A (MLM) Skeptic

Back in November 2013, Herbalife announced it is entering Cambodia with its flagship products: nutritional shake, personalized protein powder, and herbal tea concentrate, having previously entered Vietnam.

The question here is... what is Herbalife doing there? Is there a need for Herbalife products in Cambodia (or Vietnam)?

According to Herbalife, Formula 1, personalized protein powder, and herbal tea concentrate are all a part of its weight management product line.

Does Cambodia and Vietnam have a population overweight problem? No. In fact, they have an UNDERweight problem.

Here's Unicef's statistic on Cambodia and Vietnam

Both nations are plagued by malnutrition with VERY VERY few people overweight.

Why would either country even NEED "weight management" products?

Heck, there's not even a McDonalds in Cambodia! And Burger King has just entered Cambodian market in 2012.

Average annual income in Cambodia is under $900 USD.

Who can afford to buy $32 per can of "Formula 1"?

Herbalife entering Cambodia and Vietnam is like selling snow to Innuits (aka Eskimos) at caviar prices.

Ask yourself this logical question: What sort of illogical crap are their distributors feeding the local population to sell Herbalife products?

Recently I ran into this rather amusing vidcap of a Kiyosaki video:

Yes, that's Robert T. Kiyosaki giving his "haters" a piece of his mind.

Well, according to Kiyosaki's own words, Kiyosaki's a sinner!

How so, you ask?

Ah, that's a story to tell. There's betrayal, there's vindication, there's a second betrayal, and lies to "spin doctor" the treachery into triumph.

So have a seat, and let us discover a chapter of "Rich Dad" that Kiyosaki would rather you not mention.

On October 12, 2012, Kiyosaki posted on his "Rich Dad" financial education blog a post titled "Rich Dad Isn't Bankrupt Dad". This excerpted paragraph sums up the sentiment:

His (Rich Dad's) best lesson to me was: “Be smart and you won’t be pushed around as much.” He knew the law because he was a law-abiding citizen, and more importantly, it was expensive to not know the law. “If you know you’re right, you’re not afraid of fighting back,” even if you are taking on Robin Hood and his band of Merry Men. It’s better to be Rich Dad with a bankrupt corporation than to let the desperate Robin Hood destroy you.

What's the backstory though? Turns out, one of Kiyosaki's corporations declared bankruptcy in 2012. Rich Global, LLC was supposed to have gone into partnership with the Learning Annex, one of the biggest seminar providers out there. TLA really pushed Kiyosaki, to take advantage of the book's publication and organized some of the largest seminars for Kiyosaki from 2001-2004, complete with "letter of intent" signed by both parties, with promise of revenue share. TLA setup one of the most prominent of Kiyosaki's seminars at New York's Madison Square Garden in 2002. The idea is TLA will create the free seminars, where they'll upsell the attendees into attending the for-pay seminars. Except Kiyosaki never paid TLA their share. So TLA sued the entity that signed the contract... "Rich Global LLC".

Rich Global declared bankruptcy on August 20, 2012, in Wyoming, after losing the lawsuit and was ordered by the court to pay $24 million in damages. And this is a full Chapter 7 closure. According to NYPost, Rich Global has a few million left in the bank, and that's it. In other words, TLA may not even get enough to pay the lawyers. This is at best, a symbolic victory, and at worst, a Pyrrhic victory.

But Kiyosaki is not out of business. He's doing business nowadays as "Rich Dad Co." This corporation, setup by Kiyosaki and his wife Kim, was apparently founded around 2005 to 2007 after their breakup with The Learning Annex.

And now you'll find "Rich Dad Co" doing the exact same thing TLA originally proposed... free seminars to draw people in to sell them $495 full day seminars. And the full day seminars are designed to sell people on $2500 3-day seminars. And the 3-day seminars are designed to sell people on "full courses" that can cost up to $45000 dollars.

But Kiyosaki had outsourced the courses to some other company that already switched names twice after receiving multiple complaints about hard sell, bogus and possibly illegal advice, and other shady biz... just like Kiyosaki himself. And Kiyosaki has plausible deniability.

But The Learning Annex is hardly the first partner Kiyosaki had screwed over the years. The co-author of Rich Dad Poor Dad, and the source of the real financial advice, Sharon Lector, CPA, was paid off in 2008 after she threatened to expose enough secrets to force the entire company into receivership so she can get her fair share.

Yes, Kiyosaki's smart in setting up multiple corporations and let that protect his assets. The dummy corp dies like a lizard loses its tail, but the lizard will escape and live another day... and grow another tail (or two, or three).

But what's the real lesson here? To Kiyosaki, it's "if you setup your game right, you can screw other people and laugh about it later".

Apparently, the mistake here is "should have never trusted a man whose non-fiction book is about a man who does not exist".

And the only one who won't admit to a mistake is Robert Kiyosaki himself. He thinks he's the rich guy protecting himself from Robin Hood. Except this Robin Hood is someone he screwed over, not just once, but TWICE.

So Robert T. Kiyosaki is a self-admitted sinner, by his own standard, as he won't admit to his mistake.

Unless it's NOT a mistake... He deliberately chose to screw the Learning Annex after learning their system so he can clone it.

That's deliberate fraud, which is even WORSE than a mistake.

ZeekRewards is back in the news, with pending auction of their building in North Carolina, and now, the receiver has gone ahead and made the list of the worst "net winners". They are:

Todd Disner (as himself and as trustee of Kestrel Spendthrift Trust)
Trudy Gilmond and Trudy Gilmond LLC
Jerry Napier
Darren Miller
Rhonda Gates
David Sorrels
Innovation Marketing LLC
Aaron Andrews, Shara Andrews
Global Internet Formula Inc.
T LeMont Silver, Karen Silver
Michael Van Leeuwen
Durant Brockett
David Kettner and Mary Kettner.

These folks have yet to cough up their ill-gotten "profits" by paying back the receiver, and are top of the list of "net winners". Basically, if you profited by $1000 or more, expect to see a clawback lawsuit.

Disner was a well known Ponzi player that had been active in Ad Surf Daily and seem to enjoy filing frivolous lawsuits against the government for popping the scams he was involved in.

Aaron and Shara are also well known players in the shady circle of Ponzi pimps pushing this scheme and that. They are usually mentioned together so just search for them.

T LeMont Silver is said to have left for Dominican Republic, vowing to defy US justice.

Gilmond (along with Kellie King) had previously hired an ex-Madoff lawyer to sue to dissolve the receivership and had been tossed out of court. (corrected from original)

The insiders are getting a separate lawsuit... mostly employees of RVG, including Paul Burks, Dawn, Alex, Darryl, and a few more.

Previously we've reported on how the ZeekRewards Receiver Ken Bell has filed civil motion against the top "net winners" of the 700 million Ponzi scheme shut down in 2012, and among the top winner list is Dave and Mary Kettner.

Usually, the best way to deal with this sort of publicity is to simply clam up: "no comment", as anything you say can and will be used against you in a court of public opinion. Unfortunately, (or perhaps, fortunately for the people who study scammers and their psychology, such as the MLM Skeptic here) some people just can't keep their mouth shut. And in this, Mary Kettner is believed to have posted certain "whine-y" comments on Facebook, which was forwarded to Oz over at BehindMLM

Well I am listed as a net winner. What a laugh… its not because of the amount but because i stuck out my neck to defend what we were doing as a business and got a big old target on my back…

I didn’t even earn half a million in the year and a half that we were doing the penny auction business..and because it was a business I was running I paid my taxes…which was just over 50 % of what my company earned.

We paid state, federal, and employee type taxes… Add in expenses, cost of business, travel and training of my team…and there is very little left…and alot of that went to lawyers when Zeek went down….

What a laugh? I fail to see the humor in facing a lawsuit for about one million dollars. Why one million? She claimed did not even earn half a million... AFTER taxes. That suggests her take from Zeek is 1 million dollars over about 18 months (by her claim).

And she whines about having no money... hahahahaha.

Let's not forget that it was her husband, Dave Kettner, along with Robert Craddock, that was spreading all the nasty rumors trying to divert blame from Zeek Ponzi itself. Turns out NONE of the rumors they spread, such as "Zeek will rise again", "SEC has no case", "Paul Burks was railroaded" etc etc. were true. It's all crap.

