A (MLM) Skeptic

According to documents filed by Zeek Rewards receiver Ken Bell with the court, he intends to file lawsuit against both Kevin Grimes, head of "Grimes and Reese LLC", and Howard Kaplan, renowned tax expert, for legal malpractice in their role to prop up Zeek Rewards, as it is clearly a ponzi scheme. Receiver is seeking over 100 million in damages against each defendant.

According to Zeek receiver Ken Bell, both Grimes and Kaplan should have know that the business model as presented by Zeek cannot possibly to be true based on their own expertise in their own respective areas, yet both allowed their name be used in association with Zeek Rewards and its parent company, Rex Venture Group.

Grimes created a "compliance program" for Zeek affiliates i.e. what can be said and what cannot. One such "certificate of completion" is reproduced below, from court document filed back in 2012 as part of SEC complaint against Zeek.

According to Receiver Bell, Grimes sold the courses for $5 each to Zeek, and allowed Zeek to resell the course for $30 EACH, so that both profited handsomely from this course designed simply to prop up Zeek's image ("They are serious about compliance with the law! They can't be a scam!")

Furthermore, Receiver Bell stated that Grimes himself have received many questions, addressed to him personally from affiliates, asking questions about how legal is Zeek Rewards and how to explain it's not a Ponzi scheme. Grimes, instead, asked then COO Dawn Wright-Olivares, "“Do you want me to forward these types of communications to you or anyone else, or would you prefer that I simply discard them? I get several of these each week.”

Grimes, apparently has no concern regarding the actual question, according to receiver.

Howard Kaplan, a renowned tax expert, was brought in by Zeek and claimed that income received through Zeek Rewards can be claimed as business income and have "business expenses" deducted when it is clearly an investment income. He even appeared at one or more Zeek held events and stated as such.

Receiver Bell alleged that Kaplan should have known that the income claimed are impossible and he is negligent in not inquiring further and/or allowing his name to be used.

You can see both proposed lawsuits at sites.google.com/a/asdupdates.com/files-website/home which is operated by Don Ryan of ASDUpdates.com. They are at the left side column at the bottom.

Commentary

So far, there are no mention of lawsuits against other "consultants" to Zeek, such as Gerald Nehra and Richard Waak of Nehra & Waak LLC, as well as Keith Laggos, but it would not surprised the MLM Skeptic that such lawsuits are forthcoming, now that the judge overseeing the receiver agreed that such lawsuits are permissible. Nehra / Waak definitely also have fiduciary relations with Zeek like Grimes. The relation between Laggos and Zeek however is a bit murkier.

Incidentally, according to news, Nehra has hired a lawyer to defend himself for his role in the TelexFree ponzi scheme.

This guide is an adaptation of "A Rough Guide to Spotting Bad Science" by "Compound Interest", converted for spotting "shady opportunities". For length reasons, this is presented in 3 parts. This is part 1 of 3.

A Rough Guide To Spotting Shady Opportunities (part 1 of 3)

1) Sensationalized Headlines

Headlines are often click bait or link bait, such as "everyone makes money" or "How to turn $289 into $1040 guaranteed"

As Carl Sagan said, "extraordinary claim requires extraordinary evidence". Don't believe the headlines, even if they are made/repeated by people you trust. Remember, they could have been duped. If they don't bother asking for extraordinary evidence, then you cannot trust their judgement on this specific matter.

2) Misinterpreted results

Nothing beats DIRECT access to the data. If you listen to someone's pitch, you are listening to his or her version of what s/he is telling you, which may be just a sales pitch with certain amount of untruth... truth as s/he know it, or the actual truth. You don't know which one it is, or even how much of each.

Without the actual data, any interpretation is just that... an interpretation. You may look at the same data and reach a completely different conclusion. Much like these two gents used the same data and came to opposite conclusions.

3) Conflict of Interests

Most MLM companies in the "lotions and potions business" (nutritional supplements and cosmetics) employ scientists to carry out and publish research... But remember, those scientists may have conflict of interest, and if they did not disclose so, that is a huge ethical violation, as research can be misrepresented for personal or financial gain.

The worst example of which is (former doctor) Darryl M. See, who previously was a researcher at UC Irvine. He wrote a paper touting a Mannatech (MLM) product that he claimed has proven results in his study, and got it published in pretty famous American medical journal on nutrition. However, he never disclosed that 1) he had resigned from UC Irvine months before publication to pursue a career endorsing Mannatech (and was paid thousand per day for speaking gigs), 2) his wife had been a Mannatech rep for years, and 3) he made dozens of audio tapes sold at Mannatech conventions and seminars touting Mannatech products 4) His father was a personal friend of the journal's publisher When the news broke, UC Irvine had NO RECORD of any such study had occurred, but Mannatech's president already announced such to its legion of reps. In the end, Mannatech sued See, who jumped to a different company, before eventually forced to give up his medical license due to multiple medical ethics violations.

When you see a MLM touting studies that "prove" something, stay skeptical.

Furthermore, when someone suggests MLM as a way to solve your financial needs, you need to consider... Are they really doing it because they think it's the right thing for you to make some money... or is it because THEY, by recruiting you, will make some money off of you joining?

4) Correlation vs. Causation

When two things happen together, it does NOT mean one caused the other, despite how much you feel one *must* have caused the other.

Dilbert.com Copyright (C) Scott Adams Inc 2011, please visit Dilbert.com for more Dilbert-ness

For those of you who watch Stephen Colbert, this is related to the difference between the truth... and truthiness. Or as Colbert himself puts it:

Truthiness is 'What I say is right, and [nothing] anyone else says could possibly be true.' It's not only that I feel it to be true, but that I feel it to be true. There's not only an emotional quality, but there's a selfish quality.

If you BELIEVE it's causation, you'll never accept it's merely correlation. If you believe your nutritional supplements made you feel better, or that special widget increased your car's mileage by 15%, you'll never believe accept that the supplement's merely placebo effect, and the widget is relying on your lighter foot as you FEEL less need to speed and get better mileage. You believe truthiness (There is an effect and I caused it!) instead of the truth (It's just correlation and coincidence).

Stay tuned for part 2 and 3!

A Rough Guide To Spotting Shady Opportunities (part 2 of 3)

5) Speculative Language

Speculations are not facts, so if the statement contains "weasel words" like "may", "could", "might", and so on, then it's likely to be speculation, rather than conclusion.

You can often spot this when a "lotions and potions" company presents some study that "sort of" proves their product works. But this can also apply to income claims, which is usually frowned upon.

For example, a certain MLM nutritional supplement company's entire product line is based on this speculation published in "Medical Hypotheses (2002)"

...Based on a review of the literature we propose the hypothesis that in situ mobilization of stem cells from the bone marrow and their migration to various tissues is a normal physiological process of regeneration and repair and that therapeutic benefits can be generated with less invasive regimens than the removal and re-injection of stem cells, through the stimulation of normal stem cell migration. We further propose that effort should be made to identify natural compounds characterized by their ability to augment this normal process of mobilization and re-colonization of bone marrow stem cells for the potential treatment of various degenerative diseases.

If you can't read medical jargon, what it says is "Stem cells are cool. We think stem cells gets into the blood and travel around the body to where its needed to help healing. Maybe we can find a natural something that'll make the body produce more stem cells."

That's right, this is a HYPOTHESIS. There is no proof that having more "loose" stem cells in your body would improve your health (remember, HYPOTHESIS), much less any compound that can do so.

Doesn't stop this MLM company from making products with such claims, of course. In fact, some of the principals in this company where previously sued (under a different company name) in Texas and lost a false advertising suit... also involving stem cells. That company used blue-green algae, some of which are POISONOUS (see "microcystins") And it seems this particular company is still using similar formulas.

