Charges are Leveled at MLMs: Herbalife and Pre-Paid Legal - Fraudulent Marketing, Hyped Stock, Phony "Leads" Scheme, Health Risks Are Documented in Special Reports.
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 Herbalife, one of the oldest and largest America-based multi-level marketing schemes is, once again, charged with fraud and deception. The charges target the scheme's business model, its recruitment practices, its legality and potential health risks of its products. Herbalife promotes weight loss herbs and markets its products by selling "distributorships" in a multi-level marketing model.
Fraud Discovery Institute, headed by famed fraud investigator Barry Minkow, has published a detailed list of deceptions that Herbalife perpetrates in its marketing program. These include lack of retail sales, top-loaded pay plan in which 85% of all commissions are transferred to less than 1% of distributors at the top, and financial losses suffered by 99% of the rest of the distributors. The report characterizes Herbalife as a pyramid recruitment scam that has reached global saturation.
Operating on the theory that where much deception exists, still more can always be found, Fraud Discovery Institute inquired into the credentials of Herbalife's president and publicized the findings. On May 2, the Wall Street Journal reported, "Gregory Probert, the president and chief operating officer of Herbalife Ltd., lost his job after acknowledging he claimed a fake master's degree in corporate filings."
Many of the charges against Pre-Paid Legal are similar but also include the many deceptions related to its "insurance" product. Dropout rates and consumer losses are revealed in new report. Pre-Paid's recruitment is slowing and it has no new country to expand to. The end may be near for this recruitment scheme. See ""Pre-Paid Illegal."."
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| Class Action Case Against Amway/Quixtar and "Tools" Promoters to Move Forward
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Amway has lost its legal effort to stop the largest and potentially most damaging class action lawsuit ever brought against the multi-level marketing scheme. A federal judge has ruled that Amway's rules for settling disputes are "unconscionable" and unenforceable. He denied Amway's defense. The case will now proceed.
The case was brought by one of America's most prominent law firms, Boies, Schiller and Flexner. David Boies of this firm represented Vice-President Al Gore in front of the US Supreme Court in the world famous case, Gore vs. Bush. The other firm partnering with Boies, Schiller & Flexner in the suit is Gary, Williams, Parenti, Finney, Lewis, McManus, Watson, & Sperando, P.L.. in Stuart, Florida. This firm has a powerful track record of successful class action suits against large companies.
Amway delayed the case for nearly a year by claiming that the distributors could not bring a class action suit because they had to submit to Amway's "conciliation" and "binding arbitration" process. Amway distributors sign an agreement - often without realizing the consequences - that includes Amway's system for settling disputes. The distributors charged that the Amway system was unfair and that many distributors had no understanding of what they were signing.
The Amway system has also been responsible for "muzzling" former distributors who raised issues of fraud, deception, and financial losses. In the class action case, all such evidence will now get a pubic airing.
The suit is based on the very same charges that the Federal Trade Commission has brought against Equinox, SkyBiz and other MLMs that regulators shut down. The suit charges that the Quixtar program - based upon selling products to recruits "for personal use", then authorizing them to recruit others to do the same while requiring or incentivizing them to maintain quota levels of monthly purchases, and then rewarding them in a multi-level compensation system - is a fraud. The suit also attacks Quixtar's infamous "tools" business as a second pyramid scheme perpetrated on new recruits. The "tools" scheme was exposed in a 2004 special report on NBC Dateline.
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Two States in the US have Now Banned Canadian Pigeon Scheme but Canada's Reglators Remain Silent
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Consumer demands for an investigation of an apparent ponzi scheme aimed at family farms are growing in urgency. Family farm magazines have researched the scheme, called Pigeon King International (PKI), and have published detailed articles that sound the fraud alarm. An insider whistle blower - ex employee - has provided damning evidence that the pigeon-breeding investment program is an enormous Ponzi scheme. The scheme sells breeding contracts but has no known market for the pigeons that are produced. It is paying earlier breeder/investors with funds gained from later ones, which must lead eventually to a collapse and loss the all the latest investors.
One state Attorney General in the USA - Iowa - has warned consumers of the Ponzi and prevented the scheme from operating in that state. Regulators for Washington state have now also banned the scheme for violating the state's fraud laws.
To date, government regulators in Canada - where the scheme is based and where the money flows - have done nothing.
The failure of Canada's authorities and the US FTC to investigate and act is yet another example of how governments are now protecting big time scams. Canada's Competition Bureau says it can only prosecute Ponzis that meet the definitin of "multi-level marketing." In the US, the FTC has taken the oposite argument. It recently announced that in a proposed rule covering "business opportunity" scams it would only investigate schemes that are NOT multi-level marketing. The result of both agencies is to avoid taking any action against the largest - and richest - pyramid schemes that are harming the largest number of people.
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| Travel Agents Say MLM Travel Scheme, YTB, and Others Like It, Are Corrupting their Profession, Cheating Vendors and Tricking Consumers
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YTB (Your Travel Business) is a hot new MLM, started by a group of veteran MLM promoters. It claims to be one of the largest travel agencies in America. And its sells its stock on the stock exchange. YTB said it recruited over 300,000 consumers in North America to be YTB "travel agents" in 2007.
But an analyis raises the question of whether YTB is actually a disguised pyramid scheme, not a travel businesss at all.
2,300 legitimate and established travel agents - the ones that are trained and have real customers - are petitioning travel vendors to stop honoring the "travel agent" card of members of YTB (Your Travel Business). The American Society of Travel Agents (ASTA), the main trade association of real travel agents, has published a consumer warning about MLM travel schemes like YTB, which it calls "card mills." The protesting agents say that YTB is telling their "agents" that they are automatically entitled to discounts and freebies from hotels and cruise lines because they are now in the travel business. They say this is a corruption of their profession and a ripoff of travel vendors. Some vendors have stopped honoring the YTB "card."
According to YTB, anone can become a travel agent just by paying the company about $500 up front and than $50 a month. You don't need training and you don't even need customers. At YTB, you can make "unlimited" income by just recruiting other "travel agents." You can get $50 immediately on each one you sign up. If they in turn sign up some new "agents" under them you can get $25 more on each one. The chain of "travel agents" can be "infinite". But to get to the status of "infinity" override commissions, each YTB rep must personally enroll three others and have a total of six paying "agents" in his "first line."
A review of YTB filings to the government and its own income disclosures reveal that the company makes nearly all its money from fees paid by by new recruits, not from sales of travel services. And, the data shows, almost no YTB "agents" make a profit. In fact, 80% earn nothing at all. 96% of the commisions paid out by YTB go directly to the top 4% of promoters. See a report and analysis.
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