Lawyer (Photo credits: www.myparkingsign.com)

Craddock was the one she should be blaming for pinning false hopes on

And her husband deserves much of the blame, by recruiting her, and falsely identifying a Ponzi as "[legitimate] business", and spending thousands on lawyers that did nothing.

But due to narcissistic personality, it can't possibly be their fault. It had to be the receiver. It had to be the ev'l guv'mint (evil government) out to destroy their "honest" business.

Welcome to reality. Enjoy the treadmarks on your back after it went past.

According to PatrickPretty.com, one of their sharp-eyed readers tipped them off as the the following developement:

Which reads:

If you have questions or concerns about your Obopay or Payza account, please call 202-252-1903 and leave your name and contact information. Someone will return your call within 3 business days.

PPBlog (PatrickPretty.com) has since able to confirm the pending investigation through a spokesperson at the US Attorney's Office, who, of course, has nothing else to say.

Roughly two weeks ago MLM Skeptic reported that Obopay, Payza's exchange partner in the US, is no longer honoring withdrawal requests from Payza, as reported by Payza, and Payza may initiate legal proceedings against Obopay, then came the announcement on Obopay's website that Payza's funds were frozen, then seized by Department of Homeland Security.

Roughly 5 days ago Payza formally announced that it will no longer do business with any US members. (see related articles below)

US is definitely taking a stand against the "dark web", where money moves virtually anonymous. With shutdown of Liberty Reserve and Silk Road earlier, those who deal with the dark underbelly of the web should be careful where they tread.

The Superintendency of Banking and Investments of Peru has issued its ruling... Neither WCM777 nor TelexFree are allowed to receive public funds in Peru.

http://www.andina.com.pe/Espanol/noticia-empresas-wcm777-y-telexfree-no-estan-autorizados-para-captar-dinero-del-publico-486768.aspx#.Uq0tNPRDt8E (link in Spanish)

The article urges anyone who have remitted money to either entities operating illegally in Peru to contact the authorities immediately. Both phone numbers and email address have been provided and is at the link.

EDIT: Secondary link found

http://www.larepublica.pe/12-12-2013/advierten-que-wcm777-estafa-con-practica-piramidal-fraudulenta

Previously MLM Skeptic has noted that WCM777 in Peru was pushed by a pastor "David Lozano" and his "Ministry of the Light", which operates a radio station in addition to virtually non-stop events. This is very reminiscent of Nanci Jo Frasier of "Focus Up Ministries" in Ohio, USA, using a church to spread a scam (Profitable Sunrise ponzi scheme).

It took peru 3 weeks to determine that WCM777 is illegal. Not quite as fast as Colombia, who announced the investigation on Twitter and took only two weeks, but it's still plenty fast for a government. It took the US about 5 months to kick it out of Massachusetts, which prompted a full scale retreat back across the ocean to Hong Kong.

One can only hope the rest of the world follow suit QUICKLY, and bring Ming Xu to justice along with the rest of his top henchmen.

As for TelexFree, it's trying to shift out of Brazil having lost EVERY court battle it faced there, while trying to come up with new "compromises" and "ideas" that would never work, while attempting to infiltrate other countries and try to get them to join the US version, which is the SAME COMPANY, albeit more virtual. Apparently some perps have also registered a TelexFree in the UK.

If you see a WCM event being organized near you, consider notifying the local police to this webpage and to the links around the world that WCM777 is an illegal ponzi scheme.

[Thanks to PPBlog at patrickpretty.com for the heads up]

One of more "cultish" arguments raised by followers of a particular scheme (starts with V) is "I don't have to listen to you. I listen to people who made money! How much did you make, huh?"

A somewhat more polite version would be, "If I want to play basketball I want to be like Michael Jordan. If I want to play football I want to be like Peyton Manning. If I want to make money I'll want to be someone who has made lots of money, such as my leader _______ in ______."

This sounds like it made sense... For about 3 seconds.

Why would you NOT want to emulate the top billionaires in the US of A... like Bill Gates (Microsoft), Warren Buffet (Berkshire Hathaway), or Larry Ellison (Oracle), or heck, Mark Zuckerberg (Facebook)? Why would you suddenly lower your goalpost? What sort of crazy argument is that?

It's like saying, "I want to be the best in the field... EXCEPT when it comes to money!"

WTF?! Man... WTF.

But wait, there's more!

Those who look into the first statement will also immediately see a potential problem... that it ASSUMES that whoever is used as idol, that person is making money through a legitimate enterprise or method. After all, technically anybody can make a ton of money by going into the illegal narcotics business, right? The risks are huge, but those people *do* know how to make money... supposedly. Why not look up to them?

Both statements also has a "cult" feel, in that it discourages people from seeking alternate views, and shuts down learning, as if anybody else is not worth listening to. This is an integral part of cult mentality, known as "Thought Control". Once they got you thinking only their thoughts instead thinking your own thoughts, they own (pwn?) you totally.

Basically, this is a slogan that sounds good, but makes no sense upon inspection. It's useful to occupy one's mind temporarily, used as a part of "shock and awe" to overwhelm the target's mental reserves as a form of subtle coercion, but does not stand up to closer scrutiny.

[Inspired by YPRPariah blog post http://yprpariah.wordpress.com/2013/12/14/vemma-ypr-who-do-you-listen-to/ ]

A scammer is always leading you into getting the wrong impression of him, and thus of his scheme, and thus, this calls for you to think as little as possible. How that works requires explaining how your mind works.

Basically, your mind has roughly 3 parts... Reflexive, Intuitive, and Rational.

The reflexive mind (something that's so ingrained in you, it's a reflex, like move your hand away from something that causes pain, such as hot plate, electric shock, and so on. Thats completely automatic that you don't even have to think about it. It's in your subconsciousness.

Daniel Kahneman (Photo credit: Wikipedia)

The Intuitive mind handles something that is not completely similar (i.e. handled by reflex), but is similar enough that you are comfortable the recognition. This is "common sense", "going by feeling", "first impression", and so on. This is also sometimes known as "System 1" per Daniel Kahneman's book "Thinking... fast and slow".

The Rational Mind handles the rest, when something requires deeper thought beyond intuition and impression, such as logical and scientific analysis. This is also known as "System 2" per Kahneman book.

Scammers can't do anything about your mind... except how you perceive the scheme, so they will do all they can to make their scheme look familiar, and thus you NOT engage the rational mind, but stay with the intuitive mind. There are many ways to do that, but the the 4 basic techniques are

Priming the idea
Clear Visual Display
Keep you in good mood
Repeated experience

If they can use these four techniques on you, and you are not the pensive kind (i.e. you prefer to think things over, instead of doing things on impulse) they can basically make you forget about "due diligence" and join just because "it sounds good".

And that "first impression" will be wrong.. because the scheme was designed that way to take advantage of your cognitive biases to give you the wrong impression.

A presentation designed to convince you of something, such as "join my scam", would have the four elements above: priming, clear visual display, good mood, and repeated experience.

Priming the idea -- we are all affected by ideas we are exposed to, almost at a reflexive and instinctive level. If we read about old people and their lack of mobility, we will walk slower (really, it's been proven by repeated research). If I want you to think about the data I am about to give you a certain way, I merely have to tell you what you should EXPECT to see, and you will see it.

If you still don't understand priming, here's an illustration: what do you see in this pretty famous picture?

If you said "naked couple", that's because you've been primed to see human bodies since your early teens. Are you sure you don't see dolphins? Look again.

Aha, I have to prime your mind for you to see dolphins, eh?

Your intuitive mind (system 1) saw the shapes of a naked couple and that's it. You no longer process the details of the picture. You saw exactly what you wanted to see.

Children who were not exposed to pictures of naked bodies see the dolphins, not the bodies.

Scams are the same way: they present things to you, tap into things that you know about (but probably not in significant detail) that you intuitively feel you know the scheme well enough, so you don't feel the need to engage the rational mind for a detailed analysis.

The "clear words" and "repeated ideas" are pretty simple... they are meant to put you into "cognitive ease", which in turn is contributing to and is buoyed by good mood.