The company may sound confident in stating such things on their advertising materials. Look beyond the marketing material and look at the original research their products are based on. You may be surprised.

Conversely, if a company "guarantees" something, look for caveats and fine print.

6) Sample Size Too Small

7) Unrepresentative Samples

In studies or trials, the smaller the sample size, the worse the "confidence" of the results.

Sample in studies or trials are supposed to be representative of the population being studied. If the sample's different, then the conclusion will unlikely to be applicable to the general population.

For example, a highly touted study (which is indeed double-blind, randomized, and placebo controlled) by a certain MLM energy drink maker, had only 59 participants. Here's an excerpt from the study:

Excerpt from the double-blind randomized, and placebo-controlled study
of only 59 subjects between 40 and 60, all Chinese, is supposed to prove'
the efficacy of a product?

Can a trial size of only 59 participants (30 woman, 29 men, presumably all from Beijing China and between 40 and 60 years old, with no significant health issues) really predict that the drink will "significantly enhanced immune responses and improved the subject's self-appraisal on his or her overall health status" to the world's 8 billion humans of various races?

You have to read the study to realize that they asked almost 700 people, and vast majority (over 80%) of people turned them down (refused to participate).

The OTHER study the company touted is even smaller... 10 men, and 10 women, between ages of 20-23 (i.e. university students of good health) in Beijing, was tested for anti-oxidant levels after drinking this company's product. Okay, so your product increases antioxidant levels after drinking. You've proven your antioxidant is indeed absorbed somewhat by the body.

So what? But plenty of other stuff does it too. What exactly did this study prove? That's like proving "water is wet". Sounds impressive, practically useless.

8) No Control Group

Most studies would rely on a "control group" that are NOT given the actual substance being studied, and the results compared with the results from people who were given the substance. Allocation should be random. If there is no control group, then the study has no 'baseline' comparison and therefore confidence of conclusion would be much lower.

This particular problem manifests itself in MLM in two ways. One way is the product was not test with a control group, as the subjects are told to self-report the results. Another way is the facts are presented with a good vibe, but with no baseline to compare against.

The most frequent misrepresentation in MLM is the income claims, where the various leaders and "top earners" parade themselves on stage "inspiring" you all to sell, sell, sell (or worse, recruit, recruit, recruit), with promises like "you can be just like me!" (driving a free car, paying off my college, helping my family...)

If you check the various MLM income disclosure statements (each is required to publish one per year) you will find that vast majority (80% or higher) earn very little, while the very top took home most of the money, and I am NOT talking about the executive team, but the distributors. For example, following is Vemma's 2013 numbers:

Vemma Income Disclosure Chart 2013, regraphed

That's right, vast majority of Vemma reps earned very little, while some earned 2.5 mil in 2013. Here's their version of the same data. Note they cut the graph in two and used different scales (exponential instead of linear) to make the graph look more "even".

When your upline tell you that "you can be just like me", what he really mean is maybe 1 in 100 can be like me, but it *could* be you. That's assuming he's making 30K (0.96% of active reps, according to the graph). If he is making 193K, that's 1 in 770 odds.

And that's NOT counting people who had quit or is not buying enough to qualify as active.

The actual odds are probably much worse. But if you don't know the baseline, you have nothing to compare it against, and his claim thus sounds much more impressive.

Been busy last week, so this will have to be a big news update. Remember folks, I link to the actual news items, not just random blog posts.

International Suspect Schemes on the Rise

Recent scheme reviews on BehindMLM revealed that more and more schemes claim to be international, when most of the international presence are mere facades.

Mr. Link IT Solutions -- probable Ponzi investment scheme, claims to be IT exporter from Japan with office in China and Japan... AND Brazil (where it's really based in)

BrokerAds -- clone of BannerBroker ponzi scheme, with horrible broken English, and Alexa traffic pattern indicating it's probably ran out of Pakistan, even though the site's disclaimer seem to suggest a US connection.

LEO (Learn, Earn, Own) -- PO Box in Dubai UAE, Mail drop in Hong Kong, Regus Virtual office in Egypt and India, and more virtual office in other locations.

Beware when you run into one of these "international" companies. Do your due diligence.

World Ventures threatens critic with vague "cease and desist"

A travel blogger was accosted by a WV marketer, was creeped out by the vagueness, and published her experience and her subsequent research on her blog, and has recently received a "cease and desist" from World Venture's Lawyer "Shawn E. Tuma", where he 1) accused the blogger of "false, misleading, defamatory, and disparaging statements about WorldVentures"... but provided NO example of such. 2) accused the blogger of "misappropriating, misusing, and disparaging[sic] WorldVenture's intellectual property" when using name in a review / opinion is clearly a part of fair use. 3) accused the blogger of "engaging in unfair competition and deceptive trade practices" Wait, what? How does operating a travel blog compete with operating a "travel MLM"?

What's most hilarious is Mr. Tuma's demand... that the blogger not only take down (but not delete) anything related to WorldVentures, but to cease making ANY remarks in ANY public form regarding World Ventures.

Read more about this dumb threat on Popehat: http://www.popehat.com/2014/07/09/popehat-signal-help-a-blogger-threatened-by-a-multi-level-marketer-worldventures/

Seal of the United States
Federal Trade Commission.
(Photo credit: Wikipedia)

Remember, readers: VERIFY the information for yourself. If they don't include links, their news probably cannot be trusted. Even if they include links, make sure it's to a reputable website like news websites and such.

Trivita Settle with FTC?

According to leaked letter to its affiliates, Trivita has settled a demand from Federal Trade Commission against its alleged false health claims regarding its Nopalea related products. Nopalea, also known as prickly pear (a type of cactus), is reputed to have some healing properties and is often pushed by so-called alternative medicine proponents in the same manner as prior fads such as noni, mangosteen, and acai berry products.

Report by Courthouse news showed that FTC filed the demand on July 11th. However, this did not seem to have received any news coverage. http://www.courthousenews.com/2014/07/11/69432.htm

According to leaked letter as published on BehindMLM (and thus far, unverified), the settlement involves stop making false claims, and paying a large fine with no admission of wrongdoing and no stop of sales of such products (provided no further misleading claims are made). All affiliates must acknowledge the new restrictions or their commission will be withheld pending acknowledgement.

EDIT: FTC's own press release just dropped:

http://www.ftc.gov/news-events/press-releases/2014/07/cactus-juice-marketers-pay-35-million-refunds-consumers-deceptive

SEC opposes Merrill's "motion" to release 4 million for "expenses"

James Merrill, co-owner of TelexFree, out on bail, had previously filed a motion to release over 4 million dollars in one of the frozen accounts to pay for his legal defense. And SEC has filed an answer to that, explaining that James Merrill have plenty of assets available including accounts of several hundred thousand dollars, not to mention possible other sources (one of which is the house he used as bond to get himself out of jail). Why was he asking for 4 million in possibly tainted funds from alleged Ponzi scheme TelexFree? And since he haven't been indicted (merely charged), how much is his lawyers charging to require that much money, beyond what he has now?

Given that Merrill's logic for requesting the funds is "SEC have to prove that these money are tainted, if they can't, then we should have the money", SEC explained that Merrill got it backwards. SEC have already shown the judge, twice, that the money has a high suspicion of taint, first when the criminal charges are filed, and second, at the pre-trial hearing. It is actually Merrill's burden to prove the money's NOT derived from TelexFree. SEC characterize this attempt as essentially a "fishing expedition" to see if Merrill's team can force SEC to reveal what other evidence SEC has on TelexFree and Merrill before the trial, and it should be denied. No sneak peek for you!

The actual response can be viewed here: http://asdupdates.com/wordpress/archives/5741

TelexFree bankruptcy trustee Stephen Darr sent out 2nd round of subpoenas, most approved

Stephen Darr, after being appointed trustee in TelexFree bankruptcy, had been busy. He basically subpoenaed everybody who had something to do with the company (payment processors, lawyers, accountants, etc.) for more information.

