International Association to Expose, Study and Prevent Pyramid Schemes
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Pyramid Scheme Alert
Pyramid Scheme Alert is a non-partisan, non-profit, all-volunteer consumer education group.
Contact Robert L. FitzPatrick, Pres. at
[email protected]
Website Update - February 2012 
All
Previous Update Editions Are Available for Viewing
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February 2012 Update
"False Profits" Now Available on Kindles
Herbalfie Behind Massive Talk-Radio Recruitment Promo
Newspaper Series Explores Cult Connection to Multi-Level Marketing
Is USA Becoming a Global Haven for Pyramid Schemes?
Scam Alert: How to Identify Pyramid Scheme Fraud
Donate to Pyramid Scheme Alert
Sign the Consumer Petition

Classic Whistle-Blower Book, "False Profits", Now Available as E-Book on Kindles   

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The first book to comprehensively examine multi-level marketing and pyramid schemes, False Profits,  is now available at Amazon.com in an e-book format, suitable for Kindle book readers

False Profits Cover
Click on the cover for ordering information.

 

In the classic traditions of whistle-blowing and muckraking, False Profits unflinchingly reveals the facts and realities of pyramid frauds and multi-level marketing (MLM) schemes, also called network marketing or direct selling, that are sweeping America and much of the rest of the world.

 

False Profits is co-authored by PSA president Robert L. FitzPatrick and executive consultant, Joyce K. Reynolds. The book has been featured on CBS 60 MinutesNBC Today, the BBC, London Times and many other newspapers and feature television news shows and referenced in numerous court cases.  

 

The ebook edition has a 2012 introduction that details events, trends and developments since the book's original hard copy publication. Among the subjects in the new introduction:

  • The epidemic spread of "gifting" pyramid schemes and multi-level marketing companies.
  • In the midst of high unemployment and the Recession, a dramatic spike in recruitment by MLM schemes, claiming to be "Recession-proof" but in fact causing even greater losses to consumers. 
  • The effect of extraordinary political influence-buying by multi-level marketing companies, leading to a drastic cut-back in law enforcement and consumer protection.
  • The decision of China to ban the multi-level marketing compensation model.
  • The rise of Wall Street-backed pyramid selling schemes that transfer more money from Main Street to Wall Street.
  • The corrupting impact of MLM and pyramid schemes on Main Street leading to millions of ordinary people recruiting close friends, family and colleagues in order to profit from their losses.
  • The great need today of education and awareness by consumers who are subjected to constant solicitations from pyramid promoters, disguised as "businesses opportunities" and "direct selling" schemes.

False Profits will soon be translated and available in China. 

 

Hard copies of the book are still available but will soon be offered only as signed editions. A portion of revenue from all sales of False Profits is contributed to maintaining the Pyramid Scheme Alert website and activities.


Herbalife's Products and Brand Not Disclosed? 
Stealthy Recruiting Campaign for Herbalife "Income" Is All Over Talk-Radio 

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Sean Hannity does it. Rush Limbaugh does it. So do Dr. Laura, Glenn Beck and Michael Savage. In fact, most of talk radio's most famous and most expensive talk-radio shows are all promoting an exciting new solution to America's greatest need - income for the average guy of possibly tens of thousands per month! Could it be true? They all say it is, and the answer to Main Street woes is at a website called "incomeathome.com." 

 

As it turns out, "incomeathome.com" is a stealthy solicitation for the multi-level marketing company, Herbalife. This is the same Herbalife that sells weight loss pills and drinks; that a Belgian court just ruled as an illegal pyramid scheme; that paid millions to settle class action suits in which consumers charged that the Herbalife business is a pyramid scheme causing huge consumer losses. It's the same Herbalife that has been around since 1982 and has already churned through millions of consumers who lost money chasing its promises of "income."

 

None of the talk-radio promos or the radio hosts identify what the "income opportunity" is or that it is affiliated with Herbalife. Navigating to the advertised website of incomeathome.com will also not reveal anything about the business, except more promises of five or six-figure incomes, and a form to fill out for a "risk-free" information kit.  After filling out an ID form, the site announces, "It's a "Doomsday Economy But WE Are Making Serious Income... from Home!"

 

At the very bottom of the website in tiny white print is the inexplicable wording, "Business Method presented is an online method of operating an Herbalife International� independent distributorship."

 

Getting the advertised "kit" requires the investment of $10, with an additional $39.95 charge  ("a tiny investment to how much you can earn," the site states.) if the kit is not returned in a specified time. The kit does not mention Herbalife either. Only later by phone does the consumer learn that the massively advertised and hyped "incomeathome.com" is  a solicitation to sign up as a salesperson for the multi-level marketing company, Herbalife.

 

Consumers Sign Up

 

The massive incomeathome.com radio solicitation for Herbalife may be confusing or misleading, but it is also obviously effective. Herbalife reported a 16% increase in recruiting of Supervisor/Leaders" who are "active" in North America (USA and Canada) in the 4th quarter of 2011. Almost 60,000 people were reportedly "active Supervisor/Leaders" at year-end. The Leaders are 25% of the total sales force and the "active" leaders are only 37% of total number of leaders, so well over one-half-million Americans paid fees to get in on Herbalife's "income" plan!  To become a Supervisor/Leader can cost a consumer more than $3,000. 