Basically, when you feel comfortable, and presented with superficially familiar ideas, you don't think much. Your mind is on cruise control. You are more likely to believe the speaker and trust your impression and intuition about things, rather than think it through. (Conversely, when you are uncomfortable, irritable, and stressed, you will be far more hesitant to say yes, far more likely to think about every detail, possibility, permutation, and so on. )

Presentations, recruiting seminars, and so on are usually held in nice comfortable settings, (sometimes, on a cruise!) with free water and minor amenities, to make you feel comfortable, and the presenters hammer the same points over and over, by telling you what you want first (priming the idea, remember!) then telling you how to achieve it (join their scheme). The rest is reinforcement (it's so easy, virtually no risk, huge industry...)

They are INTENTIONALLY trying to prevent you from thinking things through.

That's clearly NOT good for you.

Penta Water: proven woo on multiple contients (Photo credit: Wikipedia)

I was just reading a review of "Nature's Sunshine" nutritional supplement MLM on Oz's BehindMLM when I spotted a name I never thought I'd see again: Penta Water.

For those of you who don't know, Penta Water is woo... it claims to be ultrapure water that somehow is "better" for you, with some buzzwords like "improved cell survivability" and other random junk jargon, coupled with WTF? claims like "using these in medical tests improves test accuracy"... But they'll gladly sell you bottles of it for you to drink (at a premium, of course, at prices higher than even Evian water). It was so bull****, the British ad supervisory agency shut them down for making false claims. It's so notorious, it has its own Wikipedia page.

en:Image:RANDI.jpg (Original text : James Randi)

James Randi (Photo credit: Wikipedia)

And in the US, it attracted the attention of no less than James Randi, probably the best known skeptic in the world, and the entire skeptic community in debunking their bull****. James Randi has long offered a prize of $1 million dollars of any evidence of paranormal supernatural, or occult occurances, abilities, or products... under proper observing conditions (i.e. reproducible). To date it had NOT been claimed even once. Penta Water was at one time announced that they will try for the prize, then wiffle-waffled, then tried t
o stipulate that they want to use their machine, which JREF said fine, as long as you can detect 37 out of 50 random users that drank your Penta Water. Then after a while, Penta Water stopped responding altogether, claiming it can't find a representative to oversee the test.

And the head of Penta Water was Gregory L. Probert.

Apparently, Mr. Probert had been pushing woo for a while, as he's now head of "Nature's Sunshine", after Penta Water went... down the drain (so to speak).

Before his slide into woo world, Mr. Probert had a pretty distinguished career, as head of Disney's Buena Vista home entertainment (now "Disney Studios") division (selling videos and such).

Then Herbalife happened.

Before joining Penta Water, Mr. Probert was COO of no less than the biggie in MLM... Herbalife. First appointed in 2003, he did an unremarkable job until he was ousted in 2008 after someone discovered that he inflated his resume by claiming he has an MBA from CSU Los Angeles when he never completed the course.

Probert went over to Penta Water, after being ousted in 2008, but that barely lasted 2 years before that company went down the drain. Apparently he spent 3 years doing consulting work for Nature's Sunshine and his former buddies Michael Dean and Wynne Roberts whom he knew from DMX Music and Disney way back when, and was called to take over when Dean and Roberts decided to step down.

It's a long way down from Disney, isn't it?

Nature's Sunshine can't keep its own nose clean either. as they were fined $600000 by SEC for bribing Brazilian officials to break into the Brazilian market (back in 2001) in 2009. Three years before that (2006), their auditor, KPMG, resigned because Nature's Sunshine ignored all their advice on improving their financial control (i.e. track where the money went). There were suggestions (not proven) that the CEO and CFO knew about the bribes, but the evidence was contradictory.

Two months ago (October 2013), Nature's Sunshine hired Gregory Probert as their new head, though he had been employed as interim CEO for several months before that.

When two leopards mate, will its offsprings have spots?

Rather likely, if you ask me.

Previously, MLM Skeptic has raised the question whether Robert Kiyosaki had made a Faustian bargain with Network Marketing

That's when someone pointed me to this sound-bite from Amquix, which confirmed that Kiyosaki was a downline in Amway under Bill Galvin.

http://www.amquix.info/sounds/kiyosaki_in_amway.mp3

Bill Galvin was a "diamond" level sales leader in Amway from way back when. In fact, he was thanked in the dedication / acknowledgement page of "Rich Dad Poor Dad". Here's a screenshot from the Amazon "look inside" and there's the name "Bill Galvin" right there.

This is also confirmed via research done by SimpleDollar

Amway Global (Photo credit: Wikipedia)
He [Robert T. Kiyosaki] was involved in several business deals (most notably, nylon Velcro wallets) in the 1970s and 1980s which fell apart, leaving him bankrupt in the mid-1980s. In this timeframe, he became heavily involved with Amway, a multi-level marketing system, and began to cultivate relationships with many of the “top” members. In 1985, Kiyosaki founded Cashflow Technologies, a company that was designed to pitch a series of books and other educational materials that eventually evolved into Rich Dad, Poor Dad.

By the mid-1990s, Kiyosaki had self-printed Rich Dad, Poor Dad and it was starting to appear in wide distribution among members of the Amway/Quixtar organization, as individuals higher in the pyramid would recommend it to people further down the chain looking to get ahead.

Yet you NEVER hear Kiyosaki talk about his MLM career, did you? Nope. It was NOT mentioned in ANY of his books.

Perhaps he doesn't want you to know, hmmm?

But wait, there's more!

Kiyosaki's direct involvement with Amway was further corroborated by a comment sent to John T. Reed:

I attended a Quixtar (aka, QuixScam, Amway, AmQuix, Scamway, etc.) conference in the Fall of 2000 at which he [Kiyosaki] was a keynote speaker. He espoused network marketing and recommended complete dedication to building the Quixtar pyramid business even though he hadn’t found pyramid businesses worth his time. Ultimately, RK has found a way to obtain significant financial benefit from pyramid-based businesses without having to build one of his own.

The story is that Bill Galvin discovered his book at a carwash in (or about) Houston Texas. At that time, RK could not get his book published and distributed in a more traditional manner. Bill Galvin is a diamond under the Dexter Yager organization for Amway/Quixtar. In fact, I still have an old prospecting tape of a dialogue between Bill Galvin and Robert Kiyosaki. You can have it if you want it. I’m sure you’ll enjoy it. By the way, the tapes he produces for Amway/Quixtar diamonds are also distributed by the 10’s of thousands for which he gets a cut of each $6 tape that costs less than $1 to produce.

Anyway, Bill Galvin distributed RDPD to the "leaders" in his group. Bill and his leaders loved the book, so they contacted RK to buy more. The distribution of motivational tools in the Amway/Quixtar distributor networks is extremely efficient (and profitable for higher ups). His popularity grew quickly as his books were channeled to many thousands of lower level distributors by diamond distributors. Distributors would often buy several to hand out while prospecting new recruits. Not wanting to be left in the dust, other MLM networks picked up on the book and it has spread through their organizations as well. I would guess that the MLM industry was responsible for putting RK on the best seller list.

Furthermore, if you look in the "acknowledgements" of Rich Dad Poor Dad, you'll find Bill Galvin's name among the list of people Kiyosaki thanked.

Here's further proof that Kiyosaki had been selling "motivational tools" pushing Amway back in 1990's... Here's some of Yager Organization (to which Bill Galvin belongs) motivation cassette tapes they used to sell to the Amway noobs... and were found on eBay, of all places. Here's the listing... and in the middle, is Kiyosaki!

At the MINIMUM, Robert Kiyosaki was a part of the "Amway Tool Scam". These tapes were going for $6 each 15 years ago, and there are HUNDREDS of them. As for what is the extent of Amway Tool Scam, and how this type of scam had spread way beyond Amway, I'll instead point you at the Amway Tool Scam website so you can read it for yourself.

The conclusion is quite clear. Robert Kiyosaki's success, i.e. his estimated net worth of $80 million, did not come from his financial acumen or knowledge. It came from the Faustian bargain with network marketing industry where they promised to make each other rich.

And all that money making them rich are coming from you MLM noobs who had NO IDEA what you're getting into...

One of the most frequent pro-MLM arguments from fans of network marketing is "Robert Kiyosaki likes it!" (with an implied "he knows what he's talking about!")