The second round of subpoenas had been approved by the judge, with only two objections. One requested that any information provided remain confidential, which was agreed. The other claimed that the subpoenas are harassment and will be heard by the judge in a few days.

Most of the documents for this back and forth can be viewed on the KCCLLC website setup for TelexFree

Thanks to http://behindmlm.com/companies/telexfree/telexfree-trustees-2nd-round-of-subpoenas-approved/

Oh, and one extra note:

TelexFree Brazil Guy Carlos Costas is running for Brazilian Congress Seat

Yes, a ponzi pimp running for office. And since he had not been convicted of anything, he probably will get his name on the ballot, unless his party disown him.

It was only yesterday 15-JUL-2014 when FTC announced a major settlement with Trivita for Trivita's false and unsubstantiated claims regarding their "Nopalea" drink made from Nopales cactus, yet another superfruit fad (remember noni, magosteen, and acai berry?) Trivita, without admitting fault, agrees to cough up 3.5 million refund for not having enough science to back up their claims, and not disclosing many of the testimonials in their ads are actually from affiliates (who have financial interest in seeing the product succeed).

But here's the saddest part... Trivita was warned back in 2011 regarding the SAME PROBLEMS, and apparently chose to IGNORE THE WARNING!

They think they can get away with it, and they almost did... until the FTC slapped them.

Read on for details.

Digging through Goggle revealed this little gem from ERSP, the Electronic Retailing Self-Regulation Program, that Trivita was warned about EVERY ONE of the problems they got fined by FTC for, back in 2011!

http://www.asrcreviews.org/2011/11/ersp-reviews-advertising-for-nopalea/

Quoting from the press release dated November 2011:

As support for performance and establishment claims, TriVita submitted a number of scientific studies on Nopalea’s main ingredient, Opuntia ficus indica (Nopal cactus).

While ERSP did not dispute that the studies provided useful information about the primary ingredient in Nopalea, the evidence did not support express claims regarding specific health conditions. ERSP recommended the marketer modify or discontinue the performance claims at issue.

ERSP noted that there have been no clinical studies on the product and the evidence provided does not support claims that Nopalea will alleviate or eliminate specific health conditions. ERSP recommended the marketer discontinue testimonials describing specific health conditions. Further, ERSP recommended that TriVita add a clear and conspicuous disclosure describing the relationship between TriVita and its “members.”

“The fact that the some of the consumer testimonials are made by people who receive commission on the sale of the product might materially affect the weight and credibility of the representation as interpreted by consumers and, as such, should be clearly and conspicuously disclosed in the advertising,” ERSP stated.

These are the EXACT items that FTC fined them for. The conclusion is clear: they were told about the problems, and chose to do NOTHING, for YEARS.

They thought they can get away with it.

TelexFree trustee Stephen B. Darr, in filing today to the court, announced that he has "no intention to reorganizing or restarting" the TelexFree business, and have conceded that the entire business is a ponzi / pyramid scheme. Quoting from the court filing:

"based upon the information available to the Trustee, it appears that the early investors were paid not from sales of the VoIP services but rather from the money received from the later investors, thus evidencing a classic Ponzi/pyramid scheme..."

Jordan "Ponzitracker" Maglich, who is a lawyer that specialized in tracking ponzi schemes, opined that this wording indicates that the trustee will likely convert the bankruptcy from Chapter 11 reorganization to a Chapter 7 liquidation, in the near future.

You can see the actual filing documents by clicking through to the Ponzitracker site:

http://www.ponzitracker.com/main/2014/7/16/trustee-telexfree-was-a-ponzipyramid-scheme.html

You may or may not have heard USANA, but it's okay, it's not that important. They sell pills, lotions, and baby formulas. Yes, one of these items does not fit.

Any way, their high pressure tactics in China means they NEVER received a direct sales license in China, even though other companies like NuSkin and Amway have them.

So what do they do? They basically bought one... By buying out a company called BabyCare in China in 2010, and that company did get a direct sales license in China in 2011.

So by merging the product line a bit, USANA now sells baby formula... and gets a backdoor into China, mainly by making Chinese sellers pretending to be in Hong Kong.

Previously MLMSkeptic have pointed out that Hong Kong is often used by flaunt Mainland Chinese laws. Chinese citizens are encouraged to travel to Hong Kong to sign up for various pyramid selling schemes for outrageous promises of IPO riches. One such, Interush, was busted in Hong Kong last year.

Citron Research, which previously pointed out problems with NuSkin and China, has just dropped another bombshell... USANA may be next on the chopping block.

In the article referred to, USANA affiliates in China have been citing some very odd references... USANA founder Dr. Wentz's "Einstein Prize", and a "North American Nutritional Supplement Guide" by "MacWilliams.

Let us examine each one in a bit more detail.

The Truth Behind "Albert Einstein Award" won by Dr. Wentz

When searching for "Wentz Einstein" on Google, there is a PR PDF from USANA that popped up. Which lead to this picture. So he did received... SOMETHING.

But what exactly is this prize? It's awarded by "Global Capital Associates", not anyone related to sciences or Albert Einstein himself. The only link to Einstein seem to be that GCA is apparently a Jewish Organization, as their other awards include "King David Award" and "Friend of Zion Award". Searching the GCA website revealed NO LISTING for Einstein Award after 2006.

There are several "Albert Einstein" related awards, but those are generally given to actual physicists, not to a doctor hawking nutritional supplements. The primary "Albert Einstein Award", once given out by Einstein himself, was considered equivalent to Nobel Prize.

It's pretty obvious this particular "Albert Einstein Award" (from GCA) is nowhere close to that prestigious, and thus, sounds far more impressive than it is.

The Truth Behind Nutritional Supplement Guide by MacWilliams

According to the Chinese article, apparently USANA's products are highest rated in some sort of a nutritional supplement guide by MacWilliams.

Searching Amazon.com revealed only one likely candidate:

No, I'm not asking you to buy it. I'm just showing you that this book really does exist, and it's also available in Chinese.

Author is Lyle MacWilliams. Who is this guy? He was once elected to Parliament in Canada.

He had apparently been compiling nutritional research for many years. The Nutrisearch website can be found here: http://www.comparativeguide.com/index.php?option=com_content&view=article&id=32&Itemid=20

However, a bit further search revealed that Mr. MacWilliams was apparently on USANA's board of medical advisors during 2003-2006, and his various nutritional experts who help him with the book may have spouses making 100K+ a year as USANA distributor. And folks who wrote nice things about his guide? USANA distributors. (I have not had a chance to verify these claims, so take them with a bit of salt) He was allegedly spotted at USANA events as a speaker (year unknown).

So perhaps this guide isn't as... reliable as you may think it is.

Conclusion?

Given that NuSkin was merely fined, USANA may get away with just a fine... Unless they screw up and invite a crackdown.

But their credibility will be shot, and their stock prices may take a dive and not recover for a LONG while.

A Rough Guide To Spotting Shady Opportunities (part 3 of 3)

Shady Opportunities are out there, waiting to take your money on promises of fabulous income... if you hand over your money first. There are twelve signs. Obviously a shady opportunity may not have all the signs, but the more signs you spot, the more shady the opportunity is.

9) Unverifiable Testimonials / Improper disclosure

Real testimonials were unsolicited from users who have no personal interest in the success of the product.

The problem is "personal interest" spans a huge range, and often in areas that you may not expect.

