sold to Utah-based Xyngular, another multilevel outfit. I was able to reach Grimm’s home; he was there, but he would not call me back to provide information on Actis. Sigh. The largest outside shareholder, according to the most recent (early 2007) records, Joseph V. Caracciolo, won’t get rich on his 1.3 million shares, although he barely paid anything for them. I can’t reach Caracciolo, who, working in real estate from Rancho Santa Fe, went through a long and contentious bankruptcy in the 1990s.

Grimm had 66.9 million shares and Hanser 11.4 million in 2007. The company never made money, defaulted on its debt, and had an accumulated deficit of $14.9 million. It stopped reporting its results to the Securities and Exchange Commission in 2007, but one big speculator bought several slugs of stock in 2009, and penny stock gamblers still bat the stock around.

So much for the multilevel-marketing penny stocks. A few such companies have seemingly thrived through the years and have stocks selling in the $25 to $60 range. San Diegan Barry Minkow, the subject of the new movie Minkow, has been exposing the larger multilevel marketing companies through his Fraud Discovery Institute. The rest of his time he serves as senior pastor of Community Bible Church in Mira Mesa. He is a fascinating movie subject because as a young man he perpetrated a huge fraud and was sentenced to 25 years in prison. He got religion and got out in 7 years, and he now helps government agencies with fraud detection.

The stocks of three of the four large multilevel marketing firms he has exposed are selling near their 52-week highs: Usana, Herbalife, and Pre-Paid Legal. A fourth, Medifast, is below its yearly high but doing well. Minkow tries to support his institute by shorting the stocks he exposes — that is, betting they will go down. He has generally broken even on that activity, but his adventures have been very expensive because his targets almost invariably throw lawsuits at him, claiming that his shorting activities are reasons for his probes. So he may stop shorting: “We are considering shifting our business model back to uncovering fraud for free as opposed to the whole shorting of public companies,” he says. “One can literally be sued into silence.”

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Grimm had 66.9 million shares and Hanser 11.4 million in 2007. The company never made money, defaulted on its debt, and had an accumulated deficit of $14.9 million.

LOL....sounds like the west coast version Warren Buffet!

Response to post #1: Since the stock sells for a fraction of a penny, the market doesn't seem to think much of the company's prospects. Best, Don Bauder

What a generic, hating, vengeful, biased article! I hope this doesn't qualify as 'news reporting' here. The most important thing is for people to remember it's netWORK marketing. Sure, the dreams of houses, cars, lifestyle, vacations and swimming pools filled with cash are great... but you don't join and cash starts rolling in. The person who realizes this takes work, effort, and frequently things you've never done before!
The people who 'fail' and badmouth MLM are those who QUIT and never WORKED to generate the skills they needed. Yes, it has a very high attrition rate, because people are only paid on their successes in marketing. You can make many thousands a month just retailing products. Now, not ALL MLM's are top-notch - anyone with a snazzy website can start an MLM... but there are many dozens of great, ethical companies that allow you opportuntity. But there are whole skill sets you need to develop, and if someone's looking for Get Rich Quick, they'll fail. http://JonRPatrick.com

Response to post #3: I have been badmouthing (your word) MLMs for more than two decades. I have never worked in the industry and never will. Nor have I ever seen a bar of Amway soap in someone's home. Best,, Don Bauder

To post #2 (Jon R Patrick), your bias is built-in since you obviously are a network marketeer. Don Bauder is in fact, one of the most objective, fair, honest, sincere and informed business journalist, I've seen, and I've followed his articles for decades (including those in SDUT). You say he is "generic, hating, vengeful, biased" in his topic article, and I don't see where you come up with that.

I've had many people attempt to involve me over decades into what you call "network marketing" but what is too often pyramid schemes. I will be honest to tell you that only a few trusted people or friends, did I elect to attend perhaps the first introductory meeting to get acquainted with those "network marketing" companies, their products, and people. Though, I have never joined any of them.

The bulk of "network marketers" that I've been approached by, I did not attend their first meeting because of their approaches. One, I don't like being bothered in bookstores, the business section, by someone who pretends to be highly succe$$ful (thus why are they prospecting in a bookstore?), and attempts to befriend you, and then give you some scripted $ales verbiage trying to cast you in like a fish. Second, I think any "network marketing" adventure worth attracting people into, would disclose all facts up-front, versus using the subtle disclosure method of trying to get prospects to the first meeting without ever telling them what is really involved. Third, I don't $ell to my family or friends, period. I don't care how good a product I have been trained to think I represent, I don't want to be using closing techniques on my trusted ring of family/friends.

Years ago when the dot-com boom was just going bust, I was invited to a weekend seminar where they had motivational speakers trying to swindle us into a "network marketing" type opportunity by having a shopping website for your friends/family. The gal that invited me, invested $2,300 that day, in a "training package" that set you up with the website. I walked out. She lost the $2,300 and never made a penny, although she worked hard at it for a while. The company went bust soon after.

Lastly, the only way to win in "network marketing" is to chose a stable and successful company with great products and ethical people. I am not saying they are not out there, but there is a hit & miss rate to be expected, and once you pair with the truly strong platform, one must commit enormous work (time, energy) to make it payoff. Why not do that in your own business?

Response to post #5: There has been a lot of research showing definitively that only a few people make good money in MLMs. You can see it on Barry Minkow's website, www.frauddiscovery.net. Best, Don Bauder

RE "Lastly, the only way to win in 'network marketing' is to chose a stable and successful company with great products and ethical people":

MLM is a good way for large to mega-sized corporations to avoid paying employee taxes. Example: Primerica MLM of mortgage, investment and insurance services door to door before subprimality and other related factors resulted in the Crash of 2008.

MLM pretty much describes the insurance industry today, as if AIG ever wanted to treat insurance agents as anything other than piecework producers of policies. Even after the insurance industry bailout, one can only imagine just how little anyone selling insurance is actually contributing to the tax base, while everyone else picks up the slack.

I know people who made a killing by moving air purifiers during the 2003 and 2007 SDG&E wildfires via MLM... they kept my asthmatic relatives from suffering from the really bad air quality as smoke and ash filled the outdoor air.

Response to post #7: I would certainly resent paying taxes that an MLM is dodging. Best, Don Bauder

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