Previously, MLM Skeptic has documented that Kiyosaki was actually an Amway rep (and a rather unsuccessful one, as he never touted his success there, or rather, NEVER EVER mentioned it) once upon a time, his book only became successful because it was "discovered" by Bill Galvin, a then diamond Amway rep, who recommended his sales organization, i.e. Yager Team, adopt it wholesale, as a part of the "Amway Tool Scam". With the sales numbers "kickstarted" via MLM, Kiyosaki went to Warner Business Books and FINALLY (after YEARS of trying) got a real publisher instead self-publishing.

Thus, let's just say that Robert Kiyosaki is not exactly an impartitial expert when it comes to network marketing. Because he owes his entire publishing success to it, he's unlikely to say bad things about it.

But let's analyze the book Rich Dad Poor Dad, and its sequel, Cashflow Quadrant instead, and how it REALLY applies to MLM.

Most people who got the "recruiter's version" of "why you should choose MLM" will basically explain to you that MLM is in the "B" quadrant of Cashflow Quadrant, which looks like this, from a MLMer...

Employee works for Business owner, "has a job"

Self-Employed, or specialists, controls/owns their own job

Business owners own a system, so they can sit back and their business will continue to make money. (they hire employees)

Investor owns investments... money makes more money.

Sounds pithy, yes? Nothing *really* wrong with that. But... Where does a MLMer fit in on this quadrant?

The MLMers will say that it's in "B" quadrant. In fact, even Kiyosaki claimed that "network marketing is what I recommend for people who want to move to the B quadrant".

WRONG!

Let's consider the facts: what exactly do you own when it comes to network marketing?

You own your customer list, and you own your "genealogy" (i.e. your downlines), nothing more. In fact, in some cases, you own even less than that, esp. if it's written into your affiliate agreement that you don't own ANY OF WHAT.

You do NOT own a system. You paid to use a marketing system. You are just a salesperson. So that makes you neither B nor I. At best, you're E or S.

Ah, but you say, but I own a sales team! That's something, right?

No, as I said. You don't own that, esp. when most MLMs will SUE YOU if you try to poach your downline and move them to some other MLM you are joining.

What does that leave you?

NOTHING other than some "business skills"... But that just moves you from E to S, not to B.

Ah, but you say, wait, but I can sit back and let my team work and I still get paid! That's residual income like a business, and that puts me in the B quadrant, right?

Wrong again, if you're dealing with a GENUINE MLM company trying to stay legal. Amway Safeguard Rules, established in 1979 as a result of FTC vs. Amway, stated that "10 Retail Customer Rule" is required, i.e. every affiliate / distributor must sell to ten (or more) different retail customers every month in order to earn their commission. Here's the original version from Amway:

4.22. Retail Sales Rule: In order to obtain the right to earn a performance Bonus during a given month, an IBO must:(a) make not less than one sale to each of 10 different retail customers (e.g., Members or Clients); or (b) have at least 50 PV of sales to any number of retail customers; or (c) have $100 at Retail Sales Rule Cost. Retail Sales Rule Cost shall mean the published IBO cost for all items on any orders sold to a Member or Client, or the actual price paid to Partner Stores by Members or Clients. If applicable, Partner Store Retail Sales Rule Cost is applied in the month when the Corporation credits Partner Store volume to an IBO's business.

You have to sell retail EVERY MONTH to TEN DIFFERENT CUSTOMERS to continue to earn the right to receive your commission on sales made by your downline.

You can NEVER go hands off. You CANNOT sit back and relax. If you can, or the rule was never enforced, you are NOT in a MLM, but its illegal cousin, pyramid scheme.

MLMers were NEVER in the B quadrant. They are, at best, S quadrant... with a few exceptions. However, those exceptions are highly illegal.

The most successful MLMers created a business AROUND their MLM opportunity and used that business to feed their MLM organization.

In the infamous "Amway Tool Scam", the various "Amway Motivational Organizations" created a business of making and selling "sales aid" and "motivational tools" to the junior members. Amway may have been honest dealing with its affiliates and paid them decently, but the Tool Scam took those money and fed it up to the organization leaders.

In a different version, organizations such as Shawn Dahl's IncomeAtHome troll the nation with radio ads and online ads with potentially deceptive advertising looking for recruits to be fed into the downline pool in Herbalife and Vemma. It is a copy of a scheme (organized by Shawn Dahl's mother in law!) that was already declared pyramid over in Canada.

Those guys own a system... A system designed to FEED their MLM, but is SEPARATE from the MLM, through fraud and deceit.

Joining a MLM does NOT give you a piece of the system. It makes you an E or S with delusions of B.

But listen to Kiyosaki say that again:

"network marketing is what I recommend for people who want to move to the B quadrant"

He didn't say network marketing people are in the B quadrant. He later said what he meant was you can LEARN SOME SKILLS that will enable you to move to the B quadrant.

But his hands keep moving from S and E to B.

Conflicting and self-contradictory message, isn't it?

Just like "Rich Dad" is a myth... like Harry Potter.

Yes, Kiyosaki said that.

Real Estate Agent... is it comparable to MLM?
(Photo credit: Wikipedia)

Many of the newcomers to MLM, finding people's natural reluctance toward MLM, tried to use bad facts or outright lies and misinformation to present MLM in favorable "familiar" terms, as they often just "inherit" such bad information from their uplines, who simply parrots the information from THEIR upline without any understanding of the issues.

For these noobs, MLM is often compared to:

Real estate, for its two-level commission system
Franchising, for the any one can "own a piece of the action"
Buying club, for the "share the low prices sell direct" type deal

Unfortunately, all these analogies just proves that these noobs have NO IDEA what they're talking about. Let me explain one by one.

The Real Estate Analogy

When I posted my first MLM Critique piece, I was called "king of disinformation" (really?) by a guy who took exception to EVERYTHING I wrote, and his first example was "real estate". (scroll down to first comment)

Creating your own competitors?

What, that is how Realty firms work. They train people on the laws and teach them how to sell houses for them for 1/2 of the commissions. Then once the "new" guy gets his/her license they become direct competition.

In MLM you should train people how to sell the products and help them develop new business builders. This is where the residual income is found, or as you put it your number 2 flaw.

My reply to him:

RE: Creating one's own competition -- except real estate agents usually have to sign non-competitive clauses for X years upon joining and getting trained, and MUST work through a "broker" who gets half the commission, right? Hardly comparable to MLM, where there is NO training, NO qualification, NO non-competition period, and runs in the SAME social circles. Real estate agent may run in the same local area, but they usually work on the SAME listings and split the rewards if they share sales. RE is far more cooperative than competitive.

I actually took a real estate course to be a real estate agent, but I never bothered to take the test as I am not interested in the field. But the system is pretty simple. Buyer has an agent. Seller has an agent. Each agent with has a "broker" who's sort of a supervisor / boss. Standard commission on real estate is 6%, which is split 4 ways: 1.5% each for buyer's agent, his broker, seller's agent, and his broker.

Agents basically take a course, pass a test, get RE Agent's license, and work under broker, get a sales streak going, and either become a broker, or find a better market. Brokers train agents to go out and find more deals, both as buyers and as sellers, and as explained, gets 50% of their commission.

But as I said in my reply, trained agents usually sign non-compete contracts and minimum employment length for informal apprenticeship, and agents are NOT allowed to sell without a broker (legally forbidden). MLM has no such restrictions. Real estate also only have two levels. MLM can have bazillion levels.

NOT COMPARABLE.

The Franchising Analogy

Another favorite bull**** analogy used by MLM noobs was "it's like owning Starbucks or McDonalds", except it doesn't cost a million dollars!

When you walk into Starbucks of McDonalds, were you ever approached by the owner and asked "do you want to become a Starbucks / McDonalds owner too? Ask me for details!"

Of course not. He doesn't profit from selling franchises. He profits from selling the PRODUCTS that the franchise sells, coffee or burgers or whatever.

Any one who tries this approach is selling the business opportunity itself, rather than the products, and that makes it a suspect pyramid scheme.

NOT COMPARABLE.