Dan Ariely speaking at TED (Photo credit: Wikipedia)

A person who paid a tidy sum for this 'wonder pill' will have a vested interest to learn that s/he did not spent the $$$ on worthless junk, thus they will be EXPECTING a positive result. Behavioral economist Dan Ariely of Duke University have previously done a study that showed that more expensive placebo works better. How do you know if the product you paid a like $40 for monthly supply really works better than fancy sugar pills? How do you know if the product really works unless you took it for a whole month, and actually have a proper objective measurement instead of "how do you feel" i.e. subjective mood? How do you know the person making the testimonials (that you are listening, watching, reading) are not affected thus?

Furthermore, the testimonials often came from promoters... who are out to recruit you. They have a FINANCIAL interest in making sure the product works, more than merely effectiveness interest. And when they don't even identify themselves as promoters, they are running afoul of Federal Trade Commission guidelines on online advertising.

Testimonials in generally CANNOT be relied upon. You need large scale scientific studies to verify efficacy. If they rely on testimonials instead of science, they are shady and should not be trusted.

10) Cherry-picked results
11) Unreplicable results

If they only mention the good studies they probably have something to hide.

Mannatech, in attempt to prove themselves, have indeed sponsored many clinical trials for their "glyconutrients", and many were indeed done by large reputable research labs.

Two of the tests was done by Dr. Best in Australia's Flinders University.

Back in 2005, Dr. Best did a research on Ambrotose. The conclusion was:

There were no statistically significant effects of the treatments on the performance on any of the outcome measures.

http://mannatechscience.org/files/file/Tbest-An%20investigation%20of%20sacch.pdf

Yet in the 2010 study by the same Dr. Best, with slightly different methodology, she claims noticeable performance increase.

Significant beneficial effects of saccharide supplementation were found for memory performance and indicators of well-being

http://mannatechscience.org/files/file/publications_TBest_Sacc_Effects.pdf

But of course, it was the 2010 study that was heavily highlighted and distributed to all Mannatech members, and was even mentioned by Mannatech’s “forward looking statement” to investors. Not a single WORD about the 2005 study contradicting the 2010 study. That's cherry-picking, folks.

Extraordinary claims require extraordinary evidence... VERIFIABLE evidence. Unreplicable and contradictory studies are NOT supporting evidence, much less "extraordinary" evidence.

12) Media Coverage and Reviews

Who wrote about this opportunity? If nobody covered it, or only covered as "press releases", then the company is not nearly as big as it claimed to be.

PR Newswire logo (Photo credit: Wikipedia)

Public Relations Firms are known to issue press releases, which are
sometimes posted on major news outlets. Those that appear on major news outlets obviously cost extra, but you can easily BUY such coverage. Sites like PRNewswire will guarantee posting on WSJ or NYT or similar outlets if you pay them enough.

And sometimes, some website will simply FAKE press releases, by claiming their announcement had been seen on various legitimate outlets but it's hosted on their own website. This happened so often, FTC sued ten of these fraudulent PR companies to stop them from making up fake news.

Remember, scammers are perfectly willing to lie, and you accept the lie.

And you will do so if you are ignorant of the facts, and are just NOT skeptical enough to question "proof" provided, then you should not complain about why could people trick you, when you ALLOW yourself to be defrauded.

Mixing religion and scam is nothing new. Here are several older headlines:

SEC says "Social Capitalist" is really a Ponzi Scammer scamming churchgoers
http://www.forbes.com/sites/billsinger/2012/04/13/sec-alleges-that-social-capitalist-ripped-off-churchgoers-with-ponzi-scam/2/

SEC / prosecutors went after Puerto Rican Evangelical Ponzi
http://www.forbes.com/sites/billsinger/2012/08/21/sec-and-federal-prosecutors-go-after-puerto-rican-evangelical-christian-ponzi-scam/

SoCal Korean Pastor stole millions from his flock, fled to Korea
http://www.realscam.com/f14/san-gabriel-korean-pastor-scammed-millions-out-parishioners-escaped-korea-1393/

Toronto Husband/Wife Pastors Operated Ponzi with money from flock
http://www.patrickpretty.com/2013/05/03/bulletin-3-church-officials-including-2-pastors-arrested-by-toronto-police-in-alleged-fraud-scheme-in-which-money-was-funneled-to-panama/

Which makes you wonder, are religious people more... gullible and thus, more vulnerable to scams?

The answer is very likely yes, according to a latest study on children.

Children praying at Delanco Camp
(Photo credit: Wikipedia)

The study concluded that children who were brought up religious has a harder time tellin
g what stories are utter fantasy (i.e. not real, fictional) vs. what are real, according to a recent study.

The results suggest that exposure to religious ideas has a powerful impact on children's differentiation between reality and fiction, not just for religious stories but also for fantastical stories.

http://onlinelibrary.wiley.com/enhanced/doi/10.1111/cogs.12138/

The implications are staggering. This suggests that children who were exposed to religion early are less able to distinguish facts from fiction. When you extrapolate this, the children will likely have the same sort of problem growing up, and thus, when confronted with a situation where they do not have sufficient information to make a logical decision, they are more likely to believe that the fantastical incomes and such promised by a scam are actually POSSIBLE, instead of maintaining a skeptical mindset.

Thus, one can reliably say that there are evidence that suggest religion makes people MORE susceptible to scams.

Another point to make is all religions have specific punishments for scammers. Islam has the broadest prohibitions, with prohibitions on any games of chance, or even speculation, and much more. Christianity have Ten Commandments, many of which deal with envy, theft, and cheat.

But are they enough to deter the scammers? Apparently not enough.

If you are religious, you need to do EXTRA due diligence, and be skeptical to claims. That's how you compensate for your potential blindspot to the fantastical claims.

It seems that people are losing their basic math skills, or even willingness to apply math to simple problems... such as "should I join _____". Today, we are going to pick an example, and show you how to read such an income statement. And yes, this may involve some WORK, so you should probably sit in front of a computer, as you may need to type in some numbers into a computer (one in library should be fine as long as you have access to Google)

Today's... example, Vemma. Their 2013 income disclosure can be access here:

http://news.vemma.com/wp-content/uploads/2014/03/Income-Disclosure-2013.pdf

Any way, first thing you should note about the two bar graphs is... WHY TWO GRAPHS? Looking at the two graphs should make you realize two things:

1) The two graphs have DIFFERENT scales

2) The two graphs both use exponential scale instead of linear, thus de-emphasized the difference in bar heights.

In fact, if you regraph the same numbers, using a linear scale, it looks like this (go ahead, do this in Google Sheets yourself)

The red line has the SAME numbers as the Vemma graph, but using a LINEAR scale, combined into a single graph. The blue line is the percentage of all affiliates.

Roughly translated: vast majority of the company make peanuts, while a selected few made much much more... one made like 2.5 million in 2013.

Now here's the important numbers:

In 2013, 246,388 active customers enjoyed the brands that make up the Vemma family of wellness products

These active** Affiliates totaling 105,251 in 2013

**Active, means an Affiliate has a minimum of 60 reward points every month. Platinum and above Affiliates are considered active if they have 120 reward points every month.

Here's something they didn't say, but you need to know... Affiliates who are not "active" are considered to be customers.

But how much did they sell? According to Vemma's own press release:

Vemma makes the move to affiliate marketing – Worldwide sales close 2013 at $221 million, up 89%.

221 million, divided by 105251 affiliates... comes about to be 2100 per affiliate, or roughly 175 per month.

But monthly reorder is $120+ S&H per month. Affiliates are purchasing BARELY more than what's needed to stay qualified.

Which implies that Vemma is only expanding by ADDING affiliates, NOT by selling MORE from existing affiliates.

Also keep in mind thatVemma does NOT have a "preferred customer" class where people who have no intention of retail can join just for "wholesale prices". Thus, there is a heavy suspicion that so-called "active customers" are just "inactive affiliates". If we count them... We get...

221000000/(246388+105251)/12 = 52.4 monthly.