 

Activist Exposes "Incomeathome.com"

 

Now, a website,  IncomeAtHomeExposed.com, has been launched by an independent activist that takes a deeper look into the radio advertising phenomenon and calls on the talk-radio hosts to drop IncomeAtHome.com as an advertiser. The request is mostly based on the known facts and realities of the "income" that is actually achieved by nearly all Herbalife recruits. These realities jarringly contradict the hype and endorsements on the radio.   

 

What kind of money do Herbalife "Supervisor/Leaders" really make?  

 

According to Herbalife, 83% of the "active" leaders (who are only 37% of the total Leaders) earned on average less $16 a week ($812 per year) and that's before all expenses are deducted. This would indicate a significant loss for nearly all. Only 37% of Supervisors are classified as "Active," which Herbalife defines "as those who generated at least 2,500 points of volume in 2010 after becoming Supervisor," meaning about two-thirds don't re-qualify.  

 

Amazing Numbers

 

Deciphering Herbalife's income disclosure and then merging it with data Herbalife supplies to the SEC reveals figures that are stunningly contrary to the Talk-Radio hype. Indeed, they reveal a devastating financial hit on hundreds of thousands of people. They are so contrary to the hype, as to leave the reader in a state of disbelief that such data could be advertised as an "income opportunity" at all.  

 

In fact, less than 2% of the entire Herbalife sales force in 2011 received more than $16 a week from Herbalife payments, before deducting all their own purchases, fees and all other business expenses. This show massive losses, not income. This is the "income" endorsed by Rush Limbaugh and  other talk-radio hosts as the solution to the Recession, foreclosure and unemployment?   

 

Herbalife reported to the SEC that about 60,000 people in North America were enrolled as "active Leaders" at the end of 2011. Since Herbalife's income disclosure states that the "active" Leaders  are only 37% of all Leaders, the data show that more than 150,000 people were enrolled as "Leaders" in total in North America, involving an investment of potentially thousands of dollars from each. From the total group of Leaders, only 6% gained more than $16 a week in "income" before deducting all their expenses.   

 

The "Leaders"  are the top 25% of the entire sales force. When all the salespeople are counted, the "active leaders" are just 9% of the whole sales force. And so, according to Herbalife's own data, more than 98% of the sales force shows no net income, meaning they lost money, some in the thousands or tens of thousands. These Herbalife-related losses affected hundreds of thousands of people in North America last year and many more worldwide. 

 

Truth in Advertising?

 

In a press release issued in January, the publisher of the whistle-blower site, incomeathomeexposed.com, wrote, "Anyone who listens to: Rush Limbaugh, Glenn Beck, Sean Hannity... has heard the ads for IncomeAtHome.com talking about their turn-key, work-from-home, business opportunity... "IncomeAtHomeExposed.com reveals IncomeAtHome.com's company roots, takes a personal look at the initial steps of the sign up process, illustrates the decades-long history of class action lawsuits, settlements, dubious medical & success claims, and how much can someone actually expect to earn."

  

Follow the Money

 

The expos� still leaves key questions unanswered. Exactly who is "incomeathome.com"? Who is paying the huge fees to get the endorsements of Rush Limbaugh and other famous talk-radio hosts? And, why does it solicit consumers to pay for information about Herbalife without disclosing Herbalife's name or its products?  

Newspaper Series Explores Cult Connection to Multi-Level Marketing  

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The lethal combination of cult and pyramid in a multi-level marketing company was vividly explored in a recent newspaper series on the multi-level marketing company, NXIVM (pronounced like the acid reflux

False Profits Blog Logo
For an analysis of how and why many people view MLM companies to be "commercial cults", click on the False Profits Blog logo above.

 "purple" pill).

The four-part series in the Albany Times Union by James M. Odato and Jennifer Gish chronicles lawsuits, accusations of sexual abuse of female members, legal harassment of cult-expert Rick Ross, possible regulatory violations and denials concerning whether that MLM company is both a pyramid scheme and what is commonly called a "commercial cult." 

 

The founder of NXIVM, Keith Raniere, had previously operated the MLM company, Consumers' BuyLine, which was later shut down by regulators as a pyramid scheme, and then he opened another MLM company called Innovative Network, which later closed. Raniere, according to the story, had begun his MLM career at Amway.

Consumers' Buyline was investigated or prosecuted by regulators in 20 states. It reportedly drew in over 250,000 consumers. After it closed, the story reported that Raniere signed a consent agreement with the New York Attorney General limiting his participation in any other MLM programs, but the regulators apparently had not investigated his subsequent ventures in MLM.

 

Click Here to watch a discussion of cults and multi-level marketing with pyramid expert, Robert FitzPatrick and nationally recognized attorney Douglas Brooks, led by cult-expert, Steve Hassan

Is USA Becoming a Global Haven for Pyramid Schemes?      