The Buying Club Analogy

The first time I've seen the 'buying club' analogy used, it was by "TVI Express" pyramid promoters, who claimed that this pyramid scheme is a buying club for travel deals and you're being rewarded by recruiting members. I've seen it in plenty more places since, and it still sounds as hokey as ever, because those people have NO IDEA what the law of buying clubs are.

A buying club, by definition, is NOT a profitable enterprise, as its primary purpose is to *save* its members money by leveraging its buying power through aggregation. Its primary purpose is NOT to MAKE its members money.

Buying club is often used by so-called 'travel MLMs' where they don't actually sell travel, but ACCESS to discounted travel. Those are likely to be pyramid schemes. In fact, any such schemes that don't sell the product, but merely access to discounts of product, and promise profit if you recruit more people who also buy such access, is probably a pyramid scheme.

MLM Skeptic has explained this before in detail.

NOT COMPARABLE

In conclusion, MLM noobs who want to make a proper convincing case for their particular scheme should be aware of the bad analogies as documented here, and avoid them altogether.

(And if you have no argument left, maybe you're in the wrong scheme)

According to Times-News of North Carolina, Dawn Wright-Olivares, former COO of Zeek Rewards, and her son Dan Olivares, former CTO of Zeek Rewards, have accepted a plea deal with the Federal prosecutors. It is not known if they will receive jail time, but according to documents filed with the court, together they have received over TEN MILLION dollars from Zeek, and have agreed to restitution.

http://www.blueridgenow.com/article/20131220/ARTICLES/131229993?p=1&tc=pg&tc=ar

It is now known if other "insiders" will also get similar deals. Other Zeek insiders includes Paul Burks, Darryl Douglas, and possibly many other individuals.

In other news, the formerly Zeek real estate auction yielded only about 750K toward victim restitution.

Previously, MLM Skeptic have, through SaltyDroid's little expose on the Tartol Clan of Herbalifers, illustrated how what you thought are good odds are actually not so good for you average Joes in Herbalife, though absolutely great for the "insiders". John Tartol is on Herbalife board of directors, and 12 of his clan are among the top earners in Herbalife. Still think you have the same odds as them?

Science_getting_rich (Photo credit: kas10900)

Today, we shall explore Vemma... and whether someone closely related to the top of the company, unlike you, has an edge that you don't.

Any one heard of Bob Proctor? That's him in the middle there, in that beige suit. He was part of "The Secret", or "law of attraction", which, IMHO, is just positive thinking wrapped with mysticism and bogus psycho-babble. But that's not what's important here.

Turns out his wife, Linda Proctor, has rank of 'ambassador' in Vemma, with estimated intake of $14500 a month, according to a "top earners" website. She was even profiled by Vemma themselves in a short video (where she goes to shop in some fancy store and have lunch in fancy restaurant) earlier in 2013.

According to Vemma dashboard, Mrs. Proctor appeared at "Star Presidential" rank on June 2011.

Which is actually... "level 10" on Vemma chart. Ambassador is only one level above that. And according to separate Vemma news, she achieved that on November 2011, the first Canadian to do so.

What's her secret? She claims it's great salesmanship and great inspiration from her husband, Bob Proctor.

What if it's not that? What if she has an "inside track" and has been "predestined" to success?

What if I told you that her husband, Bob Proctor, is a personal friend of Vemma head BK Boreyko, and Bob Proctor had appeared at many times at Vemma conventions as keynote speaker? Would that affect your view of her "success"?

What if I tell you that at least one OTHER person in the Proctor household is also a Vemma ambassador?

Linda Proctor wasn't new to network marketing. On her own website, she opened stated that it was Bob Proctor who taught her to change her approach to sales, and she claimed she did 20 times better within a year or two. She's so grateful, she married him (okay, slight exaggeration here, I'm sure he's a fascinating man and all) Then when she lamented about looking for something different, Bob recommended network marketing and that's like 15 years ago... Which would make it... around 2000?

She never named the company though, but it's not Vemma. Vemma was founded in 2004, less than 10 years old. So... is it because it's NOT relevant? She didn't find success in it... Or did that company ran into trouble and she doesn't want to look as if she was stupid in joining it? Any other reasons? We don't know.

Let's keep looking through. What other links is there from Proctor to Vemma? Following was provided by Vemma reps themselves:

1. Personal friend
He (Bob Proctor) is personal friend of Vemma CEO BK Boreyko and his late parents. They have known each other for years. Bob Proctor is also friends of a few Vemma top earners.

2. Trainer
He is the trainer in many of Vemma’s training events and conventions. In fact, he was at the recent Vemma US and Vemma Asia Believe Convention as guest speaker and trainer. He also produced a leadership training series called Opportunity Vemma based on the famous Lead The Field program for all Vemma brand partners. This is a 12 months training program with message from Bob Proctor on daily basis. He has also produced an opportunity video and a leaflet for Vemma.

Remember, I didn't write this. Vemma reps did. I simply don't automatically assume it's proof of legitimacy.

So let's sit back and think about it for a minute...

There is absolutely no reason for Bob Proctor to stay silent about Vemma... esp. if he's closely related to the founder, and his wife is a high level salesperson making a nice chunk of change selling the idea of Vemma to people who are supposed to sell MORE ideas of Vemma.

So what does that really say about Linda's success? Is it due to her? Or due to Bob's help?

And here's something you may or may not know... Another member of the Proctor clan is a Vemma ambassador (level 11). Her name is Colleen Filicetti. Here's her profile on a Vemma recruiting site, next to her stepmom's picture:

If that text is too small, here's what it says: "Colleen Filicetti: Colleen is Bob Proctor’s daughter (Linda’s step daughter). Prior to joining Vemma in 2009, Colleen was a stay at home mother raising her four children."

Two ambassadors (level 11) in Vemma... from the same family, that has tight ties to the head of Vemma.

Keep in mind that Vemma was founded in 2004, so it's 9 years old.

Colleen came in at 2009, only 4 years ago, and she's already ambassador? When did her stepmom join?

Or perhaps a better question... Do you still think Vemma is really "equal opportunity"? Or perhaps, have I gotten you to consider the POSSIBILITY that the game may be rigged AGAINST you?

English: Jenny McCarthy (Photo credit: Wikipedia)

Celebrities pushing bad science and bad medicine is nothing new.

Jenny McCarthy -- Playboy model, actress, "celebrity", "former" anti-vaxxer, pusher of various bogus autism "treatments" (basically told parents "try anything (whatever it costs)") [ see wikipedia entry ]

Suzanne Summers -- actress, singer, celebrity, and promoter of "Wiley Protocol", a hormonal replacement therapy that was NEVER proven with scientific study and may be dangerous, among other things. [ see wikipedia entry ]

English: Lisa Oz and Mehmet Oz at the 2010 Time 100. (Photo credit: Wikipedia)

And let's not forget the Oprah spawned... Mehmet Oz, i.e. "Doctor Oz"... who seems to often fail basic grasp of science despite his medical training, as he had featured such pseudoscience on his show as homeopathy, Reiki (his wife's a Reiki master), bogus report of arsenic in apple juice, bogus "magic" ingredient of weight loss, and "curing homosexuality" among many others. [ see wikipedia entry ]

People who follow these and many other celebrities out there giving BAD ADVICE are very likely to take these people's BAD ADVICE seriously... JUST BECAUSE THEY ARE CELEBRITIES.

And their reasoning process is virtually the SAME as people who got scammed out of money.

What causes you to trust information you're given? Clearly, you don't trust everybody you come across, so you must have some sort of criteria in your mind on whose opinion you can trust, whose opinion you'll accept but skeptical, and whose idea you count as "crackpot".

When you're given an idea, your mind goes through this "sorting process" where you decide on "accept", "question", "reject" bins. However, it seems that some people decide on "accept" even when it should be, and that's part of our "cognitive bias", where we misunderstand some things, by interpreting things the wrong way.

When we decide on to trust or not, we first check our brain for applicable knowledge. For example, if someone wants you to try this amazing weight loss product... Would you try it?

Let's assume that you don't know much about weight loss other than desire to lose 30-40 pounds.

You would probably check with family and friends, and maybe do some Internet research.

But some people don't do that. They go straight to "can I trust this person?"

In other words, they cannot separate the message from the deliverer of the message.