Remember, Platinum and above needs to reorder 120 per month, and any one below needs to reorder 60 per month. This suggests that most affiliates are not retailing much, but ordering just enough to keep them "active".

But let's consider the BETTER case... People are actually order 175 a month... maybe.

However, keep in mind that Vemma minimum qualify at platinum is 120 PV, which is a "two-pack", which costs $136 (or higher) plus shipping and handling. Following is a summary from a Vemma "training" site.

The short of it is

Vemma: Kid, give me $500 (Silver Pack)

Kid: Okay

Vemma: And $150 or so every month there after (2pk auto ship, $136 + S&H)

Kid: Uh, okay. What do I get?

Vemma: I'm not done. Go out and find me more people who will also give me $500 and $150 a month

(enroll more people who will pay for Silver Pack or 2pk)

Kid: But... what do... I get?

Vemma: You get 2 cases of Verve shipped to your door every month, a website to order more, and if you keep enrolling people, maybe I'll pay your monthly lease on a BMW.

Kid: Yes... master....

The problem is BMW lease monthly payment can be as low as $238 a month. Mini Coopers are even cheaper.

Furthermore, consider the follow verbiage from the car bonus agreement official rules from Vemma:

If in any month you do not qualify for the Vemma Platinum Club Car Bonus, you are still responsible for making the car payment and fulfilling your contractual obligations. You are also responsible for all insurance, maintenance and repairs on the car.

Considering that mostly kids (under 25) are the recipients for these car bonuses, the insurance payments may be as high as the car payment itself.

So basically you could have paid for that BMW yourself if you stay off Vemma and find a part time job, or if you buy an older car (one that's more than 5 years old) and have no need to hawk overpriced energy drinks onto your friends and get them to pay Vemma $500 and $150 a month.

In fact, here's a beautiful older BMW for a mere $5000. With ZERO down, and outrageous rate of 10% a month, your monthly payment is less than $125 if you go for a 4 year loan. If you apply that $500 you would have given to Vemma toward the down payment, your monthly drops to $115. And your insurance rate would be MUCH lower due to low price of the vehicle.

Now let's consider what is a 2pk. It's basically 2 sets of 2 dozen cans of Verve, i.e. 48 cans, size of Red Bull cans.

136/48 = $2.83 per can.

How much do you think you can sell them for? Esp. when you have to give SOME of them away, i.e. 'some to share'? When Red Bull can be shipped to your door by Amazon for $1.60 per can, NO MINIMUM and FREE SHIPPING?

And what exactly does "some to share" any way? let's refer back to the verbiage:

You are $150 a month for a 2pk, and you are drinking some and giving away some (share). You are not making money from selling the stuff at all.

YOU ARE THE CUSTOMER.

So how do you make money? Recruit other people just like these people who want to recruit you. You are indeed looking for customers... by misleading them to join, just like others lied to you about this being a business AND they're making money OFF OF YOU.

You're not in a business for yourself. You are the CUSTOMER in this business living a lie.

There are only two ways you can get out

a) Find someone UNDER YOU you can step on so they are the customer for you, just as your upline is sucking your wallet, you're sucking THEIR wallets

b) Quit playing their game.

Conclusion

No, I don't like Vemma, but I have shown you reasons why I don't.

If you want to argue, present FACTS or point out flaws in my logic.

If you don't bother presenting facts, I may let your comment through and make fun of you. Once.

Go ahead. Do your own due diligence.

Decision on 23-JUL-2014 by Federal Grand Jury has indicted Carlos Wanzeler and James Merrill of wire fraud and conspiracy to commit wire fraud.

Apparently Wanzeler had transferred TENS OF MILLIONS into his own account and had used it to buy up properties all over the state using his wife, Katia Wanzeler's real estate business.

All of that is YOUR money, if you had put money into TelexFree. It simply went into "their" pockets.

According to Wall Street Journal, there is now a formal arrest warrant out for Wanzeler.

Details at BehindMLM

http://behindmlm.com/companies/telexfree/merrill-and-wanzeler-indicted-for-fraud-and-conspiracy/

In other news, some (3 total) moronic defendants of clawback lawsuit launched by the Zeek Receiver chose to fight back by filing a countersuit, demanding almost a million in "back wages". What they don't tell you is they each are facing clawback of about 1.5 to 1.7 million EACH. That's how much they benefited from Zeek.

http://behindmlm.com/companies/zeek-rewards/zeek-top-pimps-demand-almost-1-million-from-receiver/

English: Coat of arms of the Brazilian Federal Police Português do Brasil: Brasão da Polícia Federal Brasileira (Photo credit: Wikipedia)

News in Brazil, citing sources within Brazilian Federal Police, reported that "Operation Orion" (allegedly named because it aligned with the 3 pyramids in Giza, Egypt) has commenced against TelexFree / Ympactus in Brazil, with no less than NINE search warrants being served on various TelexFree / Ympactus related locations.

http://www.eshoje.jor.br/_conteudo/2014/07/noticias/policia/20222-operacao-orion-pf-investiga-crimes-financeiros-das-atividades-da-telexfree.html (link in Portuguese)

http://www.pres.mpf.mp.br/site/ Link in Portuguese

It is also worth pointing out that these warrants were issued by the court of Espirito Santo, where Carlos Wanzeler currently lives as it was where he originally came from. Wanzeler is now a fugitive from US law (a warrant for his arrest was issued yesterday from the US grand jury indictment, according to WSJ) having abandoned all his properties and his wife in the US before the indictments were handed down. His wife had attempted to leave the US for Brazil but was arrested on a material witness warrant at JFK airport, minutes from boarding the plane. His daughter had left with him by driving across the border into Canada THEN took a flight to Brazil (apparently in an attempt to get away from government watchlists)

His partner in TelexFree, James Merrill, is under house arrest and GPS monitoring having previously been arrested, and was only let out after almost 1 million dollars in bail had been posted.

Due to the timing (this being handed down one day after the US grand jury indictment against Merrill and Wanzeler in the US) many are speculating that there may be tight cooperation between the US and Brazilian authorities on this matter. However, this cannot be confirmed at this time.

Stay tuned for further updates.

A recent Dilbert comic had this quote

"Certainty about the future is a sign of mental illness."

Why? Because only the self-delusional are absolutely certain about anything... including the future. And self-delusion is a mental illness.

Therefore, thinking only positive thoughts about yourself (well beyond what's needed for self-esteem) and your future is also self-delusion.

But wait, you say, are you saying that I can't give myself a compliment? A thumbs up to myself in the mirror?

No, I didn't say that. Going OVERBOARD with such compliments to the point of ignoring reality is dangerous, and so are anyone trying to dissuade you from reality.

But to explain that, we need to explain how the brain works when it comes to social interactions.

One of the models that tries to explain the brain in terms of human social interaction is called SCARF model:

Status -- relative important to others
Certainty -- being able to predict the future
Autonomy -- sense of control over events
Relatedness -- sense of safety with friends instead of foe
Fairness -- sense of fair exchange between people

One thing your brain craves is "certainty". Your brain simulates possibilities in your dreams based on available data. You feel satisfied when you found out more information, which is why a simple Wikipedia search often turned into hours of related links. Same with Youtube, Google, and such link-heavy sources. Some people like cleaning and organizing. Same idea: they want certainty. Everybody does.

The problem is often, you do NOT have the proper amount of information to achieve certainty, so you end up relying on other things, such as other 4 factors mentioned, like your trust in the friend who recruited you, who trusted someone else, and so on.

The need for certainty is so high that there is a huge market that thrive by selling the FEELING of certainty. The magic formula to investing in the stock market... (bazillions of them, everything from candle chart patterns to "Magic Formula" little book) The tarot card telling your future... The 1-900-PSYCHIC hotline... In fact, many consultants teach company executives how to achieve such certainty through "simulations", "pre-mortems", and so on, Even the entire self-help industry (books, seminars, etc.) is basically selling advice on how to get that feeling of certainty.