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The MLM scheme, TVI Express, also called Travel Venture, Inc., was recently declared an illegal pyramid scheme by federal regulators of Australia. It reportedly was also declared illegal in South Africa. Offices have been raided in India and, all across Asia the Internet is filled with charges, accusations and denials about the scheme's deception.

 

A press release  by the Australian Competition and Consumer Commission, states, "The Federal Court of Australia has found TVI Express to be a pyramid selling scheme... "It is beyond question that new participants in the TVI Express System are lead to believe that they will receive payments for the introduction of further new participants," Justice Nicholas said." 

 

But despite these international regulatory actions against TVI and media warnings in America, the company continues to operate in the USA without apparent investigation of Federal Trade Commission (FTC). 

 

Recently, another large MLM company - Herbalife - was declared an illegal pyramid scheme by a European court in Belgium. It also prompted no action from the FTC here in the USA,  where the scheme is based.

 

US regulators appear soundly asleep to pyramid sales schemes or they are politically gagged.  Since 2001 when an attorney whose firm had represented Amway was politically appointed chairman of the FTC - the agency that is supposed to regulate Amway and other MLMs - there has been a virtual shutdown of FTC law enforcement against pyramid selling scams. In fact, the FTC exempted MLMs from new disclosure rules, claiming that more disclosure rules will not help consumers identify fraudulent MLMs due to the complexity of the pay plans and other confusing factors. 

 

The multi-level marketing system of payments - each new "salesperson" pays to receive the right to recruit other "salespeople" and to receive payments from an endless chain of future recruits, with payments usually based on quotas of purchases or sales of products - is "Made in the USA." The marketing plan, based on promises of "unlimited" income from "unlimited" expansion, has been exported worldwide and promoted by the US Dept. of Commerce. Smaller countries report that they cannot stop the schemes, which have the legal blessing of the USA. Only China and Bhutan have outlawed MLMs. Thus, if the USA does not enforce laws and regulations to keep direct selling companies from operating as pyramid recruiting schemes, America becomes a haven and exporter of state-sponsored scams. 

What About This One?
Audio and Written Report Offers Tools for Spotting Scams Disguised as "Income Opportunities" and "Network Marketing" 

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"What about this one?"   

What About This One Logo
What About This One?

That is the most common question consumers ask Pyramid Scheme Alert. It refers to a request for information about the particular MLM scheme or network marketing company they - or someone close to

them - has been solicited to join. Most people now know that many MLM schemes are disguised pyramids - frauds - but which ones? So, they ask, "What about this one?" Is it a true business opportunity or money trap? MLM recruiters run a shell game, warning consumers that many other MLMs are frauds but the one they represent is a "legitimate

MLM."   The PSA audio and report, "What About This One," shows how to evaluate any MLM.

 

To get a free copy of the audio and the companion report click on the graphic and follow the download steps.

Donations Make It Possible
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Pyramid Scheme Alert is all-volunteer and non-profit, but it still has many costs to maintain its website, to help with legal defense, publicize its research and analysis and to assist thousands of individuals worldwide. PSA's costs are covered by contributions from courageous private citizens. You can support PSA's work by making a donation.
No More Silence: Take Action
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Over the last eight years, Pyramid and Ponzi schemes have grown and spread. The Internet is now choked with "cash gifting" scams and "matrix selling" frauds. Pyramid selling scams have multiplied and now boast that the Recession will bring them more desperate "recruits." The false promise of income from an "endless chain" recruitment scheme is the lure of these multi-level marketing scams. Many of the "job" and "business opportunity" solicitations on the Internet are nothing more than pyramid schemes, flim-flam frauds.

Consumers now have a way to fight back. A petition for stronger regulation is being gathered on the Pyramid Scheme Alert Website.
To Read and Sign the Petition, Click Here

Special Reports for Consumers...

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What About This One Logo
Click on the image to receive "What About This One?"

 What About This One?   Now Available! Free! The new audio and written report published by Pyramid Scheme Alert is the product of years of research and direct experience of analysts, former insiders of multi-level marketing companies and veterans of  direct selling.The audio is a down-to-earth, conversational dialogue. that hits the key points for evaluating income opportunities and avoiding pyramid scams. The companion written report outlines the information for easy reference.   

 

The Main Street Bubble: (free) The financial bubble is composed of in

Main Street Bubble image
To receive a copy, click on the logo and insert "Main Street Bubble" in the subject line.

vestments by millions of Main Street people in MLM "business opportunities" that depend, for their worth, on bringing in new investors. As millions "fail" each year, their individual bubbles collapse. But as millions of other new hopefuls take their places in the schemes, the MLM bubble is re-inflated, year after year.  The Main Street Bubble report details how the FTC has become corrupted by close ties to the MLM industry, with key FTC leaders working as MLM lobbyists and "experts."

 

 
 False Profits Blog: Discussion of the Economics, Politics, Legalities, Ethics and Sociology of Pyramid Schemes and multi-level marketing. The False Profits Blog, published by author, Robert FitzPatrick, is a sane, rational and fact-based forum. Read, get podcasts, make comments, subscribe.
Contact Information
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  Pyramid Scheme Alert
Tel: 704-334-2047
Fax: 888-334-1944
Email: [email protected]
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