For most people, 1+ 2 = 3. That is simply *the truth*, it doesn't matter who said it. It could be something as simple as that little arithmetic problem, or as complex as the ultimate answer to life, universe, and everything. If something's true, it's just that: true. it doesn't matter who said it. A child can say it. A homeless person can say it. The president can say it. The Pope can say it. The speaker is irrelevant. And if you don't know if that "truth" is actually true or not, you will do your OWN research.

However, for some people, they evaluate the "messenger" as a part of their decision to trust the message or not. To them, the status of the messenger (appearance and personal knowledge of the subject to the messenger, such as friend or family) is very much a part of their decision process.

In a certain sense, this is rational on a certain... irrational level. They evaluate the parts they can, rather than parts they cannot. They know nothing about the subject matter, so they will evaluate the messenger instead. However, as explained above, this is the wrong approach.

For example, let's say a person was exposed to diametrically opposed views:

Close friend says: I tried this (insert fancy weight loss product here) and it's great!

Ex-friend says: Don't, that main ingredient is possibly bad for your liver and no proven weight loss

The prudent reaction is "let me research some more, maybe ask my doctor, dietician, etc." After all, it's your health at stake, right?

However, for some people, being closer to one view makes that view more valid than the other view. Those people do not think critically. Instead, they let other people think for them.

But that's not all, as what happens next is the crazy part... They then invent a reason, out of thin air, on why they chose one view over another, because they don't want to accept that they did so with minimum thinking, and only evaluate the source, not the message. The reason often has "jealousy" involved. In the example above, it's probably "my ex-friend is jealous of me losing weight and want to sabotage my weight loss plan, what a fiend!"

Now transplant this onto Scamworld, and you'll find the SAME thing.

Let's say you have this friend who's been wanting to sign you up for this hypothetical "AcmeMoneyMaker" and she already made a few hundred first weekend and she plans to make a lot more.

Then an ex-friend sent you a link to a scambusting website that says "AcmeMoneyMaker is a scam" and listed the various reasons.

Who would you believe? Those of you who are logical and prudent would ask someone who knows more, maybe someone in law (lawyer, paralegal, police, etc.) maybe someone with more business savvy...

But some of you will just toss away the ex-friend, the website, and EVERYTHING against AcmeMoneyMaker as "jealousy", "sour grapes", etc. etc. without applying any critical thinking and logic. Just your "friend" telling you it's good, is good enough for you, even if your friend has no such expertise to evaluate such things.

These people are what I call GAVS... "gullible and vulnerable sheeple". The scammers just need to find a "friend" they trust, make the friend into a judas goat, and have the "friend" lead the GAVS to be fleeced, one flock at a time.

Are you a GAVS? It's simple to stop being one... Just start evaluating the message, instead of the messenger.

Some of the most persistent bad arguments presented by network marketers (not just noobs, but also many veterans) are various misconceptions about pyramid schemes, and using those misconceptions to explain how network marketing is NOT like that. However, that explained nothing since the rebuttal is based on a misunderstanding.

Today, we shall explore a website called "Engineered Lifestyles" by a guy named Jamie Messina, who claimed to be an automotive engineer before getting bitten by the network marketing bug. You'd think that an engineer would know about a bit of critical thinking... but let's look at the evidence, rather than presumptions.

Okay, what does Jamie Messina say about pyramid schemes? This can be found at:

http://engineeredlifestyles.com/mlm/pyramid-scheme.html

For a page with the title "Recognizing Pyramid Schemes, and subtitle: Is MLM a Pyramid Scheme?", the page is surprising light on information, as there is not a proper definition of pyramid scheme on this page at all. Instead, the entire page is actually a sales pitch about network marketing in an attempt by pointing out the pyramid like structure is all around us therefore a pyramid shaped organization is nothing to be afraid of.

While technically correct, that pyramid shaped organization is all around us and nothing to be afraid of, it is IRRELEVANT as it has NOTHING to do with a "pyramid scheme". This is a very common obfuscation defense even by famous "advisors" such as Robert Kiyosaki. A pyramid scheme is a type of FINANCIAL FRAUD and nothing nothing to do with organizational shape of an organization.

Jamie has gotten off to a bad start. Let's see if he can redeem himself in the second half...

Unfortunately, the second page revealed that Jamie Messina was bitten by the "recruiter" type of NM bug... that he doesn't care about sales. Remember, it's called network "marketing" for a reason, yet there's nothing here about sales or marketing. Instead, it's all about recruiting. This particular paragraph from his 2nd half really illustrates the point:

Alice Krige as
the Borg Queen in First Contact
(Photo credit: Wikipedia)

Below you will be your frontline distributors / associates. These will be the individuals that you personally sponsor. They in turn will start to sponsor individuals just as you have. However when they sponsor a new distributor / associate it is their frontline distributor / associate and your downline. As there are more people below you this will benefit you from leverage and duplication.

"Leverage" and "duplication"... Sounds like the Borg, doesn't it? All they do is hit more creatures with the Borg nanoprobe, which takes them over, and turn them into more Borg.

Note that there's no mention of the word "sales" or "marketing" in the article at all. NONE WHATSOEVER (other than "network marketing", which is not defined)

It's all about recruiting more people, and have the people you recruited recruit even MORE people. (Marketing? What marketing? Just recruit more people!) Just like the Borg.

Yes, I may have exaggerated somewhat, but only somewhat.

It's clear that Jamie Messina has absolutely NO understanding of what network marketing is other than what his upline told him directly or told him to read (which would be MLM marketing books)

In a way, I don't blame him, as he's obviously taught by someone who were taught by... recruiters. Somehow he doesn't see what he taught was... offbase.

Network Marketing is marketing first, network second. Network is used as an adjective to modify "marketing". The idea of network marketing is you can interact with your customers, and if some of them are helping you make sales, and may be looking for extra income, THEN you can recruit him/her to help you make more sales. You should be picky / choose-y when it comes to who you recruit, which should be a tiny fraction of who you sell to. Clearly, very few people are good at sales, and even fewer knows how t spot such talents.

Yet recruiter type MLMers proliferate because they THRIVE on replication... like Zombies or the Borg. They replicate / network first, market second. Even NM veteran commentator Len Clements (who is pro-MLM) had lamented about why are a lot of MLM training "Bass Ackwards"

And with the Internet, every such "yahoo" has a voice... and it's up to you to figure out whose opinion is based on facts... and whose are based on misinformation and misunderstanding.

And that's why this blog and website exists.

Image representing Lucrazon as depicted in Cru...

Lucrazon logo via CrunchBase

In studying network marketing and its illegal cousins, the pyramid schemes and the Ponzi schemes, it is sometimes rather disheartening to see that some people just end up reinventing old scams, or are treading so close they may as well as claimed to have reinvented the wheel. Here's one of those cliche quotes to throw around:

Those who cannot remember the past are condemned to repeat it. -- George Santayana

Perhaps in the modern times, it's necessary to add a corollary:

Those who cannot research the past are doomed to repeat it

And today, we shall examine one such biz... a seemingly very upright one... except it seem to be a business model that's a copy of a scam that was closed by the FTC 13 years ago.

That business is called Lucrazon.

Lucrazon, headed by Alex (aka "Alexy") Pitt, claims to be a merchant ecommerce solution provider, and indeed, Mr. Pitt claim to have worked for a major solution provider of such services. According to Lucrazon's own website, what you pay for is:

Lucrazon maintains a payment gateway that provides network connectivity, technology and security for a payment platform that allows its customers to access end-to-end electronic payment processing solutions.

It provides a managed technology and security infrastructure, payment applications, web services, and connections to the TSYS payment network.

The Lucrazon platform allows its customers to offer credit and debit card processing, ACH processing, gift card programs, electronic check processing services, secure hosted virtual terminal, hosted secure payment page, reporting, web services, and support for brand terminals and devices for payment processing.

Translation: replicated e-store website with shopping cart and payment processing.

How much do you pay? $1795 (discounted to $1000 until end of year), and $99 a month.

IMHO, this is overpriced when compared to similar services such as Shopify.com, with plans starting as low as $14.95 a month and no fee upfront, but that's not the point of this analysis. It's this NEXT step that can potentially get Lucrazon into trouble.