Scammers are out there to prey upon your inner desire for certainty, by lying, presenting crooked data, withholding "negative" data, and exploiting your cognitive biases in every way possible to induce you to join their scheme (and put in money) without further due diligence.

One way they encourage you to jump without looking is through enforcing "positivity" (and/or outlawing "negativity") Many view any question or doubt ("Are you sure this is legal?") as "negativity" to be avoided.

Avoiding negativity is just like burying head in sand and see no danger.

Bury head in sand
(courtesy of Photovalet.com)

Yet you can sort of understand the need for certainty... But they are obviously going about it wrong. SOME sort of uncertainty is always around us in life. AVOIDING doubt (negativity) to the point of ignoring REALITY is DANGEROUS and often, RECKLESS.

SOME negativity, such as negativity people who gives you negative feedback no matter what, are obviously to be avoided. But ignoring ALL negativity is just STUPID and same as burying head in sand.

Thus, going back to the original question: there is no absolute certainty in life. If you are going after certainty so much you are AVOIDING reality (negativity) you are exhibiting signs of self-delusion, which is a sign of mental illness.

People TEACHING others to "avoid negativity" thus is teaching people to adopt symptoms of mental illness, in the name of "self-help".

cockroach (Photo credit: TomSpinker)

Ever heard of the "cockroach theory"?

It's quite simple, actually. When you see one cockroach, there's probably a lot more hiding nearby.

When applied to investments and companies, it means when you see one problem, there's probably a lot more problems that you are not seeing. (And you should jump ship ASAP)

The theory is also applicable to potentially shady opportunities, actually. If you are smart enough to read the signs, and not ignore them.

Let's take one very obvious example: Zeek Rewards. They were shut down by the Feds in August 2012. But signs had been there for MONTHS that it was in trouble.

Zeekler, the auction, had been in operation since 2010 (as FSC auction and later Zeekler) without an auction license (required in North Carolina, their home state). They did not obtain an auction license until March 2012! But nobody checked. That may have been a roach but nobody saw it. Because everybody assumed it's all legal.

Did you know that Paul Burks, head of Zeek, was performing as "the singing magician" before he retired from performing and started MLMs instead? You know magic is just deception for entertainment, right? That may have been a roach but nobody saw it, because they've been distracted.

In April 2012 Zeek Rewards suddenly banned a dozen or so European countries from participating, and gave several bogus reasons, one even blaming the US State Department Office of Foreign Asset Control (OFAC) uttered by the head Zeek Paul Burks himself. However, this was all proven to be lies only weeks later. Turns out they were both hit with thousands of stolen credit cards and by Denial of Service attacks. And their system can't handle it. The lie was pierced by BehindMLM within two weeks. Is that a cockroach you see? Did you miss it?

By June 2012 they apparently got a local TV station to report on their "success", and even got the reporter to state that the North Carolina's Attorney General office had deemed the business legal. (Wonder whose palm they had to grease to have that happen?) AG's office was so shocked, they demanded the video be taken down and the text changed on the TV station's website. Oh my, another roach! Did you miss this one too? Or is that "I see no roach (negativity)?"

By July, they were accused DIRECTLY by another company's head as a Ponzi scheme. Did you just ignore this one as "jealousy"?

By August 1st, they fired their own consultant, Keith Laggos, who then said FTC will hit them in 6 months.

It turned out to be less than 3 weeks (August 16th), and it was the SEC.

And then we realized that it's an $850,000,000 (850 million) ponzi scheme... and it had paid off people such as Troy Dooly who was supposed to be neutral to "counter negative news", in addition to possibly ruining reputation of Howard Kaplan (tax consultant) and Kevin Grimes (MLM Attorney) and possibly many many more.

Will you miss the next "cockroach"?

The Age of Uncertainty
(Photo credit: Wikipedia)

As the MLM Skeptic, it is rather interesting to see many people who are defending their particular scheme from criticism suffer from personality disorders (not that I am a professional of any sort regarding psychology). They are often self-obsessed and arrogant as well as intolerant of ambiguity, and lack of empathy.

Many unscrupulous multi-level marketers and scammers play to these personality disorders by claiming they are VIRTUES, not disorders. These disorders are, instead, presented variably as confidence, conviction, certainty, and "they are not us".

People develop coping mechanisms when their self-image was diminished. One of the most common coping mechanism is retaliation: when they feel devalued, they devalue others as a response. Scams often play up this personality disorder by encouraging it with "they are not us; they don't think like us; they just don't understand us".
Any one who questioned the person's choice (the scam, in this case) will be devalued, even if they are best friends and family, and even spouse. That's why "intervention" when it comes to scams rarely succeed.

Another coping mechanism people develop is equating conviction with certainty. Conviction is a collection of your strong beliefs about the morality of your choice and/or behavior. If you don't really have much conviction, you'll often adopt certainty as if it is conviction. Thus you'll also develop certainty about other people (and what you believe to be THEIR conviction or lack thereof). This comes across as arrogance and intolerance. Scams play up this aspect by creating fanciful stories about the critics asking questions, such as "you're just jealous; you're just out looking for hits for your blog; you must have hated the owner; you're the 1% out to fleece us the 99%". After Zeek Rewards ponzi scheme was shut down in 2012, some started floating fanciful stories about "SEC doesn't have a case because they privately admitted to our lawyers".

However, what people don't understand is very often, certainty is an ILLUSION.

Life is never fair or certain. We never have every bit of information we need to make a decision. Thus, the only way to be certain is to THROW OUT / FILTER information, and thus, vastly increasing the potential for a wrong decision.

This is also why emotions contribute to bad decisions. Emotions, esp. anger, trigger sharp release of adrenalin and cortisol, which narrows mental focus and leading brain to ignore variables that involve self-doubt. Stimulants, like coffee, can do that too. Anger can lead you to believe that you're right and everybody else is wrong. All that mental focus leads you to pick out a few aspects of thinking and ignoring the rest, which leads to you taking things out of context and blow them out of proportion. In other words, the more certain you feel, the more likely you're wrong.

Scammers are quick to encourage this sort of attitude with the "they just don't understand you" which encourages you to react to your friends and family with anger, and also blocks you from any voice of reason.

Furthermore, they will often ply you with woo which you interpret as "most wonderful thing (since sliced bread)" because it worked on you, when in reality, it worked because you just "knew" it would work (wishful thinking, expected result, cherry -picking). And now, you're so hyper-focused on this ONE positive result, namely you (Ikea effect, anecdotal fallacy), you cannot POSSIBLY conceive this product NOT working for anybody else, any time, anywhere.

(Previously, I've had a commenter who stated that _____ coffee is good because it reduced hunger. She knows because she tried it. The problem is, ANY liquid will reduce hunger, even plain tap water. I showed her the article and never heard from her again. Wonder if she decided I'm "negativity to be avoided" or realized she had been lied to and all this testimonial she had been giving was a delusion?)

So what can you do about it?

Certainty and Doubt (Photo credit: Celestine Chua)

First thing is to recognize that uncertain is a part of life, and while it should be minimized, it cannot be covered up or ignored through illusions (or delusions).