You see, Lucrazon allows "stacking"... as you can buy up to 15 websites. Stacking for what you ask? Stacking so you can get paid by recruiting others.

Lucrazon pays its members (who had already purchased up to 15 websites / positions) through multiple ways, al all of them had to do with signing up even MORE affiliates, except "merchant commission" (i.e. you get 50% of what Lucrazon charges merchants per transaction)

There's the "20% referral commission, plus 3% up to 6 levels down" on recruited affiliates, PLUS binary commission (another 6% if you get two recruits to "pair up", thus binary).

You can read a review by Oz over on BehindMLM, and their "community relations manager"rebuttal.

When I first saw this, I thought... this sounded familiar, but I can't remember where I've seen it. It wasn't until Christmas Day, when I looked over the topic again, that I recalled the case... Skybiz.

Skybiz started in 1998, when it promised riches to the masses to join the plethora of companies selling things online... if they buy one or more online storefronts, and also recruit yet MORE people who want to do the same thing. In other words, you earn through recruiting people, not through selling stuff through your online stores. The company, based in Tulsa Oklahoma, spread and was outlawed in multiple continents (North America, Australia, Europe, Asia, and Africa). FTC finally slammed it shut in 2001, and appointed a receiver to sell off what it can after seizure of assets and repay those who lost money... with cooperation from police all over the world.

MLM Attorney Jeffrey Babener wrote about Skybiz:

In particular, it is the business model in which distributors are encouraged to purchase multiple replicating web sites, and then are encouraged to cause others to buy multiple replicating web sites, all of which are used primarily for recruiting rather than e-commerce, that is causing the greatest concern.

This describes Lucrazon PERFECTLY: multiple replicating websites (up to 15), encouraged to recruit others (all the payments except once are tied to recruitment) to also buy multiple replicating websites, all of which are used for recruiting rather than e-commerce.

I don't know Alex Pitt, so I don't know whether he sought to recreate Skybiz, or even he had heard of Skybiz before starting Lucrazon. But he had effectively reinvented the Skybiz scam, 13 years after it was closed.

The biggest achievement Lucrazon did thus far is adding a former Small Business Administration head, Mr. Barreto, to their board of directors (see below for related links). But that doesn't really prove anything, except more ammo for people who insist on using "legitimacy through association" bad argument.

The fact that Lucrazon seem to trigger 7 out of 8 warning signs on Mr. Babener's "Dot Scam" article is a major problem.

Lucrazon may not be intended as a scam, but it is effectively a clone of a PROVEN scam. Thus, you should not even get CLOSE to it until proven otherwise.

And "Alex Pitt" needs to consult a lawyer ASAP.

When did US Secret Service start
investigating Zeek Rewards?
(Photo credit: Wikipedia)

With clawback lawsuits about to start against the "net winners" in the Zeek Ponzi scheme (there's still time to settle, lest you enjoy being served with a lawsuit) one the the questions burning on the minds of the victims (besides "when do I get my money") is how could the Zeek ponzi scheme lasted as long as it did? When did they, the insiders (Paul Burks, Dawn Wright-Olivares, etc.), knew they were being investigated? Why did they continue to perpetrate the fraud rather than shutting the whole thing down?

Part of the answer on how long the insiders had known about the government investigation was hinted in the SEC press release on Dec 20, 2013 where they announced that SEC has brought charges of various securities law violations against Dawn Wright-Olivares and her stepson, Dan Olivares, respectively COO and CTO of ZeekRewards ponzi scheme, that they knew and covered up evidence of wrongdoing. The civil charges has been settled with both of them paying about 11.4 million dollars together, but the CRIMINAL charges being filed by the US Attorney's Office is still pending.

Let us then put several more documented dates in a timeline so we can visualize it more clearly:

circa early April, 2012 -- Zeek Rewards suddenly cancelled all members from certain European countries with a bogus explanation and only offered original money back
April 18, 2012 -- Zeek Reward red carpet event in Lexington, NC
circa end of May, 2012 -- Zeek posted a profit share of 8.9%, then told everybody they had a manual decimal displacement, it's really 0.89%. This basically proved that the percentage was not calculated, but manually entered
May 28, 2012 -- over Memorial Day weekend, Zeek suddenly announced that all Zeek checks have to clear before June 1st or they are void.
June 4th, 2012 -- in a "training call" hosted by Dawn, she announced that 700 Zeek members in Montana can no longer participate due to some legal problems.
June 5th, 2012 -- in another "training call", Dawn announced eWallet through NxPay, then claimed that unless other affiliates put more money into Zeek's eWallet, Zeek cannot pay people.
June 6th, 2012 -- Zeek announced they no longer accept personal checks
June 6th, 2012 -- Dawn attempts to white-wash eWallet issues with now infamous "burger Analogy" (i.e. if you buy from BK you can't pick up your burgers at Wendy's, so if you buy bids with STP you can't get paid from NxPay)
June 8, 2012 -- Dawn Wright-Olivares appeared with Troy Dooly on ACES Radio hosted by Jim Gillhouse. Dawn claimed that Burks "manages all that" when asked how was daily profit share calculated.
July 7th, 2012 -- North Carolina Office of Attorney General issued an information request to Zeek, but this was kept secret by both parties
July 24th, 2012 -- Keith Laggos, Zeek consultant, "fired" for promoting Lyoness, revealed to be receiving 40K a month through Zeek as a Zeek member.
July 30th, 2012 -- Darryl Douglas, major insider at Zeek, dropped out of sight
August 1, 2012 -- North Carolina OAG request of Zeek documents was made public
Circa August 6, 2012 -- training classes and red carpet event scheduled for August 22 cancelled
August 16, 2012 -- Secret Service agents closed the doors of Zeek Rewards and RVG.

Now, when did the Feds start investigating, and when did RVG / Zeek became aware of the investigation?

IMHO, and this is corroborated by analysis from PatrickPretty.com and editorial from Lyndell Edginton of Eagle Research, the Federal investigation is likely to have started in April 2012. It is not known what was the trigger or which agency initiated the investigation. However, it is possible for the banks getting suspicious at the amount of checks or credit card or even credit card fraud has triggered a money laundering warning.

Recall that April is when 6 countries were banned, no explanations given, then a week later Paul Burks gave a bull**** explanation involving OFAC which was quickly disproven. This may have also triggered an interoffice alert from OFAC to USSS. A later rumor was that those six countries were chosen as the top credit fraud against Zeek, but this was never proven.

This directly or indirectly lead to Zeek changing banks by June 1st, 2012. The obvious conclusion is they were kicked out... Or their assets were frozen by the bank as part of fraud probe, which is why no checks can be cashed from that account later. Their own "we've grown too big" is PR spin control.

It is unknown how many states started their own investigation, but Montana was first to act by June 2012.

By June it's clear that Zeek *had* to have known they were under investigation. However, apparently they don't know the scope yet, because another compliance expert was brought in.. Greg Caldwell of White Hat Solutions, and his hit man, Robert Craddock. They apparently thought the problem can be resolved by leaning harder on the affiliates.

It is also interesting at this time that they may have lied to Troy Dooly, their PR man, who later admitted and was fined by the SEC for accepting payments from Zeek to publish good news to counter all the negative publicity. According to Dooly (quoting from his blog MLM Help Desk 21-DEC-2012 entry)

June or July, I received a call from an MLM Attorney who had shared with me the SEC was investigating some companies which had appeared on a specific blog. Many of the penny auctions were listed on the site along with some other companies with similar pay plan. I know from reviewing my notes I had asked Dawn and Greg about any investigations around May or June and at that time they did not know of any that were directed specifically at Zeek from any regulator. There were some issues with the Montana filing, but I was told the paperwork had been turned in.

From what I have been told, is that when Dawn anf Greg had asked Paul of any investigations Paul was very clear, the SEC was asking questions about each of the companies listed on the site and that Noell Tin had it handled and the SEC “was satisfied”. In the June or July Red carpet Day I also heard Paul make it clear the regulators (I assumed the NC AG) was asking questions but everything was under control.

Assuming Mr. Dooly is being honest here (and I don't see why he would lie about this), it's clear that they were lying to him, or we have some of the dumbest and willfully blind "everything's fine" crooks in the land.

So to answer the question... Zeek was WELL AWARE that they were being investigated by June 2012, and the Federal investigation may have started months prior.

I don't know if I had anything to do with that investigation. There was a comment by Troy Dooly that claimed that my Hubpages investigation into Zeek was among the paperwork he was shown in the SEC office. While it does make me feel a bit warm and fuzzy, my hub was published in April 2012. Oz had been reviewed Zeek on BehindMLM long before I got onto the scene.

But that's just post mortem.

I can't answer the "why did they keep going". Maybe they thought they will simply be forced to make minor changes. Maybe they believe in their experts too much. There's a ton of Maybes.

If they ever write a book or two, I hope they are forced to donate every penny to victim restitution.

Zeek Rewards Receiver Ken Bell has released a new letter on the official website http://www.zeekrewardsreceivership.com/ dated 27-DEC-2013.

Determination of Claims basically confirms that you have a claim against Zeek Rewards (i.e. it owes you money). How much you will get back depends on how much he was able to claw back from the net winners... 15000 of them, 9000 of whom live in the US.

Even if you don't receive one (and as first batch is going out, and it'll take the remainder of the year just to finish the first batch) that does not mean you don't have a claim. Some claims are harder than others to document and verify. If you have met the deadline to file your claim on the official website, you will eventually get a notice.

Here's some most interesting facts:

More facts about Zeek Rewards ponzi and the receivership process

About 15000 net winners (9000 domestic, 6000 foreign)
Total amount is over $800 million dollars soaked in just over two years (SEC recently used the term $850 million, up from $700 million reported earlier)
Victims should be able to get back roughly half of their money
Top ten net domestic winners of Zeek have each received AT LEAST 900000 dollars. Top net winner got $1.8 million. They will be sued via clawback.
Total amount held by domestic net winners... about $200 million.
Foreign net winners has another tens of millions... Bell is contemplating how many of them to sue.
There are many bogus claims filed
Some net winners also filed claims of losses

If you haven't settled, there's still a little time left.

Or you can live like a fugitive out of the country, like some net winners claimed they will do.

The many portraits by Abbott originate from th...

Horatio Nelson, origin of "willfully blind"?
(Photo credit: Wikipedia)

In studying various reactions to criticism by MLM participants, it is interesting that so many of them are afflicted with "willful blindness", and it is a condition that can cause serious financial and legal problems.

The most popular example of "willful blindness" is an apocryphal story of Admiral Horatio Nelson in Battle of Copenhagen. When given a flag signal by a cautious fleet commander that Nelson may "withdraw at his discretion", and asked by a subordinate what shall he do, Nelson reported raised his spyglass to his blind eye (with an eye patch and all), then replied "I see no signal to withdraw", and continued the attack. The story was often told as if Nelson disobeyed a direct order, but the flag signal is "withdraw with commander's own discretion". This gave us the expression "turning a blind eye", and the term "Nelsonian Knowledge".

In modern times, "willful blindness" is defined as a situation where a participant INTENTIONALLY puts him- or herself in a situation where s/he cannot / does not know the facts that would make him/her liable for civil or criminal acts s/he had participated in. And it is a legal term. For example, traffic mules (those who smuggle contraband across borders) asked to be blindfolded during loading process so s/he does not know what's being trafficked. And thus, s/he want to argue they are innocent victims and thus should not be counted as accessory to trafficking.

The court had NOT accepted this defense, and has taken the position that willful blindness is merely legal sophistry, if it can be proven that the participant knows that such facts exist, and has taken deliberate steps to isolate him-/herself from knowing such facts. This case was even taken up by the Supreme Court back in 2011, when it ruled a file sharing service cannot disclaim responsibility for illegal acts of its users just because it doesn't want to see what's being shared, i.e. willfully blind to the copyright violations.

This is different from recklessness and negligence. Recklessness is knowing such risks of damaging facts do it any way, and negligence is "should have know such risks, but did not".

To illustrate with an example, using the smuggler mule as example:

recklessness: I know it's illegal, I'll take my chances

negligence: I should have known it's illegal, but I honestly thought those were nothing harmful...

willful blindness: I have no idea what they put in my luggage. I never asked. Don't need to know.

And many MLMers suffer from all three: recklessness, negligence, and willful blindness.

Previously, MLM Skeptic have discussed the problem of "avoiding negativity", which has elements of all three: I don't want to know any doubt, there is no doubt, , and if there's any doubt I ignore it. They are a combination of willful blindness, negligence, and recklessness. Thus, there is no surprise that many MLMers, taking this positivity approach to ridiculous extremes, started attacking any sort of criticism and question leveled at his/her MLM as some sort of personal affront to his or her dignity (probably Ikea Effect) usually with the various bad arguments mentioned in this blog, with such bad arguments such as:

It's just your opinion / You have no credentials for me to believe
You don't understand us / You're not one of us / no true Scotsman
You/They did it wrong
Sour grapes: You're just jealous / you have ulterior motives / you're taking "revenge" on MLM
and many many more

This happens even more often where the scheme is just BORDERLINE illegal... there is no clear division of customer vs. affiliate, for example, or the scheme has both legal and illegal components. So all the participants do is concentrate SOLELY on the legal portions, then counter ANY mention of the potentially illegal portions with the various bad arguments above. They don't want to learn about the potentially illegal portions and how it affects their sales tactics. To them it only slow them down, it's "negativity" to be purged from their mind. They simply "neglect to mention" them.

A scheme that attracts a lot of willfully blind people is Lyoness, a suspect Ponzi scheme under investigation even in its home country, Austria. While a full explanation of how Lyoness works is beyond the scope of this blog post (I recommend you read Oz's coverage on BehindMLM) let's just say it's a shopping loyalty program... except you can BUY your way up the reward levels (it's explained as "down payment" for gift card, which makes no sense at all). The ability to buy your way up makes it a potential ponzi scheme, but most Lyoness participants are willfully blind toward this possibility as they just repeats the potential income (from other people buying their way up or shop their way up) and how big Lyoness is around the world. When asked point blank why have the ability to buy "accounting units" (which can go for thousands of dollars), their reply usually goes "but you don't have to (buy any)", which is, of course, a non-sequitur.

Beware of anyone telling you to avoid negativity. They are basically asking you to be reckless, negligent, and/or willfully blind. Risk is a part of any business. If you ignore risk, you are a gambler, not a businessperson.

Upcoming article will discuss the difference between "avoid risk" vs. "ignore risk", i.e. Due Diligence vs. Analysis Paralysis.

MLM Absurdities: What is Herbalife Doing in Cambodia?

Robert T. Kiyosaki's Sins, According to Robert T. Kiyosaki

BREAKING NEWS: Top "Net Winners" of Zeek Rewards Has Been Made Public!

Scam Absurdities: A Top "Net Winner" of Zeek Ponzi whines on Facebook about persecution... I mean prosecution

BREAKING NEWS: Possible Confirmation of US DOJ Investigation into Payza / Obopay

BREAKING NEWS: WCM777 and TelexFree now ILLEGAL in Peru

Bad Argument: I Only Listen to People Who Made Money

Scam Psychology: Intuitive Mind vs. the Rational Mind

MLM Absurdities: Once a Woo Peddler, Always a Woo Peddler?

Robert Kiyosaki's Faustian Bargain With Network Marketing Is Confirmed

Why Is Robert Kiyosaki Trying to Shoehorn MLM onto his Cashflow Quadrant in the WRONG Quadrant?

MLM Mythbusting: MLM is a lot like ___________, therefore it is legit

BREAKING NEWS: First Zeek Co-Conspirators Plead Guilty to Federal Charges

Just what are Your odds in Vemma? Is there an "insider's club" in Vemma?

Scam Psychology: Why Do People Believe Celebrity Endorsement of Woo Products?

Bad Arguments: Misrepresenting Pyramid Schemes, esp. by people who should know better

MLM Absurdities: Why Do New MLM Businesses Just End Up Cloning Old Scams? (Is Lucrazon a scam?)

Scam Post Mortem: How Long Had Zeek Been Investigated Before They Were Closed?

BREAKING NEWS: Zeek Ponzi "Determination of Claim" letters going out now

Scam Psychology: The Problem of Willful Blindness, Recklessness, and Negligence

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