Recognize the instances you're being manipulated via

You are encouraged via aroused emotions (anger, frustration, infatuation) and forced to make a quick decision
You are separated from your friends and family and forced to make a quick decision
You are encouraged to devalue people who disagree instead of trying to understand their position
You are encouraged to AVOID people who disagree instead of trying to understand their position
You are encouraged to make up random reasons about people who disagree (to devalue them), or you are in groups of people who do the same (and you're expected to follow along)

You should instead:

Adopt a scientific method of evaluating evidence; never accept something at "face value". It could be a trick, a mirage, a construct, or a facade to hide the truth. Look up what experts in the specific field, with proper credentials, say about the field, and if there's a general concensus
Accept uncertainties in life; learn how to minimize them, but accept them as part of life

Inspired by
http://www.psychologytoday.com/blog/anger-in-the-age-entitlement/201402/conviction-and-uncertainty

Yep folks, this is turning into an all Zeek Rewards Ponzi aftermath update. And yes, I have links, which you should ALWAYS CHECK to make sure I'm reporting stuff accurately. (And if you don't see links, ask)

Zeek Refund Round 1 May Be Coming 30-SEP-2014

According to court documents as reported by ASDUpdates, Judge Mullens has approved the first distribution of refunds for Zeek Rewards, tentatively scheduled for 30-SEP-2014

Stay tuned to the Zeek Rewards Receivership website for actual announcement. Speaking of which...

More Zeek Winners Get Sued

In 30-JUL-2014 update, Receiver Ken Bell announced that he is starting up a new class action lawsuit against the "net winners" who have profited by 1000 or more dollars, and have NOT settled with the receiver's office. There are almost 10000 of them. They have until 18-AUG-2014 to respond. The "top winners" will be used as examples ("class representatives") to show the rest are similar albeit in a smaller scale.

No word on suing people outside of the US. Receiver's office is apparently coordinating with various international lawfirms and law enforcement outside of US on this matter, based on previous updates. No word on how that is progressing.

Zeek "Insiders" reach settlement with Receiver's office

According to documents filed with the Court, the top three at Zeek Rewards, namely Paul Burks, Dawn Wright-Olivares, and Daniel Olivares, have agreed to a $600 million judgement 'to be satisfied with majority of their assets' in order to settle receiver claims against them.

Some million dollar "net winners" have filed counterclaims, claiming various alleged technicalities such as jurisdiction. The claims are so absurd, the receiver filed ONE "consolidated response" against all of these probably bogus claims.

When defenders of a certain scheme ran completely out of viable arguments, they will often depart with a throwaway comment:

"we shall see"

It has several variations, like

"Time will tell"

"History will be the judge"

"Truth will prevail"

and such.

This is a pretty lame departing shot, as it basically demonstrate they have *faith* that they will be vindicated eventually, but they don't have any evidence to support their opinion right now, which makes that a BELIEF.

faith

fāTH/

noun

1.
complete trust or confidence in someone or something.
"this restores one's faith in politicians"
synonyms: trust, belief, confidence, conviction; More
2.
strong belief in God or in the doctrines of a religion, based on spiritual apprehension rather than proof.
synonyms: religion, church, sect, denomination, (religious) persuasion, (religious) belief, ideology, creed, teaching, doctrine More

Note definition #2... "based on ... apprehension rather than proof".

That's exactly what happened here... they have only their own apprehension of how the scheme will make them rich, rather than actual proof. It's religious, rather than evidence-based.

The fact that many scheme promoters behave in a religious fashion have lead to cult experts in calling such schemes "commercial cults".

In an article published in the Huffing Post, cult expert Steven Hassan stated:

...sometimes these schemes employ the same mind control techniques that abusive cults use. Recruitment rallies may run till early hours of the morning; the schemes are presented as the "last best hope." Critics and doubters are cast "losers" and "dream stealers." In this way, Amway's recruiting organizations (as well as other, similar MLM schemes), can themselves be considered destructive cult groups. But these groups are commercial cults that are offering a type of transcendental ideology that is not much different from that found among the religious cults. Their salvation lies in a financial promise.

That's why many commercial cults are cozy with self-help industry: they both claim to provide salvation... The commercial cults promised financial salvation, while self-help promise secular yet spiritual salvation.

Commercial cults, which can be both pyramid and ponzi schemes (which then takes on disguise of legitimate multi-level marketing) often have a charismatic leader who is well-versed in manipulation of his followers, which may even lead to physical and sexual abuse. No, that's not a joke. Look up these real examples:

Keith Raniere and NXIVM. Raniere's followers actually believe that Raniere don't drive because his spiritual energy was so strong he can set off police radars (WTF?!) Yet people apparently paid the guy thousands of dollars for "spiritual enlightening" from "the Vanguard" (whatever that means)
Tzachi Gozali and Herbalife (Israel) Gozali recruited young Israeli discharged soldiers (with their discharge payment) by waiting outside barracks with fancy cars and his prettiest "GTEAM" members... with promises of riches if they follow his every command, including who to talk to (only senior GTEAM members) and who to have sex with (no one, unless it's with him, and he only likes skinny girls).

If you realized a friend's latest obsession is all about promises and faith, s/he may be under influence of a cult. And one of the simplest signs is they can't argue with facts, but instead, answer with their own faith as conviction.

Beware.

English: Honda- Amway（AVCL）Hồ Chí Minh (Photo credit: Wikipedia)

You can't mention multi-level marketing without mentioning Amway, but do people actually know the real origins of Amway?

If you go to Amway's website, their timeline only goes up to 1950's, when Jay Van Andel and Rich DeVos founded "American Way" in Ada Michigan, and later shortened the name to Amway. But in reality, their history goes back a bit further.

Carl Rehnborg,
courtesy of nutrilite.com

Origin of Amway can actually be traced back to 1930's to a gentleman named Carl Rehnborg, founder of Nutrilite (exclusively distributed by Amway). According to Nutrilite's website, Rehnborg, who lived in China as early as 1915, had experienced much of the unrest during that uncertain era in Shanghai, and experimented with soup/broth made from various locally procured ingredients, including herbs, plants and vegetables, animal bones (source of calcium), and even rust from rusty nails (source of iron) to supplement the meager army rations at the time.

It is worth noting that Mr. Rehnborg was only verified to be a salesman for Colgate in China at some time (there are some doubts, according to some sources, that he may or may not be in China at the time he claimed) and has no verifiable formal training in nutrition. There are some unverifiable or self-referential claims that he may have been a "doctor of chemistry". According to yet another source, he's "trained in biology and chemistry" but apparently did not have a degree.

Upon returning to the US in the 1930's, healthier than others due to the broth/soup (so he claimed) but broke, he started experimenting with the beginnings of multi-vitamin / nutritional supplement market. When he felt he had perfected the formula, he started "California Vitamin Corporation" in 1934 and started selling "Vita-6" (later "VitaSol") to friends and friends of friends. What was not mentioned was upon returning to the US (he had sent back his wife and children before the unrest in China started) Rehnborg apparently turned down a job from Colgate in order to pursue his dream, which caused his first wife and two children to leave him. His second wife died at childbirth with the child.

According to Carl's son Sam (from Carl's third wife) , Carl discovered "contrafreeloading" at this time, as the supplements given to friends for "trial" was left on a shelf and forgotten. When he started CHARGING MONEY for the supplements, then people really started wanting to buy them. When people started referring people to Rehnborg to buy his products, Rehnborg told them that they should sell the stuff themselves, and he'll give them discounts. Thus is the seed planted for multi-level marketing.

The company name was changed to "Nutrilite" in 1939, but WW2 really put a damper on things. It wasn't until after the War, in 1945, that people really started pushing the products again. Rehnberg signed an agreement with Lee Mytinger and William Casselberry making them exclusive national distributors, with Rehnborg staying in the background as "scientific adviser".

In the post-war boom, growth had been phenomenal, but it was also accompanied by extremely woo-ish claims that the vitamin can be effectiveness against almost everything under the sun, including allergies, asthma, mental depression, irregular heartbeat, tonsillitis and 20 other common ailments. And this was actually printed in booklets handed out by the sales teams. The booklet also heavily suggested that the nutritional supplement can be effective on more serious conditions such as cancer, heart problems, tuberculosis, arthritis, and so on. The product, "Nutrilite XX", was marketed at $20.00, which is a SIGNIFICANT amount of money back in 1940's and 1950's, even in the post-war boom economy.

English: Logo of the . (Photo credit: Wikipedia)

FDA took action in 1947 and 1948 and dragged Mytinger, Casselberry, and Rehnberg to court for misleading claims. Many shipments of Nutrilite products were actually seized by the FDA. However, this did not slow down people from joining. Two new members, who joined in 1949, were Jay Van Andel and Rich DeVos. Formerly of USAAF (that's the US Air Force), they were extremely successful and accumulated sales force of 2000 people in a few years. According to sources, a new recruit were to buy a $49.50 "business kit", which contains one box of Nutrilite XX, along with a thick folders of speech (to be memorized and recited), and booklets, which was what got the company in trouble (as mentioned earlier).

In 1951, FDA obtained court judgment that banned Nutritilite salespeople from making use of ANY misleading claims, based on the original booklet, its various revisions, and over 50 other similar booklets. The case, along with prior seizure of vitamins, was appealed all the way to the US Supreme Court, where it was eventually ruled in favor of the FDA in the 1960's.

Fearing collapse of their Nutrilite business and seeking to diversify, the Van Andel / DeVos pair went out to look for new products to manufacture and sell, and to form their own company, named "American Way", in 1959, and it was later renamed Amway. Amway's organic and biodegradeable cleaner at the time was very good and growth was phenomenal. So phenomenal, that in 1972, they actually bought a controlling interest in Nutrilite, the company they used to sell for. And in 1994 the company was entirely absorbed into Amway.

In 1989, a generous donation by Nutrilite and Amway to Stanford University lead to the creation of a special endowment "The C. F. Rehnborg Chair in Preventive Medicine", mainly because Carl's son, Carl Sam (who goes by "Sam") got a degree in chemical engineering there (graduated 1958). Sam also later got a degree in "biophysics" from UC Berkeley, and it's worth noting that neither seem to have any links to nutrition. Sam later wrote a book about his father's struggle titled "The Nutrilite Story". Sam retired from Nutrilite in 1993.

(Sidenote: a competitor, Shaklee, paid for an endowment called "James Whittam Memorial Lecture" at Stanford also)

Today, Nutrilite is an Amway brand, nothing more.

Sources:
http://www.nutrilite.com/en-us/Nature/WhyNutrilite/our-history.aspx
http://www.amway.com/nutrition/nutrilite/about-nutrilite/nutrilite-history
http://www.culthelp.info/index.php?option=com_content&task=view&id=767&Itemid=9
http://en.wikipedia.org/wiki/Nutrilite
http://mlmtheamericandreammadenightmare.blogspot.com/2012/08/the-amwaynutrilite-quacks-have-also.html
http://www.scmp.com/node/520863

In May and June 2014, a new energy drink suddenly popped up on the market called "Energee", backed by some "Integrity Asset Group", who apparently announced that they will be the primary sponsor for Bryan Herta Autosports's Indy Car, and they have the pictures to prove it. This is the announcement on BHA's website:

BHA announcement that Energee will be their sponsor for IndyCar, as of 09-MAY-2014

Yet less than 2 months later, 31-JUL-2014, BHA is suing Integrity for breach of contract.

BHA sues Integrity Assets Group, et al, 31-JUL-2014

That of course doesn't stop all the press releases, and publicity photos, announcements, videos... Mostly to Spanish speaking folks esp. South America.

Spanish promoter touting Energee as "next best income opportunity"
promises bazillion more products like electronics, vehicle tires, and more

What happened, and why did IndyCar and a famous Indy racing team accept an unknown sponsor?

Lack of due diligence.

Let us do a little research into what is this "Integrity Assets Group" ...

Integrity Assets Group is a total unknown before May 2014. Its own domain was only registered in June 2014. On its website it claimed it was founded in 2012 along with various unverifiable claims. This stood in clear contrast to its domain reg.

A California Corporation by same name was registered in April 2013 (not 2012) in West Corvina.

There is also a New York Corp by the same name, but that address goes to a Regus mailbox/virtual office.

Officers listed: Alex Al-Ajlani (mentioned in press release), Melissa Haltom (on Linked In), and Brad Snosevick (on MyLocal / Facebook). Though Haltom and Snosevick's name require a lot more digging.

The only background found on Alex Al-Ajlani was he used to be a car salesman at Autobahn Motors in San Mateo, California.

Melissa Haltom was apparently a real estate agent and at one time ran a pizza place in Southern California.

Brad Snosevick... and Integrity Assets Group... Well, he used to sell himself as some sort of bankruptcy / foreclosure specialist...

MyLocally sais Integrity Assets Group is ran by
"Brad Snosevick" and specializes in bankruptcy

Especially on Facebook (but this page is no longer public)

Facebook page confirms bankruptcy services, claims services as
attorney, foreclosure, bankruptcy, and so on. (page has since been deleted)

But he's NOT an attorney, according to California Bar Association

California Bar Association has no listing for Snosevick

So how did a bankruptcy not-attorney, a real estate / pizza girl, and a (used?) car salesman have to do with racing sponsorship? Good question. I see no link here.

What about "Energee"? It gets even weirder.

According to TradeMarkia, the "Energee" brand, with the lightning bolt between the last two E's, only filed for trademark on Jun 14, 2014.

There was no mention of "integrity" or "drink", but it is a trademark for energy drink.

The registrar, "Overall Success Corporation", is a house on a cul-de-sac. 6420 LITTLE BROOK TRL
RIVERSIDE, CA 92509-6150

There is a website for "The Overall Success Corporation" at theoscorporation.com, but it appears to be some sort of an income scheme where you paid them $200 to start, $20 a month and get $100 for each person you refer them who also pay them $200 to start and $20 a month for some sort of "success life plan". And it's all in Spanish.

Weird. Eh?

But what is this "income opportunity" that the Spanish speakers were touting all over? It may be a Ponzi scheme, according to BehindMLM. where you purchase "positions" in the company and share in the "revenue". Put in $2151, then 200 days later take out $4000. It's essentially an HYIP trying to BUY legitimacy (as a sponsorship) with its member money.

Back to the lawsuit. According to documents obtained by MLMSkeptic, BHA is alleging that IAG has promised to pay $2 million to BHA for the sponsorship. Of which, BHA has received less than 25%. (i.e. it has received only 470K).

All of this I found online in course of couple hours, and I had some help in the form of other BehindMLM readers / fellow scambusters.

But really, did IndyCar / BHA do no due diligence when it comes to sponsors? Or are they so desperate for money they don't care where the money comes from? That they really think no shady people dare approach them to sponsor them?

Let this be a lesson to other sports franchises and whatnot... Beware of people who may be shady but want to get their name associated with YOUR name by giving you a lot of money for "sponsorships".

BREAKING NEWS: Zeek Receiver sued Kevin Grimes and Howard Kaplan for negligence, wants $100 million EACH for damages

Anti-Scam: Rough Guide to Spotting Shady Opportunities, Part 1 of 3.

A Rough Guide To Spotting Shady Opportunities (part 1 of 3)

1) Sensationalized Headlines

2) Misinterpreted results

3) Conflict of Interests

4) Correlation vs. Causation

Anti-Scam: Rough Guide to Spotting Shady Opportunities, Part 2 of 3

A Rough Guide To Spotting Shady Opportunities (part 2 of 3)

5) Speculative Language

6) Sample Size Too Small

7) Unrepresentative Samples

8) No Control Group

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Is USANA in trouble? Probably. But It Started a LONG TIME ago.

Anti-Scam: A Rough Guide to Spotting Shady Opportunities, (part 3 of 3)

A Rough Guide To Spotting Shady Opportunities (part 3 of 